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?
You can. There are two routes, and the right one depends on where you are with the property. A product switch keeps you with your current lender and is usually straightforward. Alternatively, we can arrange a new deal with a new lender.
Borrowers tend to choose the second route when the priority is securing a lower rate, reducing costs or releasing equity.
Why remortgage your buy-to-let?
Most people who remortgage are coming to the end of a fixed product. Fixed products are the overwhelming majority of what we see arranged, though trackers and discounted rates remain available.
When any product ends, the loan reverts to the lender's standard variable rate, which is typically higher than you were paying. At that point you can fix again or move to a different product to manage your monthly cost and protect the return on the property.
Equity release is another common driver - to fund a further purchase, reinvest elsewhere or refurbish the existing property. There are lots of reasons to remortgage.
How do I remortgage my buy-to-let? What’s the process?
Start with your broker - ideally us. The buy-to-let market has changed considerably over the last seven or eight years, particularly around rental affordability.
It is no longer a case of taking £1,000 a month in rent and borrowing whatever you like. The lender, the product and the affordability calculation all have to align so the rent gives you sufficient cover for the mortgage.
If your property is in the Midlands or the North, the yield is often strong enough that most lenders are open to you. In the South and Southeast, where prices are higher, yields tend to be lower and the rental income does not stretch as far.
You cannot simply choose the cheapest product; it does not work that way. The lender and product need to be selected with some care so the loan fits the property and the rent.
If you are capital raising at the same time, we take particular care that the affordability calculations stack up.
Can I be refused a buy-to-let remortgage?
Yes, for a number of reasons. The rental income may not cover the mortgage on your chosen lender's terms. The valuation may show that market rent in the area has fallen, or that the property no longer supports the loan you need.
The valuation can also flag issues with the property itself. It may have been sound five years ago when you first mortgaged it, but has since developed damage or fallen below standard and needs work to bring it back up.
Energy Performance Certificates (EPC) now matter too: if the rating is not high enough, a lender may decline until it is improved. And if your credit position has weakened or you have missed payments, that can also lead to a decline.
There are many reasons an application can be declined, and there is usually a solution. Tell us the full picture at the outset and we can make sure the case goes to the right lender from the start.
How long does it take to remortgage a buy-to-let?
This has shifted. A remortgage involves less legal work than a purchase. We used to say six to eight weeks was realistic, but conveyancing has slowed.
The cause is hard to pin down. The legal stage is simply taking longer, which may be linked to the Land Registry running behind on applications and holding up the work solicitors are trying to complete.
So our current guidance is 10 to 12 weeks for a remortgage. We will complete sooner where we can, but if you plan around 12 weeks you will not be caught out if it runs to that.
What costs are involved with remortgaging your Buy-to-let?
It depends on whether you take a product transfer or a new mortgage. With a product transfer you stay with your current lender and borrow no more than you owe, which makes the switch simple.
In most cases there are no valuation or legal fees. You may pay a modest product fee, such as £1,000, which can usually be added to the loan, and the lender moves you across on an agreed date. It often takes around two or three weeks, so we arrange it a little ahead of your product end date. A broker can handle this in a few minutes.
The costs on that route are minimal, but you are limited to your existing lender's products. If their range is narrow or uncompetitive, you are tied to it.
A full remortgage to a new lender brings a new valuation, new legal work and an arrangement fee, which may be a percentage or a fixed amount. A broker fee may also apply, depending on the case.
Do you have to pay stamp duty when remortgaging?
No. Whether the property is already a buy-to-let or becoming one, there is no stamp duty to pay. If you are turning your home into a buy-to-let, no stamp duty is due, provided you keep it in the same personal name.
You might, for instance, have bought a new home and decided to let the previous one rather than sell it. You have already paid the stamp duty, so there is nothing further to pay; you simply arrange a new buy-to-let mortgage on it.
If you already hold the property as a buy-to-let, the duty has been paid. The one circumstance in which stamp duty arises is moving the property from your personal name into a limited company. That counts as a sale and purchase - you are selling it to your company - so stamp duty is payable. In most cases, though, none is due.
What are the benefits of remortgaging a buy-to-let property?
The advantage of a full remortgage over a product transfer is that you can look across the whole market for the right rate.
If the property has risen in value, you may benefit from a lower Loan to Value (LTV). That could move you from a 75% LTV product to a 65% one, for example, which can improve the rate available to you.
You may also want to draw out equity, whether you created it through refurbishment or it has built up as the property's value has risen, perhaps to fund a further purchase. A remortgage allows that; a product transfer does not.
You could take a further advance through a product transfer, but that takes as long as a remortgage and forgoes the open-market view. So a full remortgage is often the stronger option where you want the widest choice of rates or access to your equity.
What else do we need to know about remortgaging a buy-to-let?
We guide you through the application and manage the lenders on your behalf. With buy-to-let, the work is in matching you to the right lender on affordability so you can reach the right rate. The high street lenders carry the lowest interest rates, but many landlords do not meet their rental income requirements.
That is where a broker earns their place. We take your details, identify which lenders to approach, run the right calculations, establish how much you can borrow and keep the additional costs down. There is a good deal of value in getting that right.
Your property may be repossessed if you do not keep up with your mortgage repayments.
Most buy-to-let mortgages are not regulated by the Financial Conduct Authority.
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