Remortgaging a buy to let property

If you’re looking to remortgage your buy to let property, it’s important to know what the benefits are to help you to decide if remortgaging your own buy to let property is the right financial decision for you.

The benefits of remortgaging a buy to let property include:

• Freeing up funds to purchase another property and grow your portfolio as a property investor
• Helping raise money to renovate a current property
• Finding another mortgage with a better interest rate

In order to give you the highest chance of having your buy to let remortgage approved, it helps to be as prepared as possible. One of the fundamentals of this is that the amount you are requesting for your remortgage will have to be reasonable in relation to how much your property is worth. A property valuation will be required and this will show how much equity is available and what the opportunities for borrowing are. 

Before approving your remortgage, your lender will want details of the rental income you receive, as well as information on any other properties in your portfolio. It may be useful to organise these before submitting your application.

If you’re looking to purchase a new property with this equity, the minimum deposit for a buy to let property is around 25%. However, the more deposit you have the greater opportunity there is to take advantage of the best rates.

When looking to remortgage your buy to let property, understanding the different mortgage options available to you is important, especially if you want to remortgage to improve your interest rates.

There are four main buy to let mortgages available for remortgaging. These are:

Fixed Rate

A fixed rate mortgage means your interest rate will stay the same throughout the term of your mortgage and offers more certainty and less risk than a Standard Variable Rate mortgage. It also means you can confidently set a fixed rental price to tenants.

If Bank of England interest rates climb, you have the benefit of your rate not increasing however, if they drop below the interest rates on your mortgage you won’t be able to benefit from this.

Standard Variable Rate

A Standard Variable Rate (SVR) mortgage doesn’t have fixed interest rates and therefore can carry uncertainty and risk if rates increase. Interest rates are determined by the lender and may fluctuate however these products generally offer additional benefits such as no fees and the flexibility of making unlimited overpayments if this a priority for you.

Tracker

A tracker mortgage is a type of variable rate mortgage that is linked to and tracks the Bank of England base rate. You can benefit from interest rate savings with a tracker mortgage if the Bank of England interest rates drop, as your mortgage interest rates will reflect this. However, if these interest rates go up, you’ll be subject to payment increases.

Discounted Variable

A discounted variable mortgage is another type of variable rate mortgage and offers interest rates at a set percentage below the lender’s SVR. Your monthly interest payments could change if the lender’s interest rates change. However, your interest rates will remain at the agreed percentage below your lender’s interest rate.

Yes, you can either obtain consent to let from your current lender or remortgage your residential mortgage to a buy to let mortgage.

You would typically require consent to let from your lender if you need to move out of your home temporarily and you intend to move back to the property at some point. Permission is required from your lender or you risk breaching the terms of your mortgage. Lenders will usually charge a percentage rate on top of your existing rate or a fee to provide consent, some lenders will charge both.

If consent to let is not suitable for you as you need a longer-term solution or it is not granted by your lender, you can change your residential mortgage to a buy to let one. Buy to let mortgages require more equity in your home than a residential remortgage and the projected rental income will be considered when assessing affordability.

A buy to let remortgage typically comes with several fees, which will vary depending on your lender and the details of your property – for example, higher value properties will have a higher property valuation cost. It’s important to clarify any costs with your lender before proceeding with your remortgage. Fees you may incur include:

Mortgage product fees

Also called ‘completion’ or ‘arrangement fees’, mortgage product fees are paid to your lender for setting up your mortgage. Some lenders may allow you to add this fee onto your overall mortgage loan instead of paying upfront. 

Property valuation

Your lender will require a property valuation to determine how much your property is worth before agreeing to remortgage. Not all lenders charge for this service.

Solicitors' costs

These are simply the fees you pay your solicitor for helping organise the remortgage, as well as for dealing with the legalities of the process.

You’ll also have letting agency fees and landlord’s insurance to cover while you are going through your remortgage. Make sure that you have enough budget to cover all of these before confirming your remortgage.