Remortgaging your buy to let properties may seem like an inconvenience only to be done when absolutely necessary. However there are several reasons why you may consider remortgaging a property.
While there are many circumstances where you might need to remortgage a buy to let property, we're going to concentrate on the four most common, and arguably most useful, reasons. Ultimately, most people remortgage to save or access additional money; however, you may not have considered all of these options before.
When is the best time to remortgage?
When your fixed-rate term has or will soon expire
Once your fixed rate ends, you'll automatically move to your lender's standard variable rate (SVR), which is usually higher. That means bigger monthly payments and more interest. SVRs often track the Bank of England Base Rate or LIBOR, so your payments can fluctuate, making cashflow harder to manage.
What are your options?
Most lenders offer existing customers a 'loyalty' product called a "product transfer". This is usually the most straightforward option, as your lender will offer a new rate, usually without a full financial reassessment. It's fast, often done in a day or two, and kicks in automatically when your current deal ends.
However, as with any renewal, we recommend shopping around for a more competitive deal before making a commitment. Rates and lending criteria change constantly. You might have more and better options now than when you first took out your mortgage. Comparing the full buy to let market can be overwhelming, but our expert brokers will be able to do the work for you!
Want to get prepared? You can source a new mortgage rate a few months before your current one ends. If you're switching lenders, let your current one know; otherwise, you'll roll onto their SVR.
Use our buy to let mortgage calculator to check the latest rates.
When your property has increased in value, and you want to release equity
Depending on how long you've owned the property, it will have hopefully increased in value since you purchased it. If this is the case, you may be able to remortgage and release some of the equity to use a deposit for a further buy to let investment or to refurbish and make improvements to the property. Many of our clients do this to expand and/or increase the value of their buy to let portfolios.
What can you do?
In this circumstance, the majority of investors end up using a new lender for the new mortgage, although not necessarily. It may be possible for your existing lender to offer a 'further advance' facility, which essentially allows you to take on additional borrowing from your lender at a different interest rate to that of your main mortgage. Whichever option you go for, the lender will need to complete a new assessment of your finances and re-value the property.
When your mortgage is coming to the end of the full term
All mortgages have a full term, which runs under any 'fixed terms' relating to the interest rate. The full term is the time in which the lender expects you to repay the total mortgage amount and is most commonly 20-25 years. Therefore, as you approach the end of this term, your lender will be looking to receive payment of the outstanding balance.
What can you do?
Nowadays, the majority of lenders recognise that buy to let properties are usually an investment scheme and that the mortgage doesn't have to be repaid by retirement age. We have access to lenders who will accept repayments from you until you're 85, and sometimes even older! Therefore, if you don't want to or can't repay the remaining outstanding balance by the end of your current term, we'll likely be able to help you remortgage onto a new term to extend it a little longer.
You are transferring a property from personal name to limited company ownership
The term 'transferring' here is a little misleading, as this process is a full sale and purchase transaction in the eyes of lenders and HMRC (you can read more about the process here). While some lenders lend to both individuals and limited companies, there are often a few differences between how they underwrite the mortgages and calculate affordability. Therefore, you'll need a new limited company-specific mortgage for your company to 'purchase' the property. As this transaction can trigger capital gains and stamp duty tax charges, you must speak to a professional tax adviser before starting this process.
Speak to a mortgage expert
If you are looking to remortgage your property, or if you'd like further information about what might be the best course of action for your investment plans, speak to one of our expert mortgage brokers.
You call us on 0345 345 6788 or submit an enquiry here one one of our team will get back to you.
