What is a Buy to Let Remortgage?
A buy to let remortgage is the process of taking out a new mortgage on a property you already own. Usually this is done to replace an existing mortgage, or to borrow money secured against your property.
Why Get a Buy to Let Remortgage?
- Remortgages are a viable option if you are seeking to:
- Reduce monthly repayments with a more competitive interest rate
- Pay off the mortgage earlier
- Raise money for a buy-to-let investment (capital raise)
- Consolidate more expensive debts
- Change the ownership of the property (for example, a transfer of equity)
Understanding Rates on Buy to Let Remortgages
BTL remortgages typically have higher rates than standard mortgages because lenders classify them as higher risk. This makes it essential to find the best rates when looking for financing.
When you take a remortgage, there will be a range of mortgage rates on offer from different providers, including:
Fixed-rate – This means that the rate stays constant throughout a designated period (e.g. two or five years). You pay the same monthly rate until the fixed-term is complete.
Variable-rate – The rate will follow the Standard Variable Rate (SVR) set by the lender, which may be based on the Bank of England base rate.
Tracker rate – These rates stay above the Bank of England base rate, so it changes every time the base rate changes. This means your payments will go up and down during the term of the loan when the base rate changes.
Interest-only – In this type of financing, you only pay the interest on the mortgage rather than paying the loan amount as well. The capital balance of the loan will be paid at the end of the term.
Discounted rates – This type of loan offers you a discount on the lender’s SVR. The amount you pay each month will change if the lender’s SVR changes, but the discount stays constant.
Getting a good deal on your rates depends on several factors, including your personal financial situation and how much you want to borrow. It’s possible to secure a buy to let remortgage even if you don’t have good credit (to an extent), but the rate you will pay may be higher as a result.
How Much Can I Apply for?
- The size of your buy to let remortgage depends on several factors, including:
- How much equity you have in the property you are remortgaging (you will typically need at least 20%)
- The value and rental income of the property on the current market
- Lender rental income stress tests
- Your credit record
How to Find the Best Buy to Let Remortgage Rates
Research, research, research! You’ll have to spend some time finding reputable lenders and comparing remortgage deals which can take some time. Using our buy to let remortgage rate finder will help make this process a little easier. Mortgages can be quite complex, and there are a few factors that can notably affect the overall rates and costs that aren’t always immediately apparent, including the initial rate, maximum LTV, lender fees and subsequent rate. If you want the most competitive rates for your remortgage, it’s best to speak to a knowledgeable mortgage broker, as they have the insight and network to leverage on your behalf to get the best possible rates.
What Should I Consider in a Buy to Let Remortgage?
While rates matter, there are other considerations to keep in mind to help you get the best deal. This includes:
Lender criteria - Every lender is different and looks for different things in a client. While you might be a textbook applicant for one, another wouldn’t even consider your application. Rather than only focusing on rates, rather start with a lender who feels you’re a good match.
Remortgage costs - The real cost of a mortgage is so much more than the interest rate. Be sure to consider the arrangement, valuation fees, and legal costs before you decide. Our brokers can help you compare the lifetime costs of different mortgages to help you secure the most affordable option.
Hidden stingers - Some mortgages have additional terms that are easy to miss at first glance. These can catch you out financially, so be sure to let an experienced broker take a look at your mortgage documentation before you sign.
How to Apply for a Buy to Let Remortgage
- Contact your existing lender to find out how much you owe on your property and if this process will incur any additional charges.
- Get in touch with a mortgage broker. We will run through your financial situation and what you are looking to achieve. Then we’ll do all the heavy lifting for you, including researching the market to find the best rate available and presenting these to you – for FREE.
- If you are happy to proceed, we will then approach the lender on your behalf and obtain a Decision in Principle (DIP).
- Assuming the DIP is successful, we will then submit the full mortgage application. You will also be asked to supply relevant documentation, e.g., passports, payslips, tax calculations, bank statements, proof of address, etc.
- Your new lender will request a valuation report for your property and will underwrite your mortgage application.
- Your appointed solicitor will then request the property’s title deeds together with any lease that may be present and any additional information they require.
- After your lender approves your mortgage application, you and the solicitor will arrange a completion date. This is the date the solicitor draws the “new” money down from the new lender and uses it to clear the balance with your current lender. Any money left over is paid to you.
Congratulations – you now have successfully remortgaged your buy to let property!
Why Work with Our Brokers?
We have been working in the mortgage industry for over 30 years, and we’re passionate about what we do. Our team isn’t just friendly and welcoming, they have the expertise and network to find you exactly what you need to move forward with your property investment. With a strong emphasis on open, honest customer service and a powerful strategy and product line for getting our clients the results they deserve, we make sure that we deliver the right results.
