If you’re a landlord and looking to raise equity or reduce the monthly repayments on your buy-to-let mortgage, this may be a question you have already asked yourself. So, here’s the good news: You can remortgage your buy-to-let property!
At YesCanDo, our specialist mortgage advisers are here to help you. Keep reading to learn more and then get in touch with us for mortgage advice when you’re ready to consider a remortgage for your rental investment.
How to remortgage a buy to let property?
To remortgage your rental property, you need to speak to a mortgage lender that offers buy-to-let mortgages. What they offer you will depend on a number of factors, including your affordability, the amount you want to borrow and how much equity you have in the property you own.
Rates and products vary considerably so you should do what you can to improve your chances of a better mortgage. The next steps are advised.
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 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, lenders are more likely to offer you a better rate of interest to reduce your mortgage payment plan.
Search for a new mortgage deal
After improving your financial situation, you can then consider the 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 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 mortgage 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.
Talk to a mortgage broker
When considering remortgage deals, it’s wise to speak to one of our expert mortgage brokers. 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.
Things to take into consideration when remortgaging a buy-to-let property
Before you take out a buy-to-let remortgage, consider the following first.
- 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.
- Projected income: Most mortgage lenders will require an annual projected income to be at least 125% of your annual mortgage repayments. It’s advisable to do what you can to improve your income, such as making improvements to your property so you can raise the rental charge.
- 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.
- Credit score: It’s not impossible to get a new mortgage with bad credit although you won’t be able to access to 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.
- Personal income: When assessing your affordability, lenders will take your personal income into account when deciding how much to lend you. Most lenders set a minimum income requirement of £25,000 per annum for those looking to acquire a buy-to-let mortgage, although there are those who may accept less.
- Tenants: To make a rental income, you obviously need to find tenants. However, some lenders will turn down your remortgage application if the people living in your property are students, people on benefits, or sitting tenants. This is because lenders see them as a risk to your income and your ability to pay off your buy-to-let remortgage.
Why would you remortgage a buy-to-let property?
This is a question the 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 the interest rates on your repayments.
Reasons to remortgage include:
Increase your property portfolio
If you’re looking 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.
Make improvements on your property
When you make improvements to a property you can increase the value, which is good news for you, as you may see a bigger rental yield. Lenders are likely to let you release equity for this purpose as it offsets any risks to them.
Consolidate your debts
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 value of the mortgage they offer, so you may not get access to the best deals.
Reduce your monthly payments
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 repayments 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 buy-to-let property, you will need to remortgage to convert your BTL 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 lenders as they each have their own eligibility criteria. They 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.
Your credit score – Customers with good credit scores are likely to get a better rate than those with a poor credit score.
The size of your deposit – The higher the deposit, the lower the interest rate.
When looking at buy-to-let mortgages, there are other factors that 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 loan, including setup costs for the mortgage and ERCs.
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.
FEE-FREE EXPERT BUY TO LET MORTGAGE ADVISORS
For free buy to let mortgage advice, speak to YesCanDo. We take time to understand your individual buy to let situation. We will search the whole mortgage market to find you the best rates and deals for your rental property goals.
How YesCanDo Money can help
For up to date information on mortgage rates and advice on what to do when remortgaging a buy-to-let property, speak to one of our mortgage brokers today.
As an expert mortgage broker, with access to the whole mortgage market, we can compare deals on your behalf, 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.
And we will do everything that is needed for your buy-to-let remortgage in a timely manner 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.
For more mortgage advice, get in touch with our team today and follow the links below for some useful information.