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A Complete Guide to Buy-to-Let Remortgages: Equity release options, criteria and more

See how expert advice can help secure your Buy-To-Let remortgage

No impact on credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: July 6, 2021

Remortgaging a buy-to-let (BTL) property can be straightforward for most customers, but for others it can be more difficult, especially if things have changed drastically since the first mortgage was arranged.

Getting the best buy-to-let remortgage for you depends on your situation and a number of key factors, which we cover in this article, so read on for more information about the topics in the contents list below or make an enquiry with us to be matched with a buy-to-let mortgage broker who specialises in remortgages.

Why remortgage your buy-to-let?

You can remortgage your buy-to-let to release equity if you need to raise some cash, plus it’s also a good way to get a more favourable interest rate or change the terms of your mortgage deal. Whatever the reason you want to remortgage your property, it can make a huge difference to your monthly repayments and, therefore, the return on your investment.

If you have finished your fixed or tracker initial rate period, you may find yourself on your lender’s standard variable rate (SVR), which can usually be anywhere from 4% up to 6%.

Example:

If you have a £100k interest-only mortgage on a SVR of 5.25% your monthly payments are likely to be around £438pm. At 75% Loan to value (LTV) it may be possible to get buy to let remortgage deals at say 3.9%, thus lowering your interest by 1.35%, which is £325pm, reducing your monthly payments by £113pm, that’s £1356 a year!!!

How the purpose of the remortgage impacts the products you qualify for

The reason why you’re refinancing your buy to let property can have a big impact on which mortgage lenders and deals you’ll be eligible for. If you’re looking to release equity for home improvements or to use towards a deposit for another property, your application may be treated differently than it would be if you were simply looking to switch to a better interest rate.

Releasing equity from a buy to let property

You can release any equity you’ve built up in your buy-to-let property over the years, but some mortgage lenders might have caveats where these deals are concerned. The reason you want to release the money can play a part in how much a lender will be prepared to lend, if at all. Read on to find out more about the scenarios where you can remortgage to unlock capital and the restrictions lenders might apply to each one…

Remortgaging for a deposit

If you’re a landlord and want to increase your property portfolio, a buy-to-let remortgage is one way of releasing equity to cover a deposit or partial payment.

Although a relatively common practice, there are various rules and regulations in place that can restrict landlords. For example, if you are a higher rate taxpayer or a portfolio landlord (with 4 or more BTL properties), a lender may limit the maximum number of BTLs you can own in order to reduce the risk associated with owning a larger number of properties.

Most mortgage lenders will be comfortable with a portfolio of 4 BTLs while others will accept as many as 10 properties under one umbrella. A handful of lenders will accept an unlimited number.

It’s also possible to remortgage your current home to purchase a buy to let property. Releasing equity in this way is something a lot of our customers want to do.

Whether a full remortgage, a second charge, or a portfolio mortgage is the right option for you depends on various factors that a specialist mortgage advisor, like those we work with, can talk you through.

Property improvement

Most mortgage lenders are happy to let you remortgage to release equity for your buy to let property, especially if you want to use the money to invest in making improvements. They’re likely to be even happier as the intended changes will help to increase the value of the property.

If your buy-to-let is in an area that’s growing in popularity and you’re using the money to upgrade the property to cash in on the increased rents in the area, all the better.

Debt consolidation

If you want to remortgage for debt consolidation, some lenders will limit the loan to value (LTV) ratio of the mortgage they’ll offer.

Not all lenders will consider lending for debt consolidation due to the increased risk, especially for a borrower who has accrued debt in the first place.

However, releasing equity in your buy to let property to consolidate debt is a simple way of reducing the number of debts into a single, more manageable amount and can considerably reduce your monthly outgoings.

If you’re considering remortgaging your BTL property to consolidate debt, it’s important to understand the risk of turning repayable unsecured debts into interest-only secured debts. In doing this you could be putting the property at risk, so it’s vital you have a solid repayment strategy in place and speak to an expert before pressing ahead.

Buying out a partner

If you have a buy-to-let mortgage, it’s possible to release equity to buy someone out of the mortgage, or even from another property altogether.

This is generally acceptable with most BTL lenders. You would need to make a re-application for a mortgage assessment in your own name. Even if you’re staying with the same lender, you would still need to make a fresh application so the mortgage lender could carry out a new affordability check.

Usual buy-to-let LTV limits apply. Most lenders will accept 75% LTV while others might want 80%. A handful of specialist lenders may accept as little as 85% LTV.

