What to do with equity release funds?

What to do with equity release funds?

by Readers Question

Guest Author

9:12 AM, 11th March 2022, About 2 years ago 8

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Hi guys, I’m in a position to release a total of £680,000 equity on two properties (my home and a buy to let). I’m not sure whether to use this to expand the property portfolio, or use this to clear the mortgage on my main residential home and invest the remainder?

Another line of thought is to use small amounts of the equity release as deposits and get more buy to let mortgages – does that make sense?

In a bit of a dilemma.

Any advice, please…….


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Laura Delow

10:19 AM, 11th March 2022, About 2 years ago

A short question but it's not easy to answer as any advice can only be given based on a thorough fact find of your full circumstances & needs. You really ought to discuss this with your financial adviser.

david porter

10:54 AM, 11th March 2022, About 2 years ago

When house prices are on the rise and rents are going up Micky Mouse can run a property portfolio.
When the bad times come ( and they will) that is where you need brains
All you need is the market to go down and find yourself with negative equity, then somebody does not pay you and then you have a tax bill. A cash flow crisis,
This is the shortcut to bankruptcy.
Bankruptcy will put you back 10 years and you will only have a business career of 40 years.
With that in mind, pay off all debt on your home and leave it sacrosanct.
Thereafter take as much property and debt as you feel comfortable with.
The process of selling an investment property starts when you are looking to buy. In other words buy something which others would want to live in.Not next to a glue factory or behind a crack house.
Good luck


11:40 AM, 11th March 2022, About 2 years ago

Beware an interest rate hike?
The cost of Putin's madness has yet to be computed?

Alan Hill

13:31 PM, 11th March 2022, About 2 years ago

As Laura mentioned above - it always depends on a number of factors and is worth taking advice. If you are looking to maximise growth and you can find investments that pay a return higher than the cost of the interest of borrowing (and are comfortable with the associated risks) then investing further can make sense. But by borrowing on BTL properties to pay off your mortgage - you probably will be paying a higher rate of interest on the BTL borrowing than on your personal home. So you'd likely be spending more now (in interest) than you would be just leaving it as it is. But of course without being able to analyse all the debt from a big picture point of view this is impossible to say on here, but these are just some thoughts to consider.
I personally like to borrow out to reinvest - but that's me, with my own age / personal goals / financial goals taken into account (as well as my comfort with risk and having millions of pounds of debt). This is not for everyone. Debt is a double edged sword and can serve you very well indeed (as it has me over almost 20 years) but it can also be dangerous unless you plan carefully. Feel free to get in touch if you want to chat more. But taking professional advice is a good plan, and talking to several people who have done what you want to do already as well.

Old Mrs Landlord

10:12 AM, 12th March 2022, About 2 years ago

Reply to the comment left by david porter at 11/03/2022 - 10:54
And definitely secure your own residence first so that it cannot be repossessed by mortgagee.


17:49 PM, 13th March 2022, About 2 years ago

Reply to the comment left by Old Mrs Landlord at 12/03/2022 - 10:12
What would be best way to secure family property from b2l mortgagee.

Old Mrs Landlord

0:31 AM, 14th March 2022, About 2 years ago

Reply to the comment left by Stella at 13/03/2022 - 17:49
Using the funds to clear the mortgage on his home before expanding his portfolio with the remainder. This was specifically in reply to the question posed in the original post. There is much uncertainty at the moment regarding future financial events including interest rates, inflation and attitudes of lenders. Young people with few responsibilities may be insouciant about risking repossession of their own home to invest in property to let, but with the way world affairs are currently unfolding I feel it is wise to ensure you have the security of a roof over your own head before incurring debt to house others. The original poster has revealed very little about his age, family circumstances, job security or appetite for risk, so my advice was aimed generally at making sure he did not lose everything if the financial climate were to take a serious downturn. Better safe than sorry.

Jonathan Clarke

2:23 AM, 14th March 2022, About 2 years ago

If you are not too risk adverse and not yet financially free I would def not pay off my ressie mortgage but invest in more BTL . I remortgaged my ressie on 3 occasions over a number of years so I could expand my BTL portfolio . The resulting capital gains on those BTL`s would now pay off my ressie mortgage 18 fold if i was to sell them all
Those BTL`s also produce a healthy income for day to day living and have also allowed more release of equity at the right time to buy more BTL`s . Keep a decent contingency fund out of your healthy 680K and stress test your portfolio at each juncture as you expand and you will be fine . Borrowing money to invest is good debt. Just treat debt with respect
I know several people who are 60 who proudly say they have paid off their ressie mortgage . But they still get up at 7am scrape the ice off their windscreen and go to work as they have no passive income through BTL`s and no assets.
We tend as a society to encourage people to pay down a ressie mortgage and it is seen as rather risky not to do so and also in some ways morally irresponsible . I say try to look at it another way
One of my IFA`s is a nice bloke but he is 60 and still works 9 - 5 with no end in sight to the job treadmill . To have worked 40 years in an industry giving financial advice to others but still be nowhere near financially free yourself means your advice is suspect.
Be bold but not reckless. Good Luck

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