How To Remortgage A Buy To Let Property?
Are you contemplating the moment to remortgage your buy-to-let property? Whether you seek better rates or aim to release equity for further property investments, the decision to remortgage requires careful consideration. In this guide, we explore the motivations behind remortgaging a buy-to-let property (BTL), the essential considerations in the process, and the invaluable assistance a remortgage broker can offer in securing optimal buy-to-let remortgage rates.
Can You Remortgage a Buy-to-Let Property?
Absolutely. Remortgaging your buy-to-let property is a viable option, whether you’re pursuing improved rates, capital for expanding your property portfolio, or reconsidering a property you once leased. The ability to remortgage provides flexibility and opportunities for property owners to enhance their financial position.
The buy-to-let market has encountered challenges recently, with landlords facing difficulties in borrowing due to stringent stress testing measures. The stress rate, a critical factor in borrowing capacity, has fluctuated from around 4% to 10.5%. However, there has been a slight easing, with mainstream lenders now applying stress tests under a 6% rate, offering relief for landlords.
Why Remortgaging a Buy-to-Let Property?
Remortgaging a buy-to-let (BTL) property is a strategic financial decision that landlords may consider for various reasons. Understanding these motivations can help property owners make informed choices based on their financial goals and circumstances. Here are common reasons why landlords opt to remortgage a buy-to-let property:
End of Current BTL Deal:
When your current buy-to-let mortgage deal approaches its conclusion within the next six months, it is an opportune time to explore remortgaging. This strategic move prevents being transitioned to the lender’s standard variable rate (SVR), which may be less favourable.
Securing Better BTL Rates:
Remortgaging allows you to capitalize on improved buy-to-let remortgage rates available in the market. Regularly reviewing the market and considering remortgaging options as your fixed or tracker mortgage term nears completion is advisable. Specialized brokers often facilitate access to exclusive lenders and deals.
Positive shifts in the market include lower buy-to-let mortgage rates and the scrapping of EPC requirements for landlords by Rishi Sunak. These developments, combined with improved stress testing conditions, present a more favourable landscape for buy-to-let remortgages.
Buy-to-Let Remortgage Scenarios:
Unlocking capital through remortgaging a buy-to-let (BTL) property can be a strategic financial move, providing funds for various purposes. Here are common scenarios for remortgaging to unlock capital and insights into how lenders may view these applications:
Changing a BTL Mortgage to Residential:
If the plan involves moving into a property once rented out, a remortgage is necessary to convert the buy-to-let mortgage into a residential one. This can be initiated by discussing options with the current lender or exploring the market for a more advantageous deal.
Releasing Equity for Portfolio Growth:
Remortgaging a buy-to-let property to release equity for expanding the property portfolio is common among landlords. However, lenders may impose restrictions based on the size of the portfolio and stress tests. Specialist buy-to-let remortgage brokers can navigate these complexities.
Funding Property Repairs or Improvements:
Leveraging a buy-to-let remortgage to release equity for essential property repairs or enhancements is a strategic use of capital. Many lenders support such initiatives, anticipating increased property value and rental yields.
Remortgaging When Your House Has Increased in Value:
If the property has appreciated, landlords may consider remortgaging to leverage the increased equity. Lenders may view this positively, especially if the increased value enhances the borrower’s financial position. Accurate property valuations and updated documentation will be essential for lenders to assess the new equity position.
Remortgaging a buy-to-let property to consolidate debts into a more manageable amount is possible, albeit with the need for a specialist lender. Affordability and financial stability play crucial roles in determining eligibility for such remortgages.
Eligibility Criteria for Buy-to-Let Remortgages:
Lenders evaluate buy-to-let remortgage applications similarly to initial mortgage applications. Key criteria include:
Deposit and Loan to Value (LTV) Requirements:
Buy-to-let mortgages typically require a larger deposit, with a maximum LTV ratio of 75%. Specialist lenders may offer higher LTV under specific circumstances.
Income and Affordability:
Stricter income and affordability checks are applied during remortgage applications. Lenders assess rental income to cover the mortgage, usually by 125-145%. Different lenders have varying criteria for assessing lending capacity.
The success of Rental Property to Date:
Demonstrating a reliable rental income history enhances the likelihood of approval. Tenant demographics, property type, and desirability to lenders are factors to consider.
Current Market Value of the Property:
Realistic property valuations are crucial, especially if there has been an increase in value. Accurate assessments contribute to favourable remortgage terms.
Credit profiles influence remortgage rates. While adverse credit may lead to higher rates, specialist brokers can assist in finding suitable options.
Can I Remortgage a Buy-to-Let Property When Living Abroad?
Yes, it is possible to remortgage a buy-to-let property while residing overseas. While expatriate status may pose challenges, specialist lenders accessible through broker intermediaries can facilitate the process.
Mastering the art of buy-to-let property remortgaging involves understanding motivations, navigating market conditions, and meeting eligibility criteria. Whether seeking improved rates, funding property ventures, or consolidating debt, a strategic and informed approach, often with the assistance of a specialized remortgage broker, can optimize outcomes in the dynamic landscape of property investment.