Buy to Let Remortgage
- Buy to Let specialists
- Exclusive rates available
- 5-star reviews
- Personal service
What is a Buy to Let remortgage?
Similar to a conventional remortgage on a residential property, a Buy to Let remortgage involves shifting your loan to another lender (or perhaps a different product from the same lender), in order to make sure your loan is always on the most favourable terms available.
When you take out a mortgage, there will typically be an initial set time period (usually two, three or five years) when the interest rates are more competitive. After this initial period, the rate will revert to the lender’s standard rate, which is invariably higher than that which you would have enjoyed up to that point. The best time to look into remortgaging is a few months before this is due to happen, when you should start researching lenders and deals that will offer you a better interest rate than the one your current lender will switch to.
So, a Buy to Let remortgage is sometimes a complex process of research, negotiation and completion of finding alternative lenders and products that can provide a cheaper interest rate than what your current loan will switch at the end of the initial period.
Buy to Let remortgage information
Helping you to remortgage and stay profitable
You may already understand that there are two key methods to ensure your Buy to Let business remains self-financing and as profitable as possible: to maximise your rental income and minimise your mortgage costs.
You will be looking for the best mortgage deal when you first buy your property to let, but it’s also equally important to make sure you are on most favourable deal at any given point in time, especially after the initial deal period ends. For most landlords, this will mean remortgaging your property when necessary to get the best deal on the market rather than reverting to the lenders standard interest rate.
Here, we’ll go a little further into the details.
Remortgaging my Buy to Let
The motivations for remortgaging your Buy to Let property to a new lender are clear–by finding a better deal than the one offered by your current lender after their initial deal period, you will avoid an undue increase in costs and potentially make savings on your outgoings, therefore increasing your profits.
However, it’s important to take more than the interest rate into account when looking at a Buy to Let remortgage. As with any financial decisions, the decider on what path to take with a Buy to Let remortgage will be all the associated costs involved.
Your current lender is likely to charge a standard exit fee, and if you are still within a tie-in period on your current mortgage scheme, you will also face early repayment charges, which could amount to thousands of pounds. You’ll need to check your mortgage agreement or annual mortgage statement for all the details of any early payment fees specific to the mortgage product you have, and it’ll be wise to double-check these on any future deals you consider.
Taking out a new mortgage could also come with further peripheral costs, such as valuation fees, arrangement fees and legal costs. You’ll need to check that all the extra associated costs incurred on remortgaging do not exceed the amount you expect to save in interest payments on a new deal.
Lastly, common sense will tell you to make sure the terms of the new mortgage suit your plans and needs for your investment. Will you be tied in to early repayment charges, or will you be free to move the mortgage after a certain period and remortgage again in the future? Is it really the kind of mortgage product that suits your outlook? Be aware of attractive offers designed to tempt you into a particular scheme (e.g. a tracker mortgage), when you might prefer the structure of a different kind (e.g. the predictable payments of a fixed rate mortgage).
Should I remortgage my Buy to Let?
For your Buy to Let property business to thrive, you will need to make sure your margin of profit from the rental income is as high as possible – especially in light of changes to the tax rules around mortgage interest. Ensuring your mortgage is on the most favourable interest rate available at the time is a core strategy in keeping your costs down, and is thus the main reason why most landlords will look to remortgage their Buy to Let property.
Since the financial crisis of 2008–9 and subsequent credit crunch, the Bank of England base rate of interest has gone through a period of all-time low, only rising a fraction in 2018–19 to reach 0.75%. Economic and political pressures may force a further rise at some unknown point in the future, so it may be the prudent course of action for many landlords to consider a remortgage before a Bank of England rate rise causes equivalent rises across the market.
There are other reasons for choosing to remortgage. Some landlords may have seen the value of their property increase significantly in value and will want to take advantage of this extra equity by releasing funds in a remortgage – perhaps to use on renovations or to buy an additional property. Others may want to remortgage in order to change some of the terms of their loan–for example, switching from a fixed-rate mortgage to a variable rate product.
Why shouldn't I remortgage my Buy to Let property?
It’s important to make sure that any changes to your financial arrangements or terms of agreements will be to your benefit in some way. Remortgaging can appear to be a good way to make sure you don’t waste money and keep your Buy to Let business as profitable as possible, but at the same time you should also be aware of situations when you shouldn’t remortgage your property, and why.
- If you are tied in to a mortgage product rate and time period, then you may need to pay fees (sometimes amounting to thousands of pounds) in order to release yourself from that plan and move your loan to another provider. This could work out to cost you more than staying with your current arrangement and interest rate.
