If you’re a landlord and looking to release equity or reduce the monthly repayments on your buy-to-let mortgage, a question you have already asked yourself is can I remortgage my buy-to-let? So, here’s the good news: You can remortgage your buy-to-let property!
At YesCanDo, our specialist buy-to-let mortgage advisers are here to help you. Keep reading to learn more and then get in touch with us for buy-to-let mortgage advice when you’re ready to consider a remortgage for your rental investment.
How to Remortgage Your Buy-to-Let Property
Buy-to-let mortgages are similar to residential mortgages in most ways. The main difference is the vast majority of buy-to-let mortgages are set up on an interest-only basis.
When it comes to interest rates you will find that mortgage deals are very similar on a buy-to-let mortgage vs residential mortgages.
Interest rates and products vary considerably between mortgage lenders. Some lenders specialise in buy-to-let mortgages so you should do what you can to improve your chances of a better buy-to-let mortgage. The next steps are advised.
1) Get your financial house in order
If you’re looking to remortgage your rental investment, the first thing you need to do is consider your financial situation. There are a few things mortgage lenders will take into account when deciding how much to lend you, and these include:
- Your credit history
- Your rental income
- Your current equity
- The size of the remortgage you want
Before approaching a lender, you should do what you can to improve your credit score and your level of income. You should also save money for a bigger mortgage deposit. By taking these steps, mortgage lenders are more likely to offer you a better rate of interest to reduce your mortgage payment plan.
2) Search for a new mortgage deal
After improving your financial situation, you can then consider the buy-to-let mortgage deals that are out there. However, timing is everything.
If you remortgage too early, you could be liable for early repayment charges (ERCs) from your existing mortgage lender.
If you remortgage too late, you will end up on your lender’s standard variable rate (SVR). This interest rate will usually be higher than that on an existing fixed or tracker rate mortgage, so it’s best to remortgage before the end of your fixed or tracker initial rate period.
The right time to consider remortgaging is usually about 4-6 months before your current buy to let mortgage rate ends. This will give you enough time to research buy-to-let mortgages and complete the application process before your old deal ends and your new remortgage deal begins.
3) Talk to a mortgage broker on how to release equity
When considering remortgage deals, it’s wise to speak to one of our advisers who specialises in buy-to-let mortgages. At YesCanDo Money, we can give you all the advice you need on buy-to-let remortgages and can help you gain access to a deal that will help you save money in the long run.
If you would like to talk about the remortgaging process for a buy-to-let further, feel free to contact our team of expert mortgage advisors or chat with us on WhatsApp.
4) Search for a new mortgage deal
After improving your financial situation, you can then consider the buy-to-let mortgage deals that are out there. However, timing is everything.
If you remortgage too early, you could be liable for early repayment charges (ERCs) from your current lender.
If you remortgage too late, you will end up on your lender’s standard variable rate (SVR). This interest rate will usually be higher than that on an existing fixed or tracker rate mortgage so will lead to an increase in mortgage payments. Therefore it’s best to remortgage before the end of your fixed or tracker initial rate period.
The right time to consider remortgaging is usually about 4-6 months before your current buy to let mortgage deal ends. This will give you enough time to research buy-to-let mortgages and complete the application process before your old deal ends and your new remortgage deal begins.
Things to take into consideration when remortgaging a buy-to-let property
How does remortgaging work? Before you start your buy-to-let remortgage, consider the following seven points first.
1) Equity
The more equity you have in your property, the better, as you will be able to use some of it as a deposit for your next mortgage. Your mortgage lender will instruct a valuer to determine the value of your property as this will let them know the amount of equity you have to play with.
2) Projected rental income
Most mortgage lenders will require an annual projected rental income to be at least 125% of your annual mortgage repayments. It’s advisable to do what you can to improve your expected rental income, such as making improvements to your property so you can raise the rental charge.
3) Rental Property type
If your property is deemed as non-standard, you may be ruled out of the best buy-to-let remortgage deals on the market. Non-standard properties include flats, high-rise buildings, and any type of house that doesn’t have a standard brick or slate-type roof.
4) Number of properties
Mortgage lenders will want to know about all your properties. This will include residential mortgages as well as buy-to-let mortgages. The information needed on each property includes.
- Property value
- Property address
- Mortgage lender
- Outstanding mortgage
- Rental income
- Is each mortgage a repayment mortgage or interest-only mortgages
Our advice is to set up a simple spreadsheet with all this information and this can be kept updated by you and also can be emailed to your mortgage broker when you need to remortgage any of your buy-to-let mortgages or residential mortgages.
5) Credit score
It’s not impossible to get a new buy-to-let mortgage with bad credit although you won’t be able to access the best deals on the market due to the perceived risk you pose to mortgage lenders. It’s advisable to improve your credit score before making your application.
6) Personal income
When assessing your affordability on a buy to let mortgage, lenders will take your personal income into account when deciding how much to lend you. Although the rental income is a major factor on a buy to let mortgage it is our experience that most applicants do not realise that mortgage lenders set a minimum income requirement of £25,000 per annum for those looking to acquire a buy-to-let mortgage loan, although there are those who may accept less.
7) Tenants
Your tenants will not be on a short-term tenancy agreement. Some lenders will turn down your remortgage application if the people living in your property are relatives, students, and people on benefits. This is because mortgage lenders see them as a risk to your income and your ability to pay off your buy-to-let remortgage.