Commercial purposes

You could consider remortgaging a buy to let property to take advantage of a commercial opportunity, such as a commercial building or business venture.

However, because releasing equity for commercial or business purposes with a BTL remortgage is only acceptable with some lenders, it’s advisable to speak to a specialist broker, like the ones we work with.

Make an enquiry and we’ll match you with an expert with experience in commercial mortgages and BTL remortgages. They will be happy to answer your questions and help connect you with a lender who can arrange a BTL with the right terms for you.

Switching to a better interest rate

Rather than letting your BTL mortgage slip into your mortgage lender’s standard variable rate (SVR), you may want to remortgage to take advantage of the best buy-to-let remortgage deals available in the market.

Interest rates fluctuate, so it makes sense to get the best deal by regularly reviewing your mortgages, especially if you have fixed-rate deals which expire.

The best way to do this is through a whole-of-market broker, like the ones we work with. Make an enquiry and we’ll connect you with an expert on buy-to-let remortgages. They have the tools and the experience required to ensure you get the best available rates.

Can I release equity from buy to let for any other reason?

Yes! You can potentially use buy to let equity release for just about any worthwhile (and legal) purpose, from renovations, a new car, holiday or even a wedding, assuming you pass all of the lender’s eligibility checks.

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Can I remortgage my home to a buy to let?

Yes. Remortgaging a home to a buy-to-let is more common than you might think. In the industry, this is known as a let to buy mortgage.

This scenario often occurs when someone moves in with their partner or if they inherit a property which they want to move to. Both situations can be solved by either:

  • Asking your lender for ‘consent to let’
  • Remortgaging onto a buy-to-let

Accidental landlords

These are just two situations where you may find yourself becoming an accidental landlord.

It’s important to remember that failure to notify your lender that you’re letting out your home without a buy-to-let remortgage, would be considered a breach of your contract and some could demand full and final repayment, which would be financially disastrous.

If your circumstances change and you wish to make adjustments to the way you are using your mortgaged property, always consult with your lender to ensure you don’t breach your contract.

Remortgaging your buy-to-let mortgage to a main residential mortgage

There are all kinds of reasons why a property owner might wish to change from a buy-to-let to a residential mortgage.  Perhaps you have split with your significant other and you now want to live in the buy to let property you own.

For others, it’s a move that might make sense down the line when you want to downsize. Maybe you own a smaller buy to let property that you can move into when you’ve sold your main home, or now want to rent the larger property for a higher return and live in the smaller property instead.

If you’re interested in switching from a buy to let to a residential mortgage, get in touch and the expert advisors we work with can help you choose the best course of action. Speaking to them before your proceed could help you save time, money and hassle by finding you the right mortgage at the best available rates, first time.

Is the property in your personal name or a limited company?

Mortgage lenders can offer different deals depending on whether you’re an individual or a limited company. For investors with small or large portfolios, buying property through a limited company can offer significant tax benefits, especially for higher rate taxpayers.

Limited company mortgages are perfect if you want to buy property as a collective rather than just one or two individuals. They are especially useful if you wish to protect yourself from personal liability should things not go according to plan.

Lending criteria for companies differs from individual mortgages in a number of ways, and different company structures are also treated differently.

If a trading company wishes to buy a property, the lender will usually want to see two years of accounts showing income and net profitability. The lender may also require a personal guarantee from the directors.

In the case of a Special Purpose Vehicle (SPV) – which is a limited company specifically set up to purchase buy to let properties – again, most lenders will need a personal guarantee from the directors to cover the debt.

You’ll also need a Standard Industrial Classification (SIC) which specifies the type of business the company is involved with.

How loan to value impacts the best BTL deals

The LTV a lender will offer depends on how much you want to borrow and how much equity you have in the property. Keep in mind that all motgage lenders are different and the loan to value can vary considerably.

For example, if your property is worth £250,000, with £200,00 in equity and you want to borrow £100,000 over 25 years – then your LTV is 40%. But if you wanted to borrow £160,000 – then your LTV would be 65%.

There are lenders who will grant remortgages up to 90% and a few who may lend even more.

The advisors we work with are whole-of-market with full access to all mortgage lenders, which means they are ideally placed to find the mortgage to suit your particular circumstances. Make an enquiry for a free, no-obligation chat and let them save you time, hassle and money with the right mortgage, first time.

Buy-to-let remortgages for people with bad credit

It’s possible to remortgage with bad credit. Over the years, we’ve assisted in hundreds of remortgages for people with bad credit history. Almost every time it’s the same story – customers come to us after being declined by a lender or, even worse, having been turned away by their broker.

