The best buy to let remortgages involve straightforward processes with achievable criteria and reasonable rates that make switching beneficial and affordable.
Remortgaging a buy-to-let consists in changing your current buy-to-let mortgage deal to a new one.
The best remortgages for a buy-to-let are usually exclusive to independent mortgage brokers.
Getting the best deal depends on your situation and unique factors, including income, credit history, and equity.
Here’s everything you need to know about the best buy to let remortgages.
How do the Best Buy to Let Remortgages Work?
The best buy to let remortgages allow you to save money by moving to a lower mortgage rate or borrow more money by releasing the equity held in your property.
It can involve moving to a new lender or staying with your current lender, referred to as a product transfer.
Remortgaging a buy-to-let involves taking out a new mortgage on your property but under different terms and conditions.
The process can be longer if you’re switching lenders because it consists in applying for a new mortgage all over again.
The buy-to-let remortgage process can involve various steps:
- Determine the loan to value – You’ll need to know the LTV you’re looking for based on how much you need to borrow. For example, if you want to borrow £150,000 and your rental property is £300,000, your LTV will be (150,000/300,000) x 100 = 50%. You’ll have more access to a better and broader range of products, lenders, and rates if you have a low LTV.
- Shopping around – While it’s worth asking your current lender about the remortgage deals available, you must also shop around and assess your options. This involves researching different lenders and remortgage products for the best deal, and you can use the help of a mortgage broker with whole-of-market access.
- Making your application – You must prepare and apply once you find a suitable lender and product. It includes information about you, your property, and your rental income. You’ll also undergo the same financial scrutiny you did when applying for your current mortgage.
Eligibility for the Best Remortgages for a Buy to Let
In addition to completing affordability assessments and credit checks, lenders will view your application differently than a residential one.
They’ll want to know why you want to remortgage and how much rent the property can generate compared to the mortgage cost.
Most lenders require the rental income to cover 125% to 145% of the monthly mortgage repayments.
Some also have income requirements, like earning a minimum of £25k to £45k, but not all.
The type of property or tenant you have can also be a factor for lenders. Most lenders disallow students, and anything non-standard in your property will raise red flags.
You can also face hurdles for the best buy to let remortgages if any perceived risks are involved, like having a house of multiple occupancy (HMO), a flat, a thatched cottage, or a timber frame.
Reasons for Remortgaging a Buy to Let
When your initial or fixed rate term ends, you’ll move to your lender’s standard variable rate (SVR), which is significantly higher, and you want to avoid this from happening.
Remortgaging to a new deal with a lower interest rate can help you save money.
Since you can no longer reduce your mortgage interest expenses from your tax bill, saving money has never been more critical for a landlord.
Remortgaging your rental property can help you release equity to fund home improvements like an extension, new kitchen, or additional bathroom.
It’s a common reason to remortgage and is accepted by most lenders, especially if you can show that the home improvements will add value and attract higher rent prices.
Expanding Your Portfolio
You can remortgage to raise money for buying additional properties and expanding your portfolio.
Depending on the size of your equity and whether your house has increased in value, you can raise enough money to fund buying another property outright or putting down a deposit.
The remortgage process can be complex depending on the number of properties you have, and you may need a lender specialising in landlords with a portfolio of properties.
It’s common to remortgage to pay off debts, especially if you’ve gained substantial equity in your property through repayments or an increase in value.
Remortgaging can help you pay off debts in two ways.
It can help you negotiate lower interest rates and get lower mortgage payments, allowing you to put the saved amount towards other debts.
It can also allow you to borrow enough money to pay off other debts, but you should do this lightly since you’re essentially shifting it to your mortgage.
You should get professional advice before proceeding because you may pay more in the long run or get low rates since it can signal financial difficulty to lenders.
Buying Out a Partner
You can remortgage to raise enough money to buy out a partner or change specific mortgage terms if you own a buy-to-let property with someone else.
It will involve completing a new buy-to-let mortgage application with your current lender or a new one so they can determine if you can afford mortgage repayments alone.
There should be any hurdles, provided you meet the lender’s eligibility requirements and affordability criteria.
How Much Can I Borrow with the Best Buy to Let Remortgages?
The amount you can borrow with the best remortgages for a buy-to-let will depend on the equity you have in your property, your financial position, and the LTV ratio the lender is willing to stretch to.
The loan to value refers to the amount you want to borrow as a percentage of the property’s value.
Lenders apply different limits or maximum LTVs and usually offer better deals for borrowers with low LTVs.
Best Buy to Let Remortgages Final Thoughts
Most lenders allow you to start the remortgage process three to six months before your current deal ends.
The Bank of England base rate recently increased and will likely rise again within the year, so now is the perfect time to remortgage and fix your deal to avoid increased mortgage rates.
A qualified mortgage broker can help you explore your options and give you access to some of the best buy-to-let remortgages available.
Call us today on 01925 906 210 or contact us. One of our advisors can talk through all of your options with you.