This information should not be interpreted as financial, tax or legal advice. Mortgage and loan rates are subject to change.
A buy to let remortgage is the process of switching from your old mortgage deal to a new one. If you pass all of the required criteria, you can possibly remortgage with your current lender or switch to a new deal offered by a different lender.
Remortgaging is a great option to explore available deals with the aim to potentially save extra money in monthly payments and free up equity for future investments, or adjust the terms of a new product if your needs have changed.
A remortgage is the process of transitioning from an existing mortgage to a new deal by utilising the same property as security.
The reason individuals remortgage buy to let property depends on each borrower, but the main purposes are to find a new deal, rather than revert to the lender’s Standard Variable Rate (SVR), or raise funds from capital in the property for further investment.
- BTL remortgage rates are typically higher than residential mortgage interest rates, but comparable with BTL purchase rates.
- The rent from your property must be higher than your monthly mortgage payment, for a buy to let remortgage deal to be considered affordable to you.
- Lower mortgage interest rates are typically available to those people putting down higher deposit amounts and who have a good credit score and consistent bill payment history.
The amount that you can borrow typically depends on your rental income, which will determine what level of monthly mortgage payment will be affordable to you.
How soon can you remortgage a buy to let?
You should remortgage your buy to let, or at least begin the process, up to half a year before your initial rate period is due to end. The majority of lenders will allow you to secure a deal around 3-6 months before the intended start date of the new mortgage.
- If mortgage interest rates are trending down, it may be beneficial for you to hold out and look further for a better deal closer to your renewal date.
- If mortgage interest rates are trending up, it may benefit you to secure a rate as soon as possible.
A broker will also know if other factors are at play in terms of lender behaviour, for example:
- A lender who has a lot of new business coming in, may increase their rates to stem the flow
- A lender looking to increase new business may reduce rates, to encourage more new business
- At year end, lenders who have not met targets may reduce rates, to encourage new business
- Lenders may change their criteria to accommodate different sorts of business
Speak to one of our expert advisors about your investment plans, request a call-back, talk to an advisor on our live chat facility, or call us on the freephone number at the top of this page.
Buy to let remortgage criteria
The criteria is essentially no different from purchase deals. Rates are typically similar whether you are purchasing or remortgaging.
The only difference you may find between purchase or remortgage deals, is that lenders sometimes offer ‘fee assisted legals’ – this is where the base conveyancing work associated with your remortgage is paid for by the lender.
‘Rental coverage’ is the amount your monthly rental income must exceed the mortgage payment by to be affordable. This is a requirement of a remortgage just as much as when you buy a property.
The rental coverage amount is dependent on whether you pay higher, additional, or basic rate income tax.
Additionally, lenders might require the borrower to have a minimum salary of £20,000-£25,000 per year, however there are many lenders who have no minimum personal income requirement.
Switching is quite common, where you remortgage from residential to buy to let. In the industry, this process is called “Let to buy”. This is often because you are letting a property in order to buy another and involves raising capital for a deposit for an onward property purchase.
Reasons for switching to a buy to let mortgage include:
- Moving to a different property
- Having an empty house that is under a residential mortgage that you would like to rent out
- Inheriting a property you don’t want to live in
If you want to temporarily rent out your former home, you can ask for ‘consent to let’ from your existing residential mortgage provider. If they allow this, they will usually increase the mortgage interest rate they charge you.
You may choose switching to a buy to let mortgage instead, which could be advantageous if you can get a cheaper rate, and/or it would allow you to switch to interest-only payments, where typically residential mortgages are taken on a capital repayment basis.
If you move from capital repayment to interest-only, on a like for like basis the monthly payment would be lower – but you won’t own the property at the end of the term.
When you remortgage buy to let property, you can change the application from an individual basis into a limited company or SPV (Special Purpose Vehicle), if you want to. Professional tax and financial advice may be critical to a decision to do this.
It is important to be aware that remortgaging a buy to let via a limited company, where it was previously mortgaged in your own name, essentially means you are ‘selling’ the property to the limited company – because the legal entity that owns the property changes. A key implication of this is that Stamp Duty Land Tax is payable.
It is the same process as any other buy to let remortgage, but it describes a scenario where a company owns the property, rather than an individual.
Limited company rates tend to be higher than products for individuals, as they sit within a more specialist area of lending.
Whilst not all buy to let lenders offer limited company remortgage products, there is a large range of lenders who do, so the number of products available is very diverse.
Landlords often ask the following about setting up limited companies for buy to let:
- Does the limited company have to be set up solely for buy to let investment? No, you can invest through a trading limited company, but there are fewer mortgage options if you do.
- Does the limited company have to have income from buy to let property only? No, see above.