Below is a list of potential credit issues you may be faced with as a borrower:

  • Adverse credit overview
  • Low credit score
  • Mortgage Arrears
  • Defaults
  • County Court Judgements (CCJs)
  • Individual Voluntary Arrangements (IVAs)
  • Debt Management Plans (DMPs)
  • Bankruptcy
  • Repossession

Bad credit remortgages can be more difficult to arrange. Because of this, otherwise eligible customers can end up being badly treated or messed around by brokers or lenders who simply don’t understand a customer’s circumstances.

Sometimes a customer can end up being misinformed or told that it’s not possible for them to get a mortgage, simply because the broker doesn’t have the necessary experience, or doesn’t know about the lenders who will consider borrowers with poor credit.

Fortunately, the advisors we work with offer an expert service for customers of all backgrounds. We make sure every advisor is trained to handle your enquiry correctly. To make the grade they must prove they know exactly what they are doing.

How your personal income affects a buy-to-let remortgage

Every lender is different and uses different criteria when working how much they will lend you. If you’re a first-time landlord, most lenders have a minimum income requirement of £25,000 per annum for a buy-to-let mortgage, but there are a few lenders who may accept less.

Essentially, a lender will consider your basic wage along with a number of other types of income, which may include:

  • Bonuses
  • Commission
  • Benefits
  • Second jobs
  • Investments
  • Dividends

Lenders will also take your outgoings into account, and consider things like:

  • Debt repayments (car lease, credit cards etc)
  • Communication services (phones, internet etc)
  • School fees
  • Gas/electricity bills
  • Essentials (food, clothing etc)

These factors will all be used to calculate how much you’ll have available to cover the new mortgage payment. Most lenders will also assess your ability to cover the mortgage payment if there was a rate rise.

The property’s rental income

The amount of rental income your buy-to-let property could generate will depend on many factors, including the size and condition of the property and where the property is located. Buy-to-let mortgages are usually only approved if the lender deems them to be affordable. This affordability test is balanced against your personal income, the expected rent, and the value of the property.

Many lenders require that the annual rental must be at least 125% of your annual mortgage repayments.

For example, if your repayments are £15,000 a year, then the rent should total no less than £18,750.

If you want to find out what rental properties are going for in the area where you intend to buy, a good place to start is by checking the local estate agents or looking at listings on RightMove.

Lenders use ‘Buy to let’ stress tests as a way to check that you have the ability to repay the interest on the mortgage.

For instance, if you have a £150,000 mortgage and a 5.5% interest cover rate is applied, this brings your monthly interest payments to £687.50.

The equation is £150,000 x 5.5% = £8,250 / 12 months = £687.50.

By factoring in the rate for the rental income of 125%, for the purposes of stress testing, this brings the real monthly costs to £859.38.

Buy to let landlords face remortgage crunch

Originally, the benefits of ‘buy to let’ tax relief were quite attractive; however, landlords were hit hard by the new tax rates imposed in 2017.

When it comes to buy-to-let mortgages, almost all lenders insist that your rental income covers, not just the mortgage, but other costs as well.

These include repairs, maintenance, agent’s fees and mortgage interest. As a costs guide, a study estimated the average costs involved with buying a ‘buy to let’ house to be around £8,359 a year.

While, generally, the rent required has to be high enough to cover the mortgage payment by 125%, some lenders can ask for a rental income to cover the mortgage payment by up to 145% or higher.

How the type of tenant can impact buy-to-let mortgage deals

There are lenders who may be unwilling to approve a mortgage based on the type of tenant you have or expect to have. The following tenant types can sometimes be viewed as less favourably by certain lenders:

  • Students – While students are acceptable to a few lenders, their reluctance comes from a reputation that students have for partying and damage
  • Tenants on benefits – Can be seen as a risk, but less so if they are on disability benefits
  • HMO (Houses in Multiple Occupation) – Can be more attractive if the tenants are contractors or other professionals
  • Sitting tenants – Can be a major stumbling block to a BTL mortgage, because under the Rent Act of 1977, they have the legal right to remain in the property for life and can even pass on the right to a family member upon their death. They also have the right to a ‘fair rent’ which is often well below the market value. For this reason, lenders are reluctant to agree a mortgage as they classify them as a high risk.

How the property type impacts buy-to-let mortgage deals

Lenders are most comfortable with standard brick with slate roof homes. Any deviation from this or you have a property deemed as non-standard, can affect whether you get the best deal or not.