- A new mortgage is likely to entail many set-up costs–for example, arrangement fees, legal costs and survey fees–that might negate the financial benefits of remortgaging. This is particularly worth thinking about if you only have a small balance remaining on your loan.
All these costs and other considerations should be taken into account when looking into remortgaging your Buy to Let property, and making sure that it will be beneficial to you. At The Mortgage Centres, our experienced advisors can take a close look at your Buy to Let mortgage, compare it to the whole market, and give you a thorough assessment of whether remortgaging will be the right thing for you.
What is the stress test for Buy to Let mortgages?
This is a test of the affordability of the mortgage compared to the anticipated rental income from the property.
Rental income is the key measure used by lenders to discern affordability, and when you applied for your Buy to Let mortgage, your lender would have checked that the anticipated rental income was at least a certain percentage factor more than the mortgage interest payments. In recent years, this typically would have been an annual rental value of minimum 125% of the annual interest on the mortgage, but in 2017 the Prudential Regulation Authority (PRA) set out new guidelines obliging lenders to go further to ensure that Buy to Let mortgage applicants are able to afford their mortgage payments, even in the event of an interest rate rise. Some more stringent plans will require a 145% rent-to-interest ratio, which can rise to even 175% in the case of Houses in Multiple Occupation (HMOs).
If you are a portfolio landlord–defined by the PRA as holding four or more mortgaged properties–the requirements placed on lenders is even tighter. You may have to undergo a review of the income and cash flow across your total portfolio in order for the lender to get an overview of your business and therefore the level of borrowing that you will be able to afford.
What are the criteria to remortgage my Buy to Let?
There are not really any significant differences between the criteria for obtaining a Buy to Let mortgage and those for getting a remortgage on a Buy to Let property. Of course, each individual lender will have their own small adjustments, but the main things that lenders generally take into account can be outlined in the list below.
- Your age–The range of ages that lenders typically are willing to lend to is actually very broad–from 21 or over up to 75–so the vast majority of people will not be penalised. But there are some lenders who are prepared to lend to anyone aged 18 or over, and there are others who put no upper age limit on applicants.
- The monthly rental income–This is a vital figure when it comes to calculating how much a lender is willing to allow you to borrow, and lenders will consider it in every Buy to Let application.
- Your personal income–Many lenders will not need you to prove an independent income beyond that from rent, but in some cases, other lenders may want to take your income from a salary or other sources into consideration, and require you to have a personal annual income of at least £15,000-25,000. As this is a specialist area of lending, most lenders are able to be quite flexible and could be willing to consider your self-employed income as a portfolio landlord, whether you are operating as a limited company or a sole trader.
- The equity in the property–This is the figure that is remaining from the total value of the property after the remaining mortgage loan amount is taken out. When taking out a new mortgage, this is usually the deposit. When remortgaging, it is the money that has already been invested in the property over the course of the repayments of the mortgage (as well as the initial deposit). Buy to Let lenders will usually need there to be at least 25% equity in the property, but there are a number of specialist lenders who will be willing to lend on a property with as little as 15% remaining in the property after the mortgage is allowed for.
- Your experience–If you have just one Buy to Let property, then lenders may perceive you as a higher risk and impose stricter criteria for the mortgage, although this doesn’t mean that you won’t be able to get a competitive interest rate. However, if you are an experienced landlord with a portfolio of properties and a thorough knowledge of how to run a multi-property business, then lenders are likely to look upon your application more favourably.
- The type of property–Some lenders may prefer to avoid certain types of properties, or those built using a non-standard construction method, and so getting a mortgage will be difficult. Additionally, some flats and apartments in certain situations may have restrictions or risks associated with them and lenders will usually need to see a greater amount of equity.
As with conventional mortgages, the criteria for a Buy to Let mortgage can vary from one lender to the next. It’s important to discuss your plans with an expert mortgage adviser, who will already be familiar with the small print across a range of providers and products, and will be able to guide you towards the right remortgage plan to suit your needs.
Can I remortgage my Buy to Let and increase my borrowing?
If your property has gained in value since the time you first took out your mortgage, then yes, it is entirely possible to remortgage your Buy to Let and increase your borrowing. As usual, though, there are various criteria that a lender will need to consider during the application process in order to determine if they want to lend to you.
Unfortunately, estimates of the size of a loan the lender is willing to extend may go down as well as up, depending on your individual circumstances. If you want to increase your borrowing by remortgaging your Buy to Let property, then you should get in touch with our team at The Mortgage Centres today, and one of our expert advisors will be able to guide you through the process.
What are the fees to remortgage my Buy to Let property?
