Last reviewed on 18th October 2021
A buy to let remortgage should be a simple process, but many landlords can get it wrong. It’s important to secure the best possible mortgage deal you can.
A buy to let remortgage is typically carried out to either withdraw equity or to switch to a better rate.
There could be other reasons why you’d want to remortgage your buy to let. Furthermore, a remortgage isn’t always advised, so let’s read on.
If you own a portfolio with over four properties, you may want to consider a portfolio mortgage. Learn more about portfolio mortgages here.
You can also make an enquiry with our buy to let mortgage experts. We’ll search the entire market for you ensuring you get the best buy to let deal when you remortgage.
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Reasons to remortgage a buy to let property
One of the main reasons to remortgage a buy to let is to get a better mortgage rate. After all, the aim of property investment is to generate an income.
Buy to let mortgages are usually taken out on an interest-only basis. This is so monthly mortgage payments are minimised to maximise profit.
Once your initial mortgage term expires, interest-only mortgages will revert to an SVR (Standard Variable Rate). An SVR is typically a lot higher than other rates available.
Before your initial mortgage term expires, you can look to remortgage your buy to let. This is so you’re able to maximise your investment income.
Reducing your mortgage rate as much as possible can generate thousands of pounds in additional profit, so it may well be something to consider.
See the example below (based on a £100k interest-only mortgage on a 5-year term):
SVR rate: 5% fixed rate = £417 per month (£5004 per year)
Rate after remortgage: 3% fixed rate with £600 fees to switch = £251 per month (£3012 per year)
As you can see from the above example, even though the remortgage has some associated costs, it will still save you £1992 a year!
Withdrawing equity from a buy to let
A buy to let remortgage can allow you to withdraw equity in a property. The equity withdrawn can then be used to purchase another property, or used for renovations.
Your reason for releasing equity really depends on your investment goals. This is why the reasons for remortgaging can be so varied.
Learn more: How to remortgage to release equity.
Changing the term of your current mortgage
You may be unhappy with your current mortgage term and are looking to change it. This is quite common as you may want to change the length of your mortgage term.
It’s also possible to switch mortgage types. For instance, you may want to switch from a repayment mortgage to interest-only.
Remortgaging can be very beneficial if it makes financial sense. Property owners that have run into financial difficulty can also use a remortgage to pay off debt.
There are situations when a remortgage may not be the best option. You’re perhaps already on a great rate, or your buy to let property may be in negative equity. In some situations, it can even become impossible to remortgage.
Which buy to let deals should you choose?
Landlords are typically quick to select mortgages with the lowest interest rates. Remember, a low-interest rate is only part of the mortgage.
There could be other fees and terms attached to the mortgage making it more expensive over the entire term. A mortgage with a slightly higher rate, but no fees could be a cheaper option overall.
Buy to let remortgage rates explained
Always consider the overall cost of a mortgage and if you’re not sure, utilise the expertise of a mortgage advisor.
Low rate mortgages often have high fees attached, so be careful before making any decisions. In comparison, even if an attractive rate has high fees, it may still be cheaper overall.
See the example below (based on a £100k interest-only mortgage on a 2-year term):
Mortgage A: 2.8% fixed rate – £2500 fees
Mortgage B: 3% fixed rate – £1000 fees
Mortgage C: 3.5% fixed rate – £0 fees
Mortgage A: Monthly cost = £239
Mortgage B: Monthly cost = £252
Mortgage C: Monthly cost = £292
Based on the above example, even though ‘Mortgage A’ costs £2500 in fees, it’s still £53 cheaper than the mortgage with no fees at all. When calculated annually, that’s a saving of £636. In some areas of the UK, that’s the equivalent of one month’s rent.
Checking the length of your mortgage
It’s also important to consider the term of your mortgage in addition to whether or not it has a fixed or tracker rate. You may want security in the mortgage more so than flexibility for instance.
If so, you can choose a longer fixed term as opposed to a lower variable rate for a shorter term. This is to avoid being caught out by increases in the Bank of England base rate.
Be sure to check other charges and fees, such as early redemption penalties. You can be penalised if a property is sold or remortgaged before the term expires.
In cases such as these, you may benefit from a secured loan on your buy to let instead of a remortgage.
Buy to let remortgage specialists
Utilising the experience of a broker could save you money and secure you a great mortgage. Our advisors specialise in buy to let mortgages and are whole of market brokers, meaning you can access every lender you qualify for.
To make an enquiry, ask our experts a question below.