Capital raising is a feature of many buy to let mortgages that enables investor landlords to draw down funds from the existing mortgage on a property, often to help finance further property investment. In times of rapidly rising prices, this can be an incredibly effective way to build a property investment portfolio, made possible by the repayment of debt and rising property prices.

Take the following example:

An investor buys a property for £130,000 with a mortgage of £90,000. Some time later, the value of the property has risen to £150,000, while the outstanding mortgage debt has been reduced to £70,000. This means that the investor has £80,000 worth of equity in the property.

The lender has set a maximum loan-to-value of 80%, which equates to £120,000 on a property worth £150,000. This means that there is still £50,000 worth of equity that the landlord can free up and still be within the loan to value requirements of the lender.

With the lender's permission, this could then be used as a sizeable deposit on another new property, along with a slush fund for refurbishment, marketing and maintenance costs.

The money that is drawn down doesn't have to be used to expand, as this is not the aim of every investor landlord. It could be used for repairs to the property against which the mortgage is secured, used to reduce the loan size on another property with a less favourable mortgage rate or some other purpose that falls within the definition of acceptable use by the lender.