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HomeBuy to LetBuy to let remortgages

Buy to let remortgages

Last updated on 11th November 2023 by Martin Alexander

As a landlord, remortgaging your buy to let can be an opportunity to review your investment. Remortgaging allows you to switch to a better mortgage deal or to release equity. You can also check whether you’re charging enough rent to make your buy to let profitable.

This guide will cover everything you need to know to remortgage your buy to let.

Can I remortgage a buy to let property?

To be eligible for a buy to let remortgage, you must meet the following criteria:

  • Have at least 25% equity in your property  Most buy to let mortgages start at 75% LTV. So, you’ll need 25% equity to remortgage. Having more equity can unlock more lenders and better rates.
  • High enough rental value – Your rental value must be at least 125% of your monthly mortgage payments. Lenders will check this to ensure you’re able to repay the mortgage. Some lenders will require your rent to be 140% of monthly mortgage payments.
  • You’re coming to the end of your fixed period – You’ll typically want to remortgage when your fixed period ends. Switching earlier could lead to an early repayment charge (ERC), which can be expensive.

How to get a buy to let remortgage

If you’re coming towards the end of your fixed-rate period, you can start looking at mortgage rates from various lenders. However, if you’re in a fixed deal but want to remortgage anyway, you’ll need to check whether you’ll need to pay an early repayment charge (ERC).

Once you’re ready to proceed, you can take the following steps.

Speak to an advisor

The primary purpose of remortgaging is to try and find the best possible mortgage rate. Buy to let is generally for investment purposes, so you’ll need to find a competitive rate.

An advisor can do this for you, as comparing rates across several lenders is typically done by a mortgage advisor. An advisor can also check whether your rental value meets a lender’s mortgage criteria.

Allow for enough time

If you don’t remortgage before your fixed deal ends, you’ll be on a standard variable rate (SVR), which will be higher than other rates available.

Allow at least two months to start your application. You can then set the date for your new mortgage to begin when your old deal ends. However, you’ll want to search for a new lender at least three months before your deal ends.

Review the rent you charge

When your remortgage is due, it’s a good time to check whether your rental value is correct. Rent is constantly increasing, and lenders will require your rent to be high enough to pay a mortgage.

If you increase your rent, you’ll need evidence, such as a new tenancy agreement (AST) or rent payments on bank statements. You don’t want to start increasing your rent when it’s time to remortgage, as it can be challenging. If you own over four buy to let properties, you could be eligible for a portfolio mortgage.

Learn more about portfolio mortgages here.

Start your remortgage application

You can begin your remortgage application once you’ve found a suitable deal.

It’s also worth checking whether your existing lender can match your new rate, as you’ll have much less paperwork to fill out by staying with your current lender. However, if you can save money on your mortgage, the extra paperwork is worth doing!

What fees will I pay when remortgaging a buy to let property?

You could pay the following fees to remortgage a buy to let property:

Arrangement fees

The most significant fee to remortgage is typically an arrangement fee, which lenders charge. Each deal will have different arrangement fees. Mortgages with the lowest rates usually have the highest arrangement fees. In comparison, the highest rates will have little or no fees.

You can add an arrangement fee to your mortgage, so you won’t have to pay it upfront. However, you’ll pay interest on it with your mortgage each month.

Valuation fees

Your lender will need to check the value of your buy to let property, ensuring the mortgage they’re lending is viable. Some lenders will include a free valuation as part of the deal. Otherwise, the valuation fee is typically around £200-£300.

As you switch lenders, conveyancers must remove your old lender and add your new one to the property.

Lenders will have their panel of conveyancers, or you can use your own. Legal work is sometimes free as part of the deal. Otherwise, you can expect to pay up to £500.

Early repayment fees

You’ll only be liable to pay an early repayment charge (ERC) if you end your mortgage early. You won’t have to pay an ERC if you remortgage once your deal ends. However, an ERC isn’t something to take lightly, as they’re usually a percentage of your entire mortgage!

Can I remortgage a buy to let to release equity?

You can release equity from a buy to let when you remortgage, but you’ll need at least 25% equity. For instance, if your property is worth £200,000 and your outstanding mortgage is £100,000 (50%), you can release £50,000 (25%) equity. Doing this leaves £50,000 (25%) equity in your property and a new mortgage balance of £150,000 (75%).

Only some lenders allow you to release equity, so you’ll need to check before you apply. You’ll also need to inform your lender how much equity you want to withdraw.

Most lenders will ask what you intend to do with the equity. For instance, you may want to buy another investment property, or you may want to remortgage to pay off debt. This can affect the mortgage you’re offered, so you must check your options beforehand.

Learn more: How to remortgage to release equity.

Buy to let remortgage FAQs

You can remortgage anytime, but doing so during your fixed term will result in an early repayment charge (ERC).

Remortgaging when your fixed term ends will only allow you to switch lenders without paying an ERC. You’ll also be able to get a better rate when your deal ends, as you’ll be placed on a lender’s standard variable rate (SVR), which will be higher than available rates.

The easiest way to find the best mortgage rates is to use an advisor. An advisor can then compare mortgage rates across hundreds of lenders.

Doing this without an advisor is difficult, as each lender has hundreds of deals, so comparing thousands of mortgages while understanding the criteria is difficult without a professional.

Most lenders will allow you to switch from interest-only to repayment when you remortgage. A repayment mortgage will cost more, as you’ll pay the interest and the mortgage each month.

With an interest-only mortgage, you’re only paying the interest. As a result, meeting the affordability criteria for a repayment mortgage isn’t as easy.

Yes, you can be declined when you apply for a remortgage. If your property has lowered in value, you may be in negative equity, making it impossible to remortgage.

Bad credit can also cause a lender to decline a remortgage. However, it’s still possible to remortgage with bad credit. You’ll need to find a suitable lender that accepts adverse credit.

About the author

Martin Alexander
Senior Mortgage Advisor

Martin is a senior mortgage advisor who has held a CeMAP qualification for over 15 years while completing an MBA in Global Banking and Finance.