How do I close a revolving credit facility if I no longer need it?

How do I close a revolving credit facility if I no longer need it?

As a property investor or buy-to-let landlord, managing your cash flow efficiently is the key to growing your portfolio. You may have used a secured Buy-to-Let (BTL) revolving credit facility as a flexible property overdraft. This specialist product sits behind your existing first-charge mortgage as a second charge, allowing you to draw funds, repay them, and draw them again to fund auction purchases, refurbishments, or emergency void periods.

However, once your property projects are complete, you might ask yourself: how do I close a revolving credit facility if I no longer need it?

Because this is a secured financial product and not an unsecured business loan or credit card, the closing process involves specific legal and financial steps. Below, we explain exactly how to close your facility safely, compare your options, and look at whether keeping the account open might actually benefit your property business.

The Step-by-Step Process to Close Your Secured Revolving Credit Facility

Closing a secured second-charge facility requires more than just stopping your payments. Because the facility is registered against your buy-to-let property, you must follow a formal process to clear the debt and release the security. Here is how you can do it:

• Step 1: Repay the Outstanding Balance: You must pay back any funds you have drawn down, along with any accrued interest. Because interest on this facility is only charged on the money you actually draw, your outstanding balance could be zero already. If you have an active balance, you will need to request a final redemption figure from your lender.
• Step 2: Contact Your Broker or Lender: Reach out to your lender or your broker to formally state that you wish to close the facility. Promise Money is an FCA-authorised broker (Ref: 681423) and can help you navigate this process with your lender. You can call the team on 01902 585020 to discuss your account.
• Step 3: Pay Any Discharge or Admin Fees: Some lenders may charge a modest administrative fee to cover the paperwork involved in closing the account and releasing the legal charge on your property.
• Step 4: Remove the Second Charge: The lender must instruct HM Land Registry to remove the second charge from your property’s title deeds. Once this is done, the property is no longer tied to the facility, and the closure is complete.

Should You Close the Facility or Keep It Open?

Before you take steps to close your secured revolving credit facility, it is worth considering how the product is structured. Unlike standard business loans, a BTL revolving credit facility operates like a property overdraft.

If your balance is currently zero, you are typically not paying any interest. This means you can keep the facility active behind your first mortgage without incurring ongoing interest charges. Keeping it open gives you a safety net. If you spot a new auction property, need to fund urgent EPC upgrades, or experience unexpected void periods, you can typically draw funds again within 24 to 48 hours without having to reapply.

If you decide to close the facility and change your mind later, you will have to go through the entire application process again. This includes new underwriting, property valuations, and credit searches. If you want to check your current credit standing before making any decisions, you can use online tools. Get your free credit search here. It’s free for 30 days and costs £14.99 per month thereafter if you don’t cancel it. You can cancel at anytime. (Ad)

How Revolving Credit Competes with Bridging Finance and Remortgaging

When property investors no longer need a revolving facility, it is often because they are moving to alternative methods of funding. Understanding how these alternatives work can help you decide if closing your facility is the right financial move.

Bridging Finance

Bridging finance is a common alternative for short-term property needs, such as buying a property at auction or funding a heavy refurbishment. Bridging loans are typically structured with a rigid term (usually up to 12 or 18 months) and require a clear exit strategy, such as selling the property or remortgaging.

Unlike a revolving credit facility where you can make flexible monthly payments, most bridging loans roll up the interest to be paid at the very end. Once you repay a bridging loan, the facility is closed permanently, and you cannot draw funds again without a new application.

Remortgaging

Some landlords choose to remortgage their first-charge property loan to release equity, using those funds to pay off and close their revolving credit facility. While remortgaging can offer lower long-term interest rates, it may lock you into high rates on your entire mortgage balance. It also lacks the flexibility of a revolving facility, where you only pay interest on the exact sum you borrow, rather than the entire available limit.

Understanding the Risks and Responsibilities

Because a revolving credit facility is secured as a second charge against your residential buy-to-let property, you must treat it with the same care as your main mortgage.

Your property may be at risk if repayments are not made. If you do not keep up with your repayments, your lender may take legal action. This could ultimately lead to the repossession of your investment property. Failing to meet your repayment terms can also result in increased interest rates and additional administrative charges, which will increase the overall cost of your debt.

Before deciding to close or maintain your facility, it can be useful to seek impartial financial advice. You can find free, unbiased guidance on managing property debt and secured loans on the UK government-backed MoneyHelper website. You can also verify the regulatory status of any firm you deal with by searching the Financial Conduct Authority Register.

People also asked

Can I close my revolving credit facility if I still owe money?

No, you cannot fully close the facility if you have an active balance. You must repay all drawn funds, along with any accrued interest and outstanding fees, before the lender will agree to close the account and remove the second charge from your property.

How long does it take to remove the second charge after closing?

Once your balance is zero and you request a closure, your lender will notify HM Land Registry. This process typically takes a few weeks to complete, depending on Land Registry processing times, after which the legal charge is officially removed from your property deeds.

Are there exit fees for closing a BTL revolving credit facility?

While there are generally no hefty early repayment charges like those found on fixed-rate mortgages, some lenders may charge a small administration or discharge fee to cover the legal costs of removing the second charge from your property registry.

Is a revolving credit facility better than a bridging loan?

A revolving credit facility offers more flexibility than a bridging loan because you only pay interest on what you draw, and you can reuse the funds without reapplying. Bridging finance is typically better suited for larger, single-transaction projects with a defined exit date.

Will closing my revolving credit facility affect my credit score?

Closing a secured facility in good standing shows lenders you have successfully managed and repaid your debts, which can have a positive effect on your credit profile. However, it will also reduce your overall available credit limit, which is a factor credit reference agencies consider.

Summary: Navigating Your Options with Promise Money

Closing your Buy-to-Let revolving credit facility is a straightforward process once your balance is fully paid off. However, because you only pay interest on the money you use, keeping the facility open at a zero balance could be a smart way to retain quick access to cash for future property opportunities.

If you are unsure whether to close your account, keep it open, or explore alternative options like bridging finance, the team at Promise Money is here to help. As an experienced, FCA-authorised broker, we can help you compare products and find the right solution for your portfolio.

To find out more about how we can assist you, visit our hub at promisemoney.co.uk/landlord-revolving-credit-100 or speak to one of our friendly advisers directly by calling 01902 585020.