Help with BTL equity release

holly_hobby

Its important to understand that the released BTL capital does not have to be re-invested into the business itself or used to pch further BTL properties, because its classed by HMRC as capital withdrawal (from the business). This means that the associated mge interest (* subject to cap discussed below) is a fully permitted HMRC deduction - leaving you free to use the capital for what ever (legal !) reason you want, including funding an extension to your own private home.

* the only caveat re BTL equity release and offsetting, is that HMRC cap the permitted application at an overall mge equal to the pch price of the property OR its value when it entered the business (ie - if it was previously your own home that later entered letting).

Accordingly, although you are free to withdraw available capital as and when the property value increases (subject to max LTVs/value and sufficient supporting rental income), the mge interest relating to any element of borrowings that exceeds the pivotal sum (as discussed above), may not be offset and would have be absorbed by you (effectively reducing your overall net yield).

Currently BTL lenders don't require an independent repayment vehicle for an interest only BTL arrangement (as its unregulated lending, meaning that the recent FSA/FCA IO guidance on repayment vehicles doesn't apply). Although of course be mindful that this may change from lender to lender in the future (regardless of any regulatory requirement).

Hope this helps

Holly