There are several reasons why you might want to remortgage your Buy to Let property. The good news is that it is completely possible. In this article, we will give you an overview of this type of deal, and explore some of the reasons why you would want to remortgage your Buy to Let mortgage.
A Buy to Let mortgage is a type of mortgage where the intention of the property is to be rented out to tenants. It has some differences from the normal residential mortgage.
A Buy to Let remortgage, however, is a mortgage deal to let out your property that you can switch to when your existing mortgage deal ends.
Refinancing Buy to Let mortgages is not quite as common. The majority of Buy to Let mortgages approved are made up of mortgages obtained on the properties at the time of purchase. Buy to Let remortgages consist of a much smaller portion when compared to the overall residential market. However, Buy to Let investors are open to remortgaging more than ever before.
Reasons for a Buy to Let Remortgage
You can use a Buy to Let remortgage for a variety of different reasons.
- One of the most common reasons for a Buy to Let remortgage is to purchase an additional property and to use the equity from the first as the deposit on the second. You could go for a full remortgage, paying off the original Buy to Let and replacing it with another, or look at a second charge on the property.
- Improving your rate may also be a reason, like with standard residential remortgages. It might be the case that a Buy to Let remortgage offers you lower rates than the rate you have at the moment. In that case, switching would make your monthly repayments lower, until your deal ends.
- Generally, mortgage lenders will approve your remortgage to release equity for a renovation or expansion. Increasing the value of the property, lowers the risk and improves your rental yield, making it a safe investment for you and the lender.
- Buy to Let remortgages can be a good option if you started your time as a landlord with a partner, and now want to do it alone. With the capital provided, you will be able to buy their part to make yourself a sole owner. This isn’t limited to the core property. You can also use this money from one property to secure ownership in another.
- Remortgages to clear unsecured debts are also available, but they are typically offered at inferior rates than those used for other purposes, such as for purchasing a property. However, it becomes a good option when the rate of the remortgage is more likely to be lower than the debts you plan to get rid of, saving you monthly interest.
- You may also have a residential mortgage and want to change it into a Buy to Let mortgage. Maybe you are moving away, or moving in with your partner, and are planning to keep your property to rent out. In this case, you would need to remortgage to a Buy to Let mortgage deal, as many residential mortgages don’t allow you to rent the property out by contract.
- Another reason is if you want to move into your rental property, you will have to convert your Buy to Let mortgage into a residential mortgage. This can be done as a conversion or as a full remortgage, which might be beneficial.
It is best to check with a remortgage advisor ahead of taking any decisions. There are brokers, like Independent Mortgage Brokers, offering great mortgage advice online.
Things to Take in Mind
In order to refinance your property, you will have to undergo the same financial scrutiny as when you first madeyour mortgage application. This includes a thorough credit check and an assessment of whether or not you can afford it. It is also important to keep the same high standard of financial conduct you employed to get the mortgage. You will also be offered the cheapest Buy to Let remortgage rates if you have a good credit history and don’t have a lot of debt. You need to make sure you are an attractive investment for a mortgage lender unless you go for a bad credit remortgage, in which case the scrutiny will be limited.
Buy to Let remortgages can have repayment terms set in a couple of ways, similar to the Buy to Let mortgage types. The owner may be required to pay only the interest due at the end of each month, or they might pay as a full repayment load. Which terms work best for the owner varies from one property owner to another and one portfolio to another.
Buy to Let remortgages have usually higher rates than normal residential mortgages. The bigger deposit you have to put in, the better the Buy to Let remortgage rates you will be offered.
Other things to consider before you remortgage are how successful the renting of your property has been, the tenants who currently occupy the property, and the new market value of the property.
Utilising a Buy to Let remortgage to finance the acquisition of another property can be a sharp business move. When doing this, the property that is already mortgaged stays as the only one at risk if there is any problem in the repayment of the loan. In addition, it is easier to handle a single loan payment each month than to worry about separate payments for different properties.
Things to Avoid
Switching lenders simply because of a lower interest rate is not recommended. There are many other factors to consider including exit and entry fees, the structure of the interest payments, and the flexibility of Buy to Let mortgages.
Finding a Buy to Let remortgage doesn’t need to take a lot of time and effort on your part as a property owner. Some effort needs to be spent though if one wishes to refinance his current Buy to Let mortgage to take advantage of improved terms or to finance a new purchase without risking the new property.
To help, you can contact or visit online at Independent Mortgage Brokers, who offer free mortgage advice within the UK and are a Trustpilot rated ‘excellent’ company.
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