Related reading: Remortgage Same Lender: A Comprehensive Decision-Making Guide
Why would you remortgage a buy-to-let property?
This is a question the mortgage lender will ask you as the reason why you’re looking to remortgage could have an effect on the deals you will be eligible for. If you were looking to remortgage your buy-to-let to release equity, for example, your application might be treated differently than if you were to remortgage to reduce your monthly mortgage payments. Reasons to remortgage your buy-to-let include:
Increase your property portfolio
If you raise extra on your buy-to-let mortgage as you want to buy another rental property, you could use the equity from one house to pay for the deposit on another. This is a common practice for landlords although it’s worth noting that some lenders will limit the maximum number of rental properties you own to offset the risks involved in owning a large number of properties.
Releasing equity for buy to let
If you have equity in your buy to let property, you may want to release some equity. The capital raised can then be used to achieve such things as:
Releasing equity for home improvements
It is common for landlords to release equity to reinvest in their let properties Landlords often use the released capital to make home improvements to their property to increase its value. This reinvestment can increase monthly rental income and yield as well as the value of the property. Lenders are likely to let you release equity for this purpose as it offsets any risks to them.
Releasing equity for debt consolidation
If you consolidate your debts with a remortgage, you may benefit from a lower interest rate so you will be able to improve your financial situation sooner. However, some lenders will limit the loan to the value of the mortgage they offer, so you may not get access to the best deals.
Reduce your monthly repayments
It’s common for people with a residential mortgage to remortgage as they can benefit from lower interest charges. If you were to do the same on your buy-to-let properties, you would reduce each monthly payment on your loan and make more of a profit.
You can reduce your monthly payments with a repayment mortgage and an interest-only mortgage, but speak to one of our team to find out which mortgage type is right for you.
Change to a residential mortgage
If you ever decide to live in your let property, you will need to remortgage to convert your buy-to-let mortgage into a residential mortgage, be that through your current lender or another mortgage provider. Get in touch with us for mortgage advice related to this situation.
Buy-to-let remortgage rates
Rates vary between mortgage lenders as they each have their own eligibility criteria. Lenders will consider such things as:
- Your income – Customers with a higher annual income often have access to better rates as they are seen as less of a risk factor by the lender.
- Credit score – Customers with good credit scores are likely to get a better rate than those with poor credit scores.
- The size of your deposit – The higher the deposit, the lower the interest rate.
When looking at buy-to-let mortgages, other factors can affect the rates you will be offered, such as how much equity you have in your property, the length of your proposed loan term, and the Bank of England base rate.
However, it’s worth keeping in mind that the lowest rate doesn’t always equate to the best deal. It’s important to consider the overall cost of the buy-to-let mortgage, including setup costs for the mortgage and early repayment charges.
To ensure you don’t fall into any hidden traps, it’s always worth speaking to a member of our team for impartial advice and support to make sure both your residential mortgage and your buy to let mortgages are working for you.
Laura's Buy-to-Let Remortgage Success
Expert fee-free buy-to-let mortgage advisors
For free buy-to-let mortgage advice, speak to YesCanDo. An experienced buy to let mortgage adviser will take time to understand your buy-to-let situation. We will search the whole mortgage market to find you the best buy-to-let rates and deals for your rental property goals.
Remortgage your buy-to-let property with help from YesCanDo Money
For up-to-date information on buy-to-let mortgage rates and advice on what to do when remortgaging a buy-to-let mortgage speak to one of our mortgage brokers today.
We are an experienced buy-to-let mortgage broker, with access to the whole mortgage market, we can compare mortgage rates on your behalf, to make sure you get the very best mortgage deal including those from specialist mortgage lenders that may be better suited to your particular situation.
We will discuss with you the different types of mortgage products available so you gain access to the right mortgage for your needs. YesCanDo will do everything that is needed for your buy-to-let remortgage promptly to ensure you don’t incur any charges or extra interest. This will include full support with your mortgage application and regular communication with your mortgage lender and solicitor.
If you need help with your residential mortgage we can help you with this as well.
For more advice on mortgages, get in touch with our team today and follow the links below for some useful information.
FAQs
Can I borrow against a buy-to-let mortgage?
Yes, you can borrow against a buy-to-let mortgage by remortgaging your property. This allows you to release equity and use the funds for various purposes, such as property improvements or expanding your portfolio.
Can I remortgage to release equity for buy-to-let?
Absolutely! Remortgaging your buy-to-let property can release equity, which can be used for property improvements, debt consolidation, or even purchasing additional rental properties.
Can I remortgage a buy-to-let property?
Yes, you can remortgage a buy-to-let property to access better interest rates, release equity, or change the terms of your existing mortgage.
How soon can you remortgage a buy-to-let property?
Typically, it's best to consider remortgaging 4-6 months before your current mortgage deal ends. This allows enough time to research and complete the application process without incurring early repayment charges or moving to a standard variable rate.
Can I remortgage into a buy-to-let?
Yes, if you plan to rent out your current residence, you can remortgage it into a buy-to-let mortgage. You'll need to meet the lender's eligibility criteria, including rental income requirements and personal income thresholds.
Do you need a solicitor to remortgage to a buy-to-let?
Yes, you'll need a solicitor to handle the legal aspects of remortgaging your property to a buy-to-let mortgage. They'll ensure the process runs smoothly, manage property searches, and deal with any outstanding charges or issues.
