Buy to Let Remortgage
Adam Beecher and Daniel Deering explain what to consider when remortgaging a Buy to Let.
Can you remortgage on a Buy to Let? How does it work?
It’s very similar to remortgaging a residential property. Initially, when you purchase a property with a mortgage, you’ll have an initial fixed rate or tracker rate period. That product rate will expire at some point.
Much in the same way as a residential mortgage, you would then go through the process of either switching products with your existing lender or moving to another lender at a more preferable rate.
Why should I remortgage my Buy to Let?
It’s really important to stay on top of these things, especially because Buy to Let properties are investments. Their main goal is to create as much profit on a monthly basis as possible.
If you don’t stay on top of your mortgage and know when your rate renewal is due, you could find yourself reverting to a high variable rate payment. That’s going to eat into the profit you’re making. Staying on top of that is crucial to make sure that you are benefiting from the maximum yield at any time.
How do I remortgage my Buy to Let? What’s the process?
Again, much in the same way as a residential mortgage, you’ll go to a mortgage broker – or your existing lender will write to you and let you know that your rate period is coming to an end. Then it’s time to explore your options both with your existing provider and in the wider marketplace.
Obviously, if there’s anything that you need to change, you can address that too. You might want to borrow extra money, to add or remove a party to the mortgage or perhaps something else has changed with the investment itself. It’s quite a straightforward process, as long as you have everything required.
Can I be refused a Buy to Let mortgage?
Potentially, yes. As with any mortgage, there is always a risk that a lender might not be comfortable with the security. Likewise, there may be a change in your credit history or in your circumstances.
Because there is some potential for a Buy to Let mortgage to be declined, it’s really crucial that you leave plenty of time before the product date expires to contact your broker. Then we can run through the full fact find and get everything in place to switch before that product ends.
How long does it take to remortgage a buy to let?
It can be fairly quick, but that is very much dictated by individual circumstances, what your intentions are and how much time there is before the expiry of your initial rate.
If we’re starting now, for example, and the rate you’re currently on expires in June, that should allow enough time for the switch to be quite smooth.
What costs are involved with remortgaging a Buy to Let?
It’s possible you might have a valuation fee to pay, where the lender makes sure the security is suitable for them to take on. Sometimes there are legal fees. A lot of deals do come with free legal services, but it’s possible that while you might find a good interest rate, you might have to pay your own legal services and your own valuation.
One thing that is a lot more common with Buy to Let is that product fees are associated with the interest rate – the lower the fees, the higher the rate and vice versa. They can range from zero fees right through to a percentage of the loan amount, which could be up to around 3% of the loan that you’re looking to borrow.
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Do you have to pay stamp duty when remortgaging to a Buy to Let?
No. The stamp duty would have been paid initially when you purchased the property. The only exception to this rule is potentially where you add someone on to the mortgage and do a transfer of equity. That would then require a stamp duty payment to be made.
That individual’s circumstances would dictate the amount and how that is calculated. But if nothing changes and it’s a like for like, Buy to Let remortgage, then no stamp duty is payable as that was paid at purchase.
What are the benefits of remortgaging a Buy to Let property?
The main benefits are in making sure you’re staying on top of the finance side of things. It means you’re able to budget for the profit you’re going to be making from the property.
When you review the mortgage it’s a good time to reexamine that budget. Your property might have increased in value, so there might be some equity you could take out via the remortgage to fund another investment – or anything else that you may need to do.
Remortgaging a Buy to Let is really important in staying on top of everything.
How can Yellow Brick Mortgages help somebody looking to remortgage their Buy to Let?
An important thing to note right now (podcast recorded in March 2023) is that there have been a lot of changes with mortgages in the last nine months. Obviously, interest rates have gone up, but we’re starting to see them becoming more stable now. So it’s even more important to have that conversation with a broker. We can show you what the marketplace looks like today and we can then explore the options as we go through.
Think carefully before securing other debts against your home.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Your home may be repossessed if you do not keep up with your mortgage repayments.
The Financial Conduct Authority does not regulate most Buy to Let Mortgages.
Approved by The Openwork Partnership on 24/04/2023.