What Interest Rate Is Typically Charged on a BTL Revolving Credit Facility?

What Interest Rate Is Typically Charged on a BTL Revolving Credit Facility?

For UK property investors and buy-to-let (BTL) landlords, managing cash flow is one of the biggest challenges of growing a portfolio. When you need quick access to capital for refurbishments, auction deposits, or EPC upgrades, traditional financing can sometimes feel too slow or too expensive. Many landlords are now turning to a BTL revolving credit facility as a flexible alternative.

This product functions like a secured property overdraft. Once set up, it sits behind your existing first-charge mortgage as a second charge. You can draw down funds, repay them, and draw them down again without having to reapply each time. But before you apply, you need to understand the costs. Below, we break down what interest rate is typically charged on a BTL revolving credit facility and how it compares to other property finance options.

Typical Interest Rates for a BTL Revolving Credit Facility

Interest rates on a BTL revolving credit facility are typically calculated on a monthly basis rather than an annual one. You can generally expect rates to range from 0.7% to 1.2% per month. The exact rate you receive may depend on several factors, including your credit history, the amount of equity in your security property, and your overall investment experience.

The most important feature of this facility is how the interest is charged. Unlike a standard term loan, you only pay interest on the money you actually draw down, not on the total facility limit. For example, if you secure a credit limit of £100,000 but only draw down £20,000 to refurbish a property, you will only pay monthly interest on that £20,000.

When lenders assess your application for this secured facility, they will run a credit check to evaluate your financial history. If you want to check your credit file beforehand, you can prepare early. 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 Rates Compare to Bridging Finance and Remortgaging

To understand whether a monthly interest rate of 0.7% to 1.2% is competitive, it helps to compare this secured facility with the two main alternatives: bridging loans and remortgaging.

Bridging Finance

Bridging loans are a popular tool for short-term property funding. They can be structured as either closed bridging loans (which have a fixed repayment date and a clear exit strategy, such as an exchange of contracts) or open bridging loans (which have no fixed end date but usually must be repaid within 12 to 24 months).

While interest rates on bridging loans are comparable (often between 0.5% and 1.5% per month), there is a key structural difference. Most bridging loans roll up interest, meaning you do not make monthly payments. Instead, the total interest is added to the loan balance and repaid in one lump sum at the end. Additionally, with bridging finance, you pay interest on the entire loan amount from day one, whether you use the cash immediately or not. A revolving credit facility offers much more flexibility because you only pay for what you draw, and you can repay and reuse the funds as your projects progress.

Remortgaging

Remortgaging your property to release equity typically offers a lower interest rate than both bridging finance and revolving credit facilities. However, remortgages can take several weeks or even months to arrange. They also force you to pay interest on the full lump sum immediately. If you only need funds in stages, you may end up paying interest on idle cash. Furthermore, if you remortgage during an existing fixed-rate term, you could face expensive early repayment charges.

A BTL revolving credit facility sits as a secured second charge behind your current mortgage, meaning you do not have to disturb your low-rate first-charge mortgage. Once the facility is arranged, you can typically draw funds within 24 to 48 hours, giving you the speed of bridging finance with the ongoing flexibility of an overdraft.

Real-Life Landlord Scenarios

To see how these interest rates and structures work in practice, let us look at how landlords typically use a BTL revolving credit facility:

• The Auction Purchase: A landlord spots a property at auction. They must pay a 10% deposit immediately and the remaining 90% within 28 days. Because they have a revolving credit facility already in place, they draw down the deposit in 24 hours. They pay interest on this drawn amount for a few weeks until their long-term finance is approved, then repay the balance to stop the interest charges.
• The Light Refurbishment: A property investor needs £25,000 to install a new kitchen and bathroom to increase rental yield. Instead of taking out a bridging loan for the full amount, they draw down £10,000 for materials, and then another £15,000 for labour a month later. They only pay interest on the funds as they are drawn, keeping borrowing costs to a minimum.
• Managing Void Periods and EPC Upgrades: A landlord needs to carry out energy performance certificate (EPC) upgrades to meet regulatory standards while the property is empty. They use the facility to cover both the upgrade costs and the mortgage payments during the void period, repaying the balance once a new tenant is in place.

Understanding the Risks of Secured Borrowing

While a BTL revolving credit facility is a highly flexible financial tool, it is not an unsecured business loan or a credit card. It is a secured second charge against your residential buy-to-let property. This means you must carefully consider your ability to make repayments.

Your property may be at risk if repayments are not made. If you default on your agreements, it could lead to legal action, repossession of the property, increased interest rates, and additional charges from the lender. It is vital to have a clear repayment strategy before drawing down any funds.

Because these products are complex, it is highly recommended to work with a specialist broker. Promise Money is an FCA-authorised broker (Ref: 681423), not a lender. Our team can help you compare available deals to find the right rate for your circumstances. You can read more about how the industry is regulated on the Financial Conduct Authority website, which serves as an official source for UK financial standards.

People also asked

Is a BTL revolving credit facility an unsecured loan?

No, it is not an unsecured loan. It is a secured financial facility that sits as a second charge behind your existing first-charge buy-to-let mortgage.

Can I use this facility to buy properties at auction?

Yes, this is a common use. Once the facility is set up, you can typically draw down funds within 24 to 48 hours, making it ideal for meeting tight auction payment deadlines.

Do I pay interest when the facility is not in use?

No, you do not. One of the main benefits of a revolving credit facility is that interest is only charged on the funds you have drawn down, not on the total credit limit.

How does this differ from a bridging loan?

While bridging loans usually provide a single lump sum with interest rolled up until the end of the term, a revolving credit facility allows you to draw, repay, and redraw funds dynamically while paying monthly interest only on your active balance.

What happens if I cannot make the repayments?

Because the facility is secured against your buy-to-let property, failing to make repayments may result in legal action, additional charges, higher interest rates, or ultimately the repossession of your property.

Next Steps with Promise Money

If you want to find out more about how a BTL revolving credit facility could work for your property portfolio, Promise Money can help. As an authorised broker, we compare options across the market to help you secure the most competitive interest rates.

To explore your options, visit our dedicated information page at promisemoney.co.uk/landlord-revolving-credit-100 or speak directly to one of our experienced advisors by calling 01902 585020 today.