Examples of non-standard construction include:

  • Flats
  • High rise buildings
  • Thatched roofs
  • Stone construction
  • Tin roofs
  • Felt roofs
  • Wooden framed homes
  • Metal framed homes
  • Solar panels

There are many other property types that may affect which lenders will consider your application. Talk to one of the advisors we work with for the right advice on getting the best deal, whatever property type you have.

How do I get the best buy-to-let remortgage rates?

There are a number of remortgages on the market and every lender has different criteria when it comes to remortgaging a buy-to-let. The best rate available is dependent on a number of factors including:

  • Your credit history
  • Your income
  • The size of your deposit (higher deposits attract lower interest rates)
  • How much equity you have

The mortgage experts we work with have total access to the whole market, which means they can find the best buy-to-let remortgage rates to suit you and your circumstances.

Current buy-to-let remortgage rates in the UK

At the time of writing, buy-to-let rates are relatively low, but you need to consider the future and the implications of interest rises.

When it comes to buy-to-lets, it’s important to think about all of the associated costs of owning rented property. Things like wear and tear, accidental damage, even income tax and agents’ fees should all be taken into account, and these things will need to be covered by the rent you receive.

Proposals put forward by the Prudential Regulation Authority have recommended increasing the criteria for buy-to-let mortgages, because they believe this sector at greater risk of interest rate increases and fear many landlords would not have enough rent to cover the aforementioned costs.

All of this makes it vital that when you remortgage a buy-to-let, you get the very best specialist advice available. Which is where we come in.

The expert mortgage advisors we work with are specialist whole-of-market brokers. They’ll use all their expertise and experience to find you the cheapest buy-to-let remortgage deal on the market.

Rates table

For a quick overview of the buy to let remortgage deals currently available, search through our best buy tables below.

Fees

The lowest interest rate, doesn’t necessarily mean the best deal. You have to look at the overall cost, including early repayment charges (ERCs), and the setup costs for the new mortgage, which can be quite hefty. In fact, any savings can be wiped out in fees alone.

Again, this is where an expert advisor comes in, guiding you through the traps and pitfalls so you can remortgage your buy-to-let property and end up with the best possible outcome.

Buy-to-let remortgage deal and rates compared

It’s important to consider the overall cost of the remortgage deals on offer. While one lender might ask for a higher upfront fee, going with them might be cost-effective in the long run, if they were offering a significantly lower interest rate than a competitor with lower fees. Hypothetical example…

Lender A offers a 2yr fixed rate at 3% with £1,000 in fees.

Lender B offers a 2yr fixed rate at 3.5% with £99 in fees.

So which remortgage interest rate offers the most savings?

For a buy-to-let remortgage of £105,000:

Lender A 2 Yr Fixed Rate at 3% Total Cost
£105k + £1k fees £265 pm approx. £7,360
Lender B 2 Yr Fixed Rate at 3.5% Total Cost
£105k + £99 fee £307 pm approx. £7,467

Savings made by taking the lower rate with higher fee = £107

Higher fee and better rate, or lower fee and higher rate?

If the loan is relatively low, say around £100,000, it might be best to go for the lender with the lower fees, but higher interest. Conversely, if your loan will be around £200,000 or more, then the higher fee with the lower interest rate might be more financially rewarding.

The best deal over the term depends on the tipping point

The “tipping point” is the point at which the size of the loan makes more sense to take a different deal. In this example, if the mortgage was much under £105k then it will most likely be best to take the mortgage with lower fees.

Some lenders offer buy-to-let remortgages with no fees, where the savings at lower loan amounts can be even more substantial.

When is it a good idea to pay a fee?

Generally, as the loan amount becomes higher, the savings made with the lower rate and higher fee increase dramatically.

Hypothetical example:

For a buy-to-let remortgage of £200,000:

Lender A 3% Rate Total Cost
£200k + £1k fees £503 pm approx. £13,072
Lender B 3% Rate Total Cost
£200k + £99 fee £584 pm approx. £14,115

Savings made by taking the lower rate with higher fee = £1,043

As you can see, finding the best buy-to-let mortgage broker to take care of your remortgage for is crucial. Otherwise it could end up costing you thousands more than it needs to.

Talk to an expert buy-to-let remortgage advisor

The advisors we work with are experts in this field and can help you get the best possible deal on a buy-to-let remortgage, so call us on 0808 189 2301 or make an enquiry so we can match you with one of them for a free, no-obligation chat today.

All the experts we work with are whole-of-market brokers with vast experience and access to mortgage lenders across the entire market. We’ll pair you up with a broker with the right experience to help you get the right buy-to-let remortgage at the best available price.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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