Buy to Let Remortgage Guide

Refinancing an Existing Rental Property

A Buy to Let mortgage should not necessarily be left untouched until the existing deal has already ended.

For landlords, remortgaging can be an opportunity to review the financing of a rental property, understand what happens when the current mortgage deal expires and consider whether the existing lender or another lender offers a suitable option.

Some landlords simply want to replace an expiring mortgage deal. Others may want to release equity, restructure borrowing, change the mortgage term or raise funds towards another property purchase.

However, a Buy to Let remortgage is not simply about finding a lower interest rate.

The property's current value, rental income, mortgage balance, loan-to-value, Early Repayment Charges, ownership structure and the landlord's wider circumstances can all affect the available options.

This guide explains the main considerations when remortgaging a Buy to Let property.

What Is a Buy to Let Remortgage?

A remortgage generally involves replacing the mortgage secured against an existing property with a new mortgage.

This might involve moving from the existing lender to another lender.

The new mortgage repays the existing mortgage, and the property becomes security for the new borrowing.

A landlord might remortgage because:

• an existing mortgage deal is approaching its end;

• they want to review available mortgage products;

• they want to raise additional capital;

• the property's value has changed;

• the rental income has increased;

• they want to restructure the mortgage;

• they want to change the mortgage term; or

• their wider property strategy has changed.

The appropriate approach depends on the individual circumstances.

Remortgage vs Product Transfer

These two options are often confused.

A remortgage generally involves arranging a new mortgage, often with a different lender.

A product transfer generally means selecting a new mortgage product with the existing lender while keeping the mortgage with them.

A product transfer can sometimes involve a simpler process because the mortgage is already with that lender.

However, staying with the existing lender does not automatically mean it is the most suitable option.

Equally, moving lender does not automatically mean it is better.

The available rate, fees, valuation, legal work, Early Repayment Charges, affordability and lender criteria should all be considered.

When Should I Review My Buy to Let Mortgage?

It can be sensible to begin reviewing an existing mortgage before the current deal expires.

Starting early provides time to understand:

• when the current product ends;

• whether Early Repayment Charges apply;

• the outstanding mortgage balance;

• the property's estimated value;

• current rental income;

• potential loan-to-value;

• rental affordability;

• existing lender options; and

• alternative lender options.

Waiting until the mortgage deal has already ended can reduce the time available to consider these properly.

The exact point at which a new mortgage can be arranged depends on the lender and circumstances.

What Happens When My Current Mortgage Deal Ends?

When an initial mortgage product ends, the mortgage does not normally disappear.

Unless another product or mortgage has been arranged, the loan may move onto the rate specified by the existing mortgage terms.

That rate could be different from the rate you have been paying during the initial deal period.

This can affect monthly mortgage costs and rental cash flow.

Understanding the existing mortgage end date is therefore an important part of managing a rental property.

Check Your Early Repayment Charges

Before remortgaging, check whether the existing mortgage has an Early Repayment Charge, commonly abbreviated to ERC.

An ERC may apply if you repay or refinance the mortgage during a specified period.

Depending on the mortgage, the charge could make an early remortgage expensive.

This does not necessarily mean you should always wait until the ERC disappears.

There can be circumstances where paying a charge is considered as part of a wider refinancing strategy.

However, the cost needs to be included when comparing the options.

Don't Compare Interest Rates Alone

A lower mortgage rate does not automatically mean a cheaper mortgage overall.

A mortgage product can include:

• arrangement fees;

• valuation fees;

• legal costs;

• Early Repayment Charges;

• product fees; and

• other conditions.

For example, one product may have a lower rate but a substantial arrangement fee.

Another may have a slightly higher rate but lower upfront costs.

The most appropriate option depends partly on the mortgage amount, intended holding period and overall cost.

How Does Property Value Affect a Remortgage?

The current property value is important because it affects the loan-to-value.

Loan-to-value, or LTV, compares the mortgage balance with the property's value.

For example, if a property is worth £300,000 and the outstanding mortgage is £180,000:

£180,000 ÷ £300,000 × 100 = 60% LTV

Different LTV levels can provide access to different mortgage products.

If the property's value has increased or the mortgage balance has reduced, your LTV may be lower than when the original mortgage was arranged.

What If the Property Has Fallen in Value?

Property values are not guaranteed to increase.

If the property's value has fallen, the loan-to-value may be higher than expected.

This can potentially affect:

• available lenders;

• mortgage products;

• interest rates;

• ability to raise additional capital; and

• overall remortgage options.

An online property estimate should not be treated as confirmation of the value a mortgage lender will accept.

The lender may require its own valuation.

Will the Lender Revalue the Property?

Potentially.

A new lender will normally need an acceptable property valuation.

The method used can vary.

Depending on the lender and property, this might involve a physical inspection, automated valuation or another approved valuation method.

