How to Remortgage Buy to Let
There are many reasons why a landlord may want to remortgage. This includes improving their mortgage rates or wanting to release equity from a rental property.
Regardless of the reason for remortgaging, it’s important to have a good understanding of the process. This enables you to organize your remortgage in good time.
In this article, we discuss how to remortgage a buy-to-let property.
What is Remortgaging?
Remortgaging is when a homeowner switches from their existing mortgage to a new one. The mortgage is either transferred to a new lender or a new deal with an existing member.
Once the remortgage has been approved, it will replace your previous one.
Can you Remortgage a Buy-to-let Property?
Yes, it’s possible to remortgage a buy-to-let property.
If you have previously been accepted for a mortgage it places you in good stead to have a remortgage offer accepted. This is not always guaranteed, and there is an eligibility criterion you will need to meet.
When looking to remortgage a buy-to-let property, here are some aspects that lenders will take into consideration:
- The success of the property
- The income received from the property
- Your credit score
- The properties equity
- The type of buy-to-let mortgage (e.g. interest only mortgages)
Your eligibility may change based on the individual lender. This is why it’s important to do all you can to ensure your finances and paperwork are in order before applying for a remortgage.
Given that it can take a while to secure a new mortgage, it can be useful to look at remortgage deals in advance.
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How to Get a Buy-to-let Mortgage?
The process of securing a buy-to-let mortgage is typically straightforward. Certain aspects can vary depending on the chosen lender.
You will want to begin by looking for remortgage deals. You can do this independently, or you can seek help from a mortgage broker.
Choosing the right time to remortgage is important. It’s useful to look for deals around six months before your current mortgage ends to give yourself ample time to find the best deals.
To apply for a buy-to-let mortgage, it’s important to have all the correct documentation needed. This includes:
- Your current finances and credit history
- The equity in the buy-to-let property
- ID documentation
- Proof of the income received from renting
How Soon Can You Remortgage?
You will typically need to wait at least 6 months to remortgage. However, you will need to check your contract to confirm the exact date for your remortgage.
The majority of lenders will have a set amount of time you are required to adhere to before you remortgage a buy-to-let property.
The length of time it takes to remortgage a buy-to-let property after submitting your application will vary. While some may take as little as 3-4 weeks, others may take up to 8 weeks or longer.
How Much Can You Borrow?
When it comes to how much you can borrow, lenders will focus on aspects such as:
- The amount of rental income you have
- Your credit score and history
- Current equity in the property
- Any personal assets and capital gains
- Some may consider the current tenants of the property
Once you have provided this information, lenders are able to have a better understanding of your financial situation.
There isn’t a set amount of money you can borrow. This is because it’s based on different factors, such as the equity in a property, and the amount you’re looking to borrow.
The money a lender will allow you to borrow is called the Loan to Value (LTV). The LTV is a percentage based on the value of the property and the equity it’s raised.
While the LTV could be 50% for one property, it could be as much as 80% for others. The rates are always based on each individual lender. As a result, there is no set number or LTV.
To find out how much you will likely be able to borrow you should speak to a mortgage broker. You will want to be placed in contact with a buy-to-let solicitor.
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Why Should I Remortgage a Buy-to-let?
There are many reasons why people choose to remortgage a buy-to-let.
Release Equity for a Deposit for Another Property
Remortgaging is a common reason why people will consider remortgaging a property. It allows a person to release the equity in the property. This can then be used to place a deposit on another property.
Equity is the money built up in a property as it increases in value over time. If a property was purchased for £100,000 and the property value increases to £150,000, £50,000 of equity has been gained.
Converting Buy-to-Let to a Normal Mortgage
Landlords may choose to remortgage a buy-to-let property to move into the property. To do this, they will need a residential remortgage. You legally cannot live in a buy-to-let property.
Getting a Better Mortgage Deal
When it comes to fixed-rate mortgages, they are only fixed for a set number of years.
When this period ends, the person will automatically begin to pay the lender’s standard variable rate (SVR). The SVR tends to be more expensive than a fixed mortgage rate and often has higher interest rates.
By choosing to remortgage, a person can typically find a less expensive option. This can help to lower monthly mortgage repayments and help landlords to save money.
Improvements to the Property
Upkeeping a Buy-to-let property can be expensive. Over time it will be subject to repairs and may need renovating. If you need to replace things such as the roof, a bathroom or a kitchen, you will need to finance this.
If you don’t have the available funds, it’s often possible to remortgage to release a property’s equity. The equity can then be used to make necessary home improvements.
It’s not guaranteed that a remortgage will be accepted on these grounds. However, renovations and improvements are often favoured by lenders. They can help increase the value of a home.
Why Could I Be Denied a Buy-to-let remortgage?
When applying for a remortgage, it’s never guaranteed and you may be denied. Here are some reasons why this may happen:
Your Credit Score and Finances
While you may have had good credit when you were accepted for your initial mortgage, your finances will be looked at again when remortgaging. If you have bad credit and are currently in debt, this can affect your remortgage.
A lender needs to be confident in your ability to carry out monthly repayments. If one lender denies your remortgage request, another may be willing to accept your application.
The Lease of the Property
If you own a leasehold property, and the lease is shorter than 80 years, this can affect your ability to remortgage.
The Type of Property and Tenants
Some lenders can be quite strict when it comes to the type of property you want to remortgage. Some lenders will also take into consideration the tenants living at the property.
Age
If you’re over 60, it can be more difficult to secure a remortgage due to your age. It’s not impossible, but there will be fewer lenders available offering this.
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Frequently Asked Questions
Can I Remortgage a Residential Mortgage to Buy-to-Let?
Yes, in the majority of instances, it’s possible to remortgage a residential mortgage to a buy-to-let. However, there are aspects lenders will consider. This includes:
- Where you will live
- The mortgage type
- The type of property
- The amount of rent you will gain
A lender will likely assess why you’re looking to change your type of mortgage, and whether they think you’re suited to this.
How Do I Remortgage Residential Buy-to-Let?
To begin the remortgage process you need to contact your mortgage lender. After assessing your finances, credit and how you’re planning to use the property, they will come to a decision.
If your mortgage lender doesn’t approve this, it can be possible to remortgage with a new lender. You will need to speak to individual lenders and a mortgage broker to begin this process.
Can I Remortgage My Buy-to-Let to Release Equity?
Yes, it can be possible to remortgage your buy-to-let property to release equity. This is the reason why many people choose to remortgage in general.