- How quickly can you set up a limited company? Setting up a limited company for property investment can be done very quickly.
A limited company set up for a specific purpose is a Special Purpose Vehicle (SPV).
Lenders who offer limited company buy to let remortgage products do not require the company to have any history to it whatsoever. So, if it had been set up the day before discussing a mortgage that presents no issues.
You should do is ensure you have set up your company with the correct Standard Industrial Classification (SIC code) to demonstrate it is for property investment.
Standard Industrial Classification codes are a system that tells Companies House what the company does.
When establishing a company, you must choose at least one SIC code (up to four). There are 4 SIC codes that are commonly used by buy to let limited companies:
- 68100 – Buying and selling of own real estate
- 68209 – Other letting and operating of own or leased real estate
- 68201 – Renting and operating of housing association real estate
- 68320 – Management of real estate
If you are uncertain on how to set up a limited company, you should take professional legal and tax advice.
Remortgaging a buy to let to release equity from it, for further investment or home improvements, such as kitchen refurbishment, renovation or loft conversion is very common. It is often a core step in a landlords buy to let investment strategy. As such, this is something any broker can help you do.
Naturally, there would need to be equity in the property in order to do this.
If you are looking at undertaking improvements on the security property, it is of benefit not only to you as the landlord, but also to the lender, as it enhances the property they have lending secured against.
To remortgage buy to let property, first, you have to find out what loan to value (LTV) you require. For example, if you are looking to remortgage a property that is worth £200,000, and you need to borrow £150,000, then your LTV is 75%.
Landlords who are looking for a higher LTV (e.g. 80%), tend to pay higher mortgage interest rates. There are typically more lenders offering a wider range of mortgages and rates for people who seek a lower LTV deals (e.g. 60-75%). This is because there is less risk associated with lower LTV deals.
Our buy to let mortgage calculator will show you the latest buy to let remortgage rates available, it is updated twice daily.
Rates can change quickly; you could bookmark the page in your browser, so you can come back and re-check the deals available.
Many borrowers think that the best buy to let remortgage deals are those with the lowest rate. But, this is not necessarily always the case.
Some deals with low mortgage interest rates have high upfront fees, so over the initial period of the deal it may not offer the most cost effective solution.
The best buy to let remortgage deal you can secure, if lowest monthly payments are a priority, requires factoring in all costs associated with the product.
In order to get the best possible deal, it is strongly recommended that you check your credit report before applying for a remortgage, to ensure that your credit score is in good shape. Some tips to maintain a good credit score are:
- Do not miss payment deadlines for bills
- Register on the electoral poll
- Close your unused credit cards
All of which helps provide lenders with evidence that you will be able to afford mortgage payments.
A specialist buy to let broker will have access to deals from across the market. This offers you choice of deal. They can then calculate the full cost of that deal against other products in the market, to find you the best possible outcome from the range of deals in front of them.
There are two main types of buy to let remortgage rates (the same as with a purchase): fixed and variable. You may also see rates described as discount and tracker, these are types of variable rate.
- Fixed rates - you pay the same amount per month over the initial rate period, which is commonly two or five years. The biggest benefit of fixed interest rates is that you know what you are paying for an extended period of time, which allows you to plan ahead.
If mortgage rates go up, you are protected from your mortgage costs increasing, whilst you are within the initial rate period timeframe.
If rates go down, you will not benefit from a reduction in mortgage costs during the initial rate period, because you are on a fixed rate.
- Variable rates – the amount you pay may vary, because variable rates are calculated from another rate of charge that is subject to change. There are sub-categories of variable rate:
- Discounted rate – is calculated based on a discount on the lender’s Standard Variable Rate (SVR). For example, a lender might offer a 1.5% discount on their SVR of 5%. This means that the payable rate would be 3.5%. If the lender’s SVR changes, either by going up or down, your payable rate would change.
- Tracker rate – is calculated based on an external rate, usually the Bank of England’s Base Rate, plus a certain percentage on top. Some tracker deals have a minimum interest rate, called a “collar” or “floor”. It means that your interest rate will never drop below it, even if the rate it tracks drops below that the initial amount set.
- Managed variable rates – is a rate calculated and managed by the lender and is subject to change.
Reversion rate – after the initial rate period with the lender ends, you will be moved onto their reversion rate, which is usually their Standard Variable Rate (SVR) (a rate calculated by the lender). You will stay on this rate for as long as your mortgage lasts or until you move onto a new mortgage product.
Your lender will decide if their reversion or SVR will increase or decrease, based on Bank of England’s Base Rate movements. Since it is usually a more expensive option, it is sensible to find an alternative buy to let remortgage rate / product.
During the application process, you will have to go through an affordability assessment and credit check – the same process as you will have gone through when you first took out your mortgage, so be prepared.
