How to Buy-to-Let Remortgage
What is a buy-to-let remortgage?
A buy-to-let mortgage is a type of mortgage used by people who want to purchase a property for investment purposes rather than to live in it. The buy-to-let remortgage is like a normal remortgage.
When you take out a mortgage to buy a property, it will most likely come with a standard rate. This rate lasts for up to 2-5 years before the initial rate expires and gets increased by the lender of the mortgage.
If you are looking to do a remortgage, the best time you can take action is a few months before your original mortgage is transferred to a higher rate.
We recommend searching for a different lender in this period that will agree to take on your mortgage and additionally give you a more preferable rate than what your existing lender will raise your rate to.
Three reasons why you should get a buy-to-let remortgage
A buy-to-let remortgage is often taken out to maintain a mortgage top offer interest rate for the entirety of the mortgage. Many property investors find the best product to be the one that has the most reasonable and lowest interest rates.
For a property owner to do well in their business, they need to keep the profit of their investments as high as possible. You can achieve this by getting the best mortgage interest rates available.
The second reason why a property investor chooses the option of doing a remortgage is if they have a property experiencing growth in the price and that has a lot of equity.
Choosing a remortgage in this situation often helps in renovating the property or even increasing your portfolio.
Remortgaging can also help to change the loan in many forms. For instance, getting a remortgage lets you change from a variable-rate mortgage product to a fixed-rate mortgage.
What to consider before getting a remortgage for a property
When making an important decision such as taking out a remortgage you need to consider the consequences it comes with. Even though remortgaging is a great strategy to save money when investing in a property, it could also mean that you could lose a lot of money if you do not do the proper research.
If you are tied into an agreement with a lender for a product rate, you need to see the profit and loss that comes if you break the agreement.
Even if it means that you might get a better rate out of remortgaging, you should still consider the fact that breaking ties with your current lender could mean losing money.
Before deciding to get a remortgage, it is advisable to consider any additional cost that can come up in this situation. Even finding a different lender that may give you a better rate can be costly.
You might pay survey fees, lender arrangement fees, or even legal fees. Before taking action, do the proper research to find out whether the buy-to-let remortgage will remain beneficial from your end.
How to get the best buy-to-let remortgage
There are numerous remortgages available for you in the UK. But you need to take into consideration that the lenders that make remortgages possible have different criteria to meet.
To get the best buy-to-let remortgage out there, you need to take into account some important factors including:
- A considerable yearly income
- The size of your deposit. The higher your deposit is the higher the chances are for you to get a lower interest rate.
- Owning a reasonable amount of equity
- A good credit history
Buy-to-let remortgage rates in the UK
Remortgage rates change depending on the economic situation. So even if remortgage rates are low in the present days, they can still rise unexpectedly.
Before getting a remortgage, you need to consider all the existing costs that apply to owning a property for renting purposes. It is advisable to take into consideration accidental damages, wear and tear, and also agent fees and income tax.
These costs will all need to be covered by the profit you earn from the property.
Propositions set forward by the Prudential Regulation Authority have prescribed expanding the measures for purchasing to-let contracts.
Because more contracts are accepted this leads to more danger of loan fee increments and potential losses for numerous landowners because of not having enough tenants to take care of the previously mentioned costs.
Fees to consider before applying for a buy-to-let remortgage
A low-interest rate does not always mean that you will get the best deal. Applying for a buy-to-let mortgage is a big step.
You need to make sure to view the cost of the repayment charges and the cost for the new mortgage. These expenses can be quite hefty in most cases, especially if you have a limited budget.
For some people, the savings they have prepared to buy a property can all vanish just because of the required fees.
If you are unsure of what decision to make regarding a buy-to-let remortgage, it is advisable to talk to an expert advisor with knowledge in the field. This will help bring you a better outcome when taking a remortgage.
What buy-to-let remortgage rates could you get?
- Stepped: The rate you get rises over the term of the arrangement. For example, a multi-year ventured bargain beginning at 1% could rise to 1.5% in the second year and 2% in the third.
- Fixed: This kind of rate won’t change during the underlying rate timeframe. This implies you will pay the same amount every month until your contract ends.
- Tracker: This sort of rate references the Bank of England base rate. This implies your rate could go up or down whenever during your mortgage agreement.
- Variable: This is the standard variable rate (SVR) and is set by the loan specialist. This is dependent on the Bank of England base rate and the expense of offering a mortgage.
- Discounted: This is a fixed markdown on the moneylender’s SVR. The rate you pay is based on the changes made to the SVR.
What criteria should you meet to be able to get a buy-to-let remortgage?
The conditions for getting a buy-to-let remortgage are the same as taking out a mortgage for a property that you will rent out. The only thing that might change are the requirements that different lenders acquire.
- Your age makes a difference for being able to get a mortgage for a property that you will rent out. The required age is 21 to 75. In some cases, there are also a few lenders that might lend to people that are as young as 18 years old.
- There are important factors that determine if you can get a mortgage. One is the amount of equity a property has currently available. Usually, lenders require your property to have at least 25% equity. But there are still exceptions where you find lenders that approve you to get a remortgage even with 15% equity remaining from the property.
- Another criteria that you have to meet is having a personal income. There are lenders out there that do not require personal income if you already have a rental income. But there are other lenders that require a personal income of up to £25,000 a year. There are even lenders that are open to approving you even if you receive a personal income from being self-employed as a landlord.
- The type of property also influences whether a lender can give you a buy-to-let remortgage. Most lenders don’t approve properties that have construction that is not up to standard. You should keep in mind different lenders have different types of criteria depending on what kind of property you want to get the remortgage for.
- If you have been a landlord before and have years of experience working in the field, then finding good lenders will be easier. The reason behind this is that you lower their risks for lending purposes. If you are new to the field then finding a good lender could be more challenging. There is a chance of you having a higher interest rate.
- The month to month income of a rental property is considered in all occurrences. Lenders will utilize this in their calculations to decide the amount they are willing to loan on a property.
- You need to always keep in mind that your rates for a buy-to-let remortgage may vary depending on lenders. To make sure, we recommended speaking to a mortgage advisor.
Deciding on getting a remortgage for a property you are renting out is not simple. In many cases, doing the proper research on required fees and expenses pays off. This will determine if you will gain any benefit or profit from the buy-to-let remortgage.
We always recommended asking a person with either knowledge or experience in taking these kinds of remortgages. This will help you grow further as a landowner and an investor.
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Can I remortgage with bad credit?
You can remortgage with bad credit, although you may not get as good of a deal as you would if you were applying with a higher credit score.
Your lender may charge a higher interest rate so consider taking a few months to raise your score before you apply.
How much does remortgaging cost?
The cost of remortgaging includes legal fees of around $1,000 to set up your new deal. If you have a high mortgage balance still, your new lender may help you cover the fees.
How do you remortgage?
To remortgage, you switch from one mortgage lender to another. You would need to apply to remortgage with the new lender and be approved.
Remortgaging is only worth it when you can get a better interest rate than what you already have.
Why should I remortgage?
You should remortgage if you are unhappy with your current mortgage terms or interest rate. Remortgaging can potentially get you a cheaper rate and save you money in the long run.