Remortgaging Your Buy-to-Let Property

As a buy-to-let landlord, your mortgage is likely your largest monthly expense, making it crucial to secure the most competitive terms available.

With interest rates fluctuating and lender criteria constantly evolving, knowing when to remortgage buy to let properties – and how to navigate the process – can significantly impact your rental yields and long-term investment success.

The buy-to-let mortgage market has become increasingly sophisticated, offering landlords numerous opportunities to optimise their financing arrangements. However, the complexity of available products and varying lender requirements mean that securing the best buy to let remortgage deals requires careful planning and strategic timing.

Key Signs It’s Time to Remortgage Your Buy-to-Let

Your Fixed Rate Period is Ending

The most obvious trigger for remortgaging occurs when your current fixed-rate deal approaches its end. Most buy-to-let mortgages revert to the lender’s standard variable rate (SVR) after the initial period, which can be significantly higher than competitive market rates. Typically, you should start exploring remortgage options 3-6 months before your current deal expires to ensure seamless transition to better terms.

Your Property Value Has Increased

Property appreciation can improve your loan-to-value (LTV) ratio, potentially qualifying you for better mortgage rates. If your property has increased in value by 15% or more since your last mortgage, you might access improved rate bands. Many lenders offer their best rates to borrowers with LTV ratios of 60% or lower, so significant property appreciation could unlock substantial savings.

Your Financial Circumstances Have Improved

Enhanced income, reducing other debts, or improved credit scores can qualify you for better mortgage terms. If your rental income has increased through rent reviews or you’ve reduced your overall debt burden, you might access preferential rates previously unavailable to you.

You Want to Release Equity

Remortgaging can provide access to property equity for portfolio expansion or other investment opportunities. If your property has appreciated significantly, you might increase your borrowing to fund additional property purchases, though this strategy requires careful consideration of increased risk and debt service requirements.

How to Shop Around for the Best Deals

Understanding Buy-to-Let Mortgage Types

The buy-to-let market offers various mortgage products, each suited to different landlord circumstances. Fixed-rate mortgages provide payment certainty but might be higher than variable rates initially. Tracker mortgages follow Bank of England base rate movements, offering potential savings when rates fall but exposing you to payment increases when rates rise.

Interest-only mortgages remain popular among buy-to-let investors, maximising monthly cash flow by deferring capital repayments until the mortgage term ends. However, you’ll need a credible repayment strategy for the outstanding balance.

Comparing Lender Criteria

Different lenders apply varying assessment criteria, making it essential to understand their specific requirements. Some lenders focus heavily on rental yield calculations, typically requiring rental income to cover 125-145% of monthly mortgage payments at a stressed interest rate. Others prioritise your personal income, requiring minimum earnings regardless of rental income.

Utilising Mortgage Advisors

Mortgage brokers specialising in buy-to-let, like our team at Exe Mortgages, can access exclusive deals not available directly to consumers. We understand individual lender criteria and can match your circumstances to the most suitable products.

The Buy-to-Let Remortgage Process

Initial Assessment and Preparation

The buy to let remortgage process begins with assessing your current situation and gathering necessary documentation. You’ll need recent bank statements, tax returns, rental agreements, and proof of rental income. If you’re self-employed, prepare at least two years of certified accounts.

Obtain updated property valuations to understand your current LTV position. Many lenders accept desktop valuations for remortgaging, reducing costs and processing times compared to full surveys.

Application and Underwriting

Submit applications to your chosen lenders, providing all required documentation promptly to avoid delays. Lenders will assess your application based on their specific criteria, including stress-testing your ability to service the mortgage at higher interest rates.

The underwriting process typically takes 2-4 weeks, during which lenders may request additional information or clarification on specific aspects of your application.

Legal and Completion Procedures

Once your mortgage offer is confirmed, instruct solicitors to handle the legal aspects of the remortgage. This includes conducting searches, reviewing the mortgage terms, and managing the funds transfer on completion day.

The legal process usually takes 4-6 weeks, though this can extend if complications arise with property searches or documentation requirements.

Understanding Remortgage Costs and Fees

Lender Charges

Most lenders charge arrangement fees, typically ranging from £0 to £2,999, or sometimes offered as a percentage of the loan amount. Higher fees don’t necessarily indicate better deals, so calculate the total cost over your intended mortgage term. Some lenders allow you to add arrangement fees to the loan amount, though this increases the total interest paid over time.

Valuation fees vary depending on property value and type. Many lenders offer free valuations as part of competitive packages, though complex or high-value properties might require more expensive surveys.

Legal Costs

Solicitor fees for remortgaging typically start from £500, depending on case complexity and your location. Some lenders offer free legal services for straightforward remortgages, though you might prefer independent representation for complex situations.

Early Repayment Charges

If remortgaging before your current deal expires, check for early repayment charges (ERCs). These are a percentage of the outstanding mortgage balance, that could potentially outweigh the benefits of securing better rates. Calculate whether long-term savings justify paying ERCs, particularly if you’re only slightly into your current mortgage term.

Impact on Rental Yield and Cash Flow

Calculating True Rental Yield

When evaluating remortgage options, consider the impact on your rental yield calculations. Gross rental yield simply divides annual rental income by property value, but net yield accounts for all costs including mortgage payments, maintenance, insurance, and management fees.

A lower interest rate directly improves your net rental yield by reducing monthly mortgage costs. However, factor in remortgage fees and any changes to loan terms when calculating the true improvement to your investment returns.

Cash Flow Considerations

Improved mortgage terms can significantly enhance monthly cash flow, providing additional funds for property maintenance, portfolio expansion, or personal expenses. However, consider whether switching from interest-only to repayment mortgages might reduce monthly cash flow despite lower interest rates.

Factor in void periods and unexpected maintenance costs when assessing whether improved cash flow provides adequate buffer for property investment risks.

Strategic Landlord Remortgage Advice

Timing Your Remortgage

Market timing can significantly impact available rates and terms. Monitor interest rate trends and economic indicators that influence mortgage pricing. However, avoid trying to time the market perfectly, as other factors like your personal circumstances and property values often outweigh small rate variations.

Portfolio Considerations

If you own multiple buy-to-let properties, consider staggering remortgage dates to spread refinancing risk and take advantage of rate variations over time. This strategy also provides opportunities to review and optimise your entire portfolio rather than treating each property in isolation.

Future-Proofing Your Investment

Choose mortgage terms that align with your long-term investment strategy. If you plan to sell within five years, prioritise low fees over slightly higher rates. For long-term holds, focus on the lowest possible rates even if arrangement fees are higher.

Consider the flexibility of potential products, including overpayment options and portability features that might benefit future investment decisions.

Successfully navigating the remortgage buy to let UK market requires careful analysis of your current situation, thorough research of available options, and strategic timing of your application. By understanding when market conditions favour remortgaging and how to effectively navigate the process, landlords can optimise their financing arrangements and maximise their investment returns.

Looking to learn more about buy to let remortgaging? Talk to our expert advisors and get started today.