Starting the remortgage process before your current deal ends gives you plenty of time to evaluate your options and gather the information you will need.
When you decide upon the most suitable option, you will have to submit your buy to let mortgage application. If you are working with a broker, they will do this for you.
The average duration from a buy to let remortgage application being submitted to completion, is 6-8 weeks (purchases take longer).
You don’t need a deposit as such, because if you are remortgaging, the down payment would be the equity you already have in your property at the time of planned remortgage. Equity is the percentage of the property you own.
Buy to let mortgages typically require a greater amount of equity than a residential mortgage does, so if you have less than the minimum amount of required equity in your property when you come to remortgage as a buy to let, you will need to find more cash to top it up.
Yes, you can release equity from your buy to let property if the amount you plan to release does not exceed the maximum loan to value available on a buy to let mortgage. A specialist mortgage broker can investigate the available options.
Yes, you can. People change their type of mortgage for various reasons, such as moving in with a partner, buying a new home and keeping the current one as an investment. The process would class as a remortgage, and depending on the loan to value of your current residential mortgage you can switch on to a buy to let mortgage deal. A specialist mortgage broker can guide you through the process.
- Getting consent from your current lender – this option does not involve remortgaging, but provides you with an option to let your property on a temporary basis whilst preserving current residential mortgage. Your lender could increase your mortgage rate with this process.
- Remortgaging onto a buy to let product – you would have to switch from your residential mortgage onto a buy to let mortgage. Lenders assess buy to let mortgages differently, compared to residential. Personal income is less of a concern because lenders look at your expected monthly rental income to assess how much you can borrow. What’s more, you can make changes to the mortgage to suit any changes in your mortgage needs.
It is uncommon to be refused for a buy to let remortgage, as properties that have already been assessed as suitable security for a mortgage tend to be viewed more favourably than a new purchase deal by lenders.
Things that may cause you to struggle to remortgage include:
- A large drop in the property value: which has either resulted in your loan to value being higher than the maximum available or in extreme cases where the property has gone into negative equity.
- A significant change in your credit history: not all credit issues stop you remortgaging your buy to let, but some can, for example, being made bankrupt.
Many people believe their age may be problematic but actually, in isolation, upper age limits really aren’t an issue. Some lenders have very generous criteria around the age you can be at application for a buy to let mortgage.
You cannot live in a property you own that has a standard buy to let mortgage. Neither can your immediate family.
If you would like to live in your buy to let property, you would need a residential mortgage and if you wanted to rent your property to your family, you would need to switch it to a regulated buy to let mortgage.
This type of mortgage is only applicable to properties that are rented to immediate family. They are regulated by the Financial Conduct Authority (FCA). A regulated buy to let mortgage has stricter guidelines, compared to a regular buy to let mortgage, which offers better financial protection to the borrower.
Yes, it is possible. Be sure to check when your deal ends, as if you want to make a change before the end of your initial rate period, you may have to pay early repayment charges. The best time switch from a repayment to an interest-only buy to let mortgage is after the renewal date (the date the initial period comes to an end) but you can plan to make this change 6 months in advance.
Many lenders allow overpayments of up to 10% of the current outstanding balance, which would have a similar effect to a switch to capital repayments, at least until you can remortgage.
It is not always better to remortgage with your existing lender.
In fact it is very important to do thorough research to establish who you should remortgage your buy to let with. Your lender may offer preferential terms to you as an existing customer, than they would to a new customer, but that still does not mean that it represents the best deal you could get.
To establish who can offer you the most cost effective deal, it is important to compare deals from across the buy to let market, as you might be able to achieve a significant saving by doing so. A specialist mortgage broker can help you with this.
When you remortgage buy to let property, you have the opportunity to make changes to your borrowing, if you want or need to. One of those options is to select either capital repayment or interest-only monthly mortgage payments.
- Capital repayment buy to let remortgage: capital repayment, or just ‘repayment’, buy to let mortgages not only pay the interest a lender charges for lending you money, but also gradually pays off the lump sum you have borrowed too. The lump sum is referred to as the capital. At the end of the mortgage term, you will have repaid the full amount you borrowed and the interest, and you will own the property outright, or ‘unencumbered’.
- Interest-only buy to let remortgage: With an interest-only remortgage, you only pay back the interest the lender changes for lending you money, and not the capital or lump sum you borrowed. At the end of your mortgage term, you will have to repay this capital/lump sum.Interest-only mortgages are popular with landlords who aim to generate more income over the course of term. The gained income can then be used to purchase other properties or to refurbish current buy to lets.
At the end of the term landlords can pay back the loan:
- By selling the property
- Using savings
- By remortgaging to a new product