If you want to remortgage your Buy to Let property for any reason, then you need to make sure that the arrangements will benefit you in some way, and that the costs do not outweigh the potential gains. There a number of fees that you should take into account:
- Lender’s arrangement fees–You are likely to get the most competitive rates from a lender if you are able to pay an arrangement fee, which can range from being a fixed amount to a percentage of the loan value. Many lenders will allow the fee to be added to the loan amount, so you will not need to pay it up front, but you should note that if this is the case it will remain there for the life of the mortgage, during which time you will be paying interest on the arrangement fee amount as well as the loan itself.
- Application or Product fees–These are similar to arrangement fees, but are simply payment to access a particular service, rather than a fee for completion. As such, they are likely to be always charged up front, and will be non-refundable in cases where your mortgage does not go through or complete.
- Valuation or Survey fee–A big part of a lender’s assessment into how much they are willing to lend against your property is a survey to ascertain its value. A lender will want to determine the property’s condition, property type and market value in order to be sure of the amount they should let you borrow. There are many lenders who offer this service free of charge as part of the arrangement, but many others who will charge you for the survey that they need carrying out.
- Legal fees–Again, some lenders will have their own legal representative to act on their behalf during the process of remortgaging your Buy to Let property, but others will ask you to cover this cost.
- Mortgage broker fees–You should always make sure you get the best advice from a qualified, experienced broker when looking into remortgaging a Buy to Let property, as it is imperative to get the most suitable and favourable deal available in the circumstances. Mortgage brokers are essential to this end, and will usually charge a broker fee for their services.
As you can see, the list of potential fees around remortgaging your Buy to Let property can add up, so it is important to make sure you don’t end up paying over the odds for this service. Getting professional help will reduce the chances of wasting money, ensure the deal is viable and improve the likelihood of you getting the best remortgage product in the shortest amount of time.
Buy to Let remortgage rates
It can be quite a time-consuming and often confusing exercise when trying to find the right remortgage rate for your Buy to Let. Every lender will have their own packages, deals and criteria, each with their own incentives and drawbacks. It’s essential to know exactly what your priorities will be in your new mortgage.
Each lender will also have their own methods of analysing a range of technical information–about you, your income, the property and the potential rental revenue–in order to confirm the amount that they are willing to lend in a remortgage deal. Lenders are typically most interested in how much equity you already have in the property, the achievable market rental rates, the type of property, and your own personal income as well as your experience as an investment property owner and landlord.
Even with all the information listed above, the amounts offered for a remortgage may vary significantly, and some lenders may even decline your application. For this reason, it’s important to go over your circumstances and application with a specialist Buy to Let mortgage adviser, who will be able to guide you through what can be a financial minefield if you don’t know what to look for.
At The Mortgage Centres, our advisers have access to the whole market, and are able to source exclusive deals that are not available elsewhere due to our familiarity with the market and relationships with specialist lenders. Take advantage of our in-depth knowledge of the Buy to Let remortgage market.
Buy to Let remortgage lenders
Many high street banks and building societies do offer Buy to Let mortgage and remortgage products that you will be able to access directly, but they are unlikely to be at the most competitive rates. You’ll find that the best rates are offered by specialist lenders who you don’t find on the high street and don’t advertise online-these lenders and deals are accessed via a specialist mortgage broker with expert knowledge of the mortgages landscape.
If you’d like to access exclusive deals and favourable rates not available from mainstream lenders, drop a line to our team at The Mortgage Centres today and arrange a free initial discussion.
Buy to Let remortgage advice
When people consider a remortgage on their Buy to Let property, they usually simply try to find the best interest rate available and go with that. Unfortunately, this could end up costing you more in the long run, as a great rate is usually balanced by larger arrangement fees, a shorter initial deal period, a tie-in period, possible early repayment fees, and other possible charges or inconvenient criteria (either hidden or upfront).
Making sure you have the most suitable mortgage for your circumstances and needs is often more important than getting the best interest rate, and you should be sure the mortgage meets your plans and goals, both short-term and long-term, and contains terms you are comfortable with.
It’s also vital to understand the many varying criteria that lenders use when assessing your suitability for the loan, its affordability and deciding whether to loan or not. Mainstream lenders do offer some Buy to Let mortgage products, but the best range of deals is available through specialist lenders that you won’t find on the high street, and usually accessed through expert mortgage brokers like our team at The Mortgage Centres.
Our familiarity with the market means we will know which particular lender will be able to offer the best deal to suit your individual circumstances. If you’d like help with a Buy to Let remortgage today, please contact one of our specialist Buy to Let mortgage advisors via our online contact form. It could save you a lot of time, effort and money in the long term.