Buy to Let Remortgage
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Buy to Let Remortgage
Scott West answers some frequently asked questions about remortgaging a Buy to Let property.
Can you remortgage a Buy to Let?
Absolutely. There are two different routes to go down depending on where you’re at with the property. You can do a product switch with your current lender, which is usually quite straightforward, or we can look at a new deal with a new lender.
People tend to do this if they really want to reduce the rate down as much as they can, to make some savings or release equity.
Why remortgage your Buy to Let?
Typically people who are looking to remortgage are coming to the end of their fixed product. Fixed products are pretty much the only thing I see sold these days, although trackers are available, as are discounted rates.
At the end of any product, the rates jump back up to a standard variable product, usually a lot higher than you were paying before. People often want to fix again or change their product to reduce their monthly costs and make as much profit as possible from the Buy to Let.
Often people want to release equity to buy another property, reinvest it somewhere else or refurbish that property. There are lots of reasons to remortgage.
How do I remortgage my Buy to Let? What’s the process?
Speak to your broker – hopefully us. There have been a lot of changes in the Buy to Let market in the last seven or eight years with rental affordability.
It’s not quite as straightforward as getting £1,000 a month and borrowing as much as you want. You need to find the right lender with the right product and the right affordability calculators to ensure that you have enough coverage for your mortgage.
If you’re in the Midlands or the North, your property probably has a good enough yield that you can pick from most lenders. But if your property is in the South or Southeast, yields are relatively low because property prices are much higher. Your rental income doesn’t go quite as far.
You can’t just pick the cheapest product – it doesn’t work that way. You need to be a bit creative with the lenders and product you choose to make sure you get the loan that fits.
If you’re capital raising as well, we need to really make sure that the affordability calculations make sense.
Can I be refused a Buy to Let remortgage?
Yes. for a number of reasons. Perhaps your rental income doesn’t cover the mortgage for your chosen lender. Or the valuation report might have come back showing that market rent has dropped in the area, or the property doesn’t meet the loan requirement you need.
The valuation report might come back with problems with the property. Although it was fine five years ago when you first mortgaged it, perhaps now it’s had some damage or needs some work to do to bring it back up to standard.
Energy Performance Certificates (EPC) are a thing now and if your rating isn’t good enough, a lender might decline the mortgage until you’ve improved it. If your credit status was good five years ago but is poor now, or you’ve missed payments, a lender might decline you for that reason.
There are myriad reasons you might be declined – but there are always solutions. Advise us up front so we have a full picture, and we can make sure we end up at the right place with the right lender.
How long does it take to remortgage a Buy to Let?
This has changed. On a remortgage, there is less legal work to do than the purchase. I used to say that a remortgage should take six to eight weeks, but solicitors are getting a lot slower.
I can’t really pinpoint why. Conveyancing is just taking a lot longer to get through. It might be something to do with the Land Registry being so far behind with applications. It makes it difficult for lawyers to finish up what they’re doing.
So these days I’m saying 10 to 12 weeks for remortgages. If we can get it done sooner, we will, but if you’re mindful that it might be 12 weeks, you won’t be disappointed if we do run up to that timeframe.
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What costs are involved with remortgaging your Buy-to-let?
It depends whether you’re going down a product transfer or a new mortgage route. If you’re doing a product transfer, you want to stay with your current lender and you’re not borrowing any more money, you can switch very easily.
In most circumstances, there are no valuation fees or legal fees. You’ll probably pay a small product fee, such as £1,000 which can be added to the loan, and the lender will switch it over on a given date. It often takes around two or three weeks so we need to do it a little ahead of your product end date. A broker can do that for you and it takes a few minutes.
There are very little costs for that route, but it means you don’t get the best market options. If your lender only has a few products and they’re not the best in the market, you’re stuck with those.
If you’re going down the remortgage route with a new lender, you’re going to be paying new valuations, new legals and an arrangement fee, which could be a percentage or a fixed fee. Possibly there will be a broker fee as well, depending what the case is.
Do you have to pay stamp duty when remortgaging?
No – whether the property is already a Buy to Let or it’s becoming one, there’s no stamp duty. If you’re turning your home into a Buy to Let, you don’t have to pay stamp duty – presuming that you’re keeping it in the same, personal name.
You might have bought a new home, for example, and rather than sell your previous property you want to let it out. You’ve already paid stamp duty so there’s nothing more to pay there. You just get a new Buy to Let mortgage on it.
If you already own the property as a Buy to Let, you’ve paid the duty. The only time that stamp duty would be payable is if you move it from your personal name to a limited company. Technically, it’s a sale and a purchase – you’re selling it to your limited company so stamp duty is payable. But in most circumstances, no stamp duty is due.
What are the benefits of remortgaging a Buy to Let property?
The benefits of remortgaging properly versus a product transfer are that you are able to scour the market for best rates.
If your property has increased in value, you could benefit from a lower Loan to Value (LTV). That might move you from a 75% LTV product to a 65% product, for example, and improve your product rates.
You might want to take out equity – perhaps you created that equity through refurbishment, or the market has improved your property value over time. You want to take that cash out to buy a new property. A remortgage will allow you to do that, whereas a product transfer won’t.
You could do a product transfer and take a further advance with your lender – but that takes just as long and you won’t benefit from the open market view. So remortgaging can be more beneficial if you’re looking to benefit from maximum rates or use your equity.
What else do we need to know about remortgaging a Buy to Let?
We take you through the application process and we manage the lenders. With Buy to Let, it’s all about ensuring that you end up with the right lender for affordability purposes, to get the best rates. The high street lenders have the lowest interest rates, but many clients won’t meet the rental income requirements for those.
So this is where brokers help. We take your information and we know which lenders to approach, which calculations to run through, how much you can borrow and how to minimise additional costs on top of that. There’s a lot of value we can add.
YOUR PROPERTY 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.
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