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Buy to Let Remortgage
James Roberts explains the process of remortgaging a Buy to Let property.
Can you remortgage on a Buy to Let?
Yes, definitely, and it always makes sense to review the latest rates, primarily at the end of your fixed rate period. We recommend starting to look about six months before your current deal expires.
Why remortgage your Buy to Let?
Primarily, it’s to check what current rates are. It’s not always going to be cheaper than what you’re on, but it makes sense to find the best option at the time.
A lot of people will also remortgage a Buy to Let to release equity, perhaps to fund a deposit for a new Buy to Let if you’re looking at building a portfolio, or for other reasons such as home improvements. You might want to improve your Buy to Let property or your own residence. You can release money for a whole host of reasons.
How do I remortgage a Buy to Let?
The best time to probably start looking is about six months before the end of your current deal. If you do want to take extra money out, we will look at how much you will likely be able to take, and start getting some of your paperwork prepared.
Buy to Let lenders usually lend money based upon the rental income that’s coming in, not necessarily your own personal income – although some lenders take that into account as well.
So it’s all about getting prepared. Gather recent bank statements, tenancy agreements and tax returns to be as prepared as you can. Then the remortgage application process will be as smooth as possible.
Can I be refused a Buy to Let remortgage?
Unfortunately, yes, you can. Apart from obvious reasons like having poor credit, you could be declined based on how lenders make the borrowing calculation.
As I’ve already mentioned, the amount you can borrow is linked to the rental income, and there are some weird and wonderful calculations around this. When interest rates are higher, those calculations get stricter.
So if somebody took out a mortgage when rates were lower, they wouldn’t need to receive as much rent as they might do now. Based on the rent you’re charging, you might not be able to borrow the amount you need to repay the existing mortgage.
A couple of other things can have an effect too, such as the energy performance certificate (EPC). If you’ve owned a property for a period of time, you might not have received an EPC recently. And now, to let out a property, there’s a requirement for an EPC rating of at least grade E. It’s very important to make sure you’ve got an up-to-date certificate.
Finally, some lenders don’t accept ‘portfolio’ landlords, who have four or more mortgaged Buy to Let properties. Some lenders might only lend on the first three, and when you get to number four they might no longer be able to lend to you.
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How long does it take to remortgage a Buy to Let?
Getting the mortgage offer issued normally takes two to three weeks, and on some occasions it can go quicker. It could also take a little bit longer.
Then there’s the legal process to change from one lender to another. That probably takes six to eight weeks. So whilst it can be done more quickly, I recommend customers allow up to a couple of months for the whole process.
What costs are involved when remortgaging a Buy to Let?
The main fees are arrangement fees from the lender and potentially some solicitors fees. Most lenders tend to give an option not to pay an arrangement fee or application fee, which will lead to a slightly higher rate; or you can pay a fee to lower the rate.
Some have varying options of fees, rather than one fee or nothing. They might have two or three options, where increasing the fee reduces the interest rate. Your mortgage broker will do the calculations to make sure you get the best combination of fee and interest rate over the whole two, three, or five year term.
Most lenders will either contribute towards your legal fees or give a fee-assisted product. The solicitors might not be completely free, but the main part of their work will be covered by either that cashback or the lender themselves.
Do you have to pay stamp duty when remortgaging your Buy to Let?
If it is a simple remortgage, where you’re keeping the property in the same name, there won’t be any stamp duty to pay. Changing lenders or borrowing more money won’t affect that.
That’s as it stands at the moment, because stamp duty is a government tax and the rules can always change [podcast recorded in June 2024].
What are the benefits of remortgaging a Buy to Let property?
The two main benefits are to obtain the best interest rate at the time, and if need be, to release equity for whatever reason – you might want to make home improvements, expand your portfolio or just release capital.
A lot of lenders will allow you to release capital for any legal purpose. There are lots of reasons that it might make sense to remortgage.
How can a mortgage broker help?
A lot of Buy to Let lenders don’t actually deal with customers directly. They might not have high street branches you can deal with. So one of the main advantages is that a broker has access to far more Buy to Let lenders than you can find direct.
We will assess the most suitable combination of interest rate, fees, cashback and valuation fees, taking into account all the costs, not necessarily purely the cheapest interest rate. A broker is also going to know whether or not a lender will consider an application based upon just the rent, or if they will take your income into account as well.
We also make the assessment based on the overall size of your portfolio. Remember, this is what we do every day. With us, you can be sure that the application will go through as smoothly and quickly as possible.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
SOME BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
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