| Metric | 🔄 Refinance | 🏷️ Sell |
|---|---|---|
| Net cash in hand | — | — |
| New mortgage amount | — | — |
| Monthly IO payment | — | — |
| Monthly cashflow | — | £0 (sold) |
| Annual cashflow | — | — |
| CGT due | £0 (deferred) | — |
| Total costs | — | — |
Refinance vs Sell — Making the Right Decision
When your investment property has grown in value, you face a choice: remortgage to release equity tax-free while keeping the asset, or sell and take full liquidity — triggering a capital gains tax liability in the process. Both paths have fundamentally different tax, cashflow and reinvestment implications.
When remortgaging makes sense
Refinancing releases equity without triggering CGT. On a property worth £200,000 with an £80,000 mortgage, refinancing to 75% LTV releases £70,000 in equity — completely tax-free, today. You retain the rental income, defer CGT to a future date and can reinvest the released equity as a deposit on another purchase. If your property is generating positive cashflow at the new rate, it is almost always more tax-efficient to refinance than sell.
LTV limits on buy-to-let remortgages
Most BTL lenders cap remortgages at 75% LTV, though some specialist lenders offer 80% at higher rates. Lenders also apply an interest coverage ratio (ICR) stress test — monthly rent must typically cover 125–145% of the new monthly interest payment at a stressed rate of around 5.5–6%. Run the numbers in the calculator above to check your rental income supports the new borrowing at your target LTV.
The CGT deferral advantage
Selling crystallises your CGT liability now and permanently. On a property purchased for £120,000 and sold for £200,000, CGT at 24% on the £77,000 taxable gain (after £3,000 exempt) equals £18,480 — money you lose immediately. By refinancing instead, that £18,480 stays invested, generating returns, until you eventually sell. Over a 5-year reinvestment horizon, the deferred tax alone could compound meaningfully at reasonable property returns.
When selling makes more sense
Selling becomes the better option when: the property generates negative or very low cashflow after refinancing at current rates; you want complete liquidity with no ongoing obligations; you are consolidating a portfolio ahead of retirement; or CGT rates are expected to rise significantly (making further deferral less attractive). If the monthly cashflow after the new mortgage payment is negative, the long-term argument for refinancing weakens considerably.
Cashflow is the deciding factor
Ultimately, cashflow determines whether refinancing is sustainable. A new IO payment of £688/month at 5.5% on a £150,000 mortgage leaves you with £212/month cashflow from £900 rent — tight, but positive. Tighten the rent by a void period or increase the rate to 6% and it turns negative. Always model the worst-case cashflow scenario before committing to a remortgage, and ensure you have a reserve to cover voids and repairs.
Related calculators: Model CGT on a sale with our Capital Gains Tax Calculator. Check rental yield after refinancing with our Buy-to-Let Calculator. Test monthly cashflow with our Cashflow Calculator.
External references: HMRC: Capital Gains Tax | MoneySavingExpert: Remortgage guide
Refinance vs Sell FAQs
Should I remortgage or sell my investment property?
Remortgaging keeps the asset, avoids CGT and preserves rental income. Selling gives full liquidity but triggers CGT. The key question is whether cashflow remains positive after a new, higher mortgage — and whether you need the full sale proceeds or would be satisfied with the equity released via remortgage.
How much equity can I release by remortgaging?
Most BTL lenders allow up to 75% LTV. On a £200,000 property with an £80,000 outstanding mortgage, a 75% LTV remortgage to £150,000 releases £70,000 of equity tax-free. The lender will also check that rent covers 125–145% of the new interest payment.
Do I pay tax when I remortgage?
No. Remortgaging is not a disposal for CGT purposes. You only pay CGT when you sell the property. This makes refinancing a powerful way to access capital without an immediate tax charge — you simply defer CGT to whenever you eventually sell.
What are the typical costs of a BTL remortgage?
Expect to pay an arrangement/product fee (£0–£2,000), legal fees (£500–£1,000), a valuation fee (£150–£500), and any early repayment charge on the existing deal (0–5% of the outstanding balance). A broker may also charge a fee. Use the calculator above to see how these costs affect your net equity release.
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