For Buy to Let, the lender may also need to consider the property's expected rental value.

The valuation can therefore affect both the loan-to-value and rental affordability assessment.

Does the Current Rent Matter When Remortgaging?

Yes.

A Buy to Let remortgage may still need to satisfy the lender's rental affordability requirements.

The lender may assess whether the property's rent provides sufficient coverage for the mortgage being requested.

This can involve:

• expected market rent;

• an Interest Coverage Ratio;

• a mortgage stress rate; and

• lender-specific affordability criteria.

The fact that you already have a mortgage of a particular size does not guarantee that a new lender will provide exactly the same amount.

What If My Rent Has Increased?

An increase in rent may potentially improve the property's rental affordability position.

However, the lender will need to be satisfied with the rental figure used in its assessment.

The amount you currently charge does not necessarily mean every lender will use exactly the same figure.

The lender's valuation process may include an assessment of market rent.

Rental affordability should therefore be checked rather than assumed.

What If the Rent Doesn't Support the Existing Mortgage?

This can create a challenge when moving to another lender.

The current mortgage may have been arranged when:

• lender calculations were different;

• mortgage rates were different;

• rental stress requirements were different;

• the property's rent was assessed differently; or

• your circumstances were different.

If the property does not satisfy a new lender's affordability calculation, possible options may depend on the circumstances.

These might include:

• considering another lender;

• reducing the mortgage balance;

• considering a different mortgage product;

• reviewing whether another affordability approach is available; or

• considering options with the existing lender.

Not every solution will be available in every case.

What Is Top Slicing?

Some Buy to Let lenders may consider an applicant's personal disposable income alongside the property's rent where their criteria allow.

This approach is commonly known as top slicing.

It can potentially help in some situations where the rent alone does not satisfy the lender's standard calculation.

However, top slicing is not available with every lender.

Where it is used, the lender may carry out a more detailed assessment of personal income, expenditure and financial commitments.

Can I Release Equity When Remortgaging?

Potentially.

If the property has sufficient equity and the lender's criteria are satisfied, you may be able to borrow more than the amount needed to repay the existing mortgage.

The additional borrowing releases some of the property's equity as capital.

For example, if a property is worth £300,000 and the existing mortgage is £150,000, there is substantial gross equity in the property.

However, this does not mean all of that equity can be withdrawn.

The amount available depends on factors including:

• lender maximum LTV;

• rental affordability;

• property value;

• existing mortgage balance;

• purpose of the additional borrowing;

• applicant circumstances; and

• wider portfolio position.

What Can Released Equity Be Used For?

Subject to lender criteria, landlords may consider releasing equity for purposes such as:

• contributing towards another property deposit;

• property improvements;

• refurbishment;

• restructuring finances;

• business purposes; or

• other acceptable uses.

The lender will normally want to understand the purpose of the additional borrowing.

Not every lender accepts every capital-raising purpose.

Releasing Equity to Buy Another Property

One common portfolio strategy is to release equity from an existing rental property and use those funds towards another property purchase.

This can potentially allow a landlord to expand without funding the entire new deposit from cash savings.

However, the strategy increases borrowing on the existing property.

That can affect:

• monthly mortgage costs;

• rental affordability;

• portfolio leverage;

• cash flow;

• future remortgage options; and

• exposure to interest-rate changes.

Available equity should not automatically be treated as money that should be borrowed.

Should I Reduce the Mortgage Instead?

Remortgaging can also provide an opportunity to reduce borrowing.

A landlord with available savings might decide to repay part of the mortgage when refinancing.

Reducing the balance could:

• lower the loan-to-value;

• reduce the amount of interest charged;

• potentially improve mortgage product availability; and

• reduce the rental income required to support the mortgage.

However, using substantial cash to reduce borrowing also means retaining less money for repairs, void periods and other investment opportunities.

The decision should be considered in the context of the wider financial position.

Can I Change From Interest-Only to Repayment?

Potentially.

A remortgage can be an opportunity to review how the mortgage is being repaid.

With an interest-only mortgage, monthly contractual payments generally cover interest rather than reducing the original capital balance.

With a repayment mortgage, monthly payments include both interest and capital, meaning the mortgage balance should reduce over time if the required payments are maintained.

Changing from interest-only to repayment can increase monthly payments.

The affordability and longer-term implications should therefore be considered carefully.

Can I Change From Repayment to Interest-Only?

Potentially, subject to lender criteria and suitability.

A landlord may consider interest-only to change monthly cash flow or as part of a wider investment strategy.

However, reducing the contractual monthly payment does not eliminate the original mortgage debt.

The capital remains outstanding and needs to be repaid eventually.

A clear repayment strategy remains important.

Should I Extend the Mortgage Term?

Extending the mortgage term may affect monthly payments and the period over which the mortgage remains outstanding.

The lender will consider its maximum term and age criteria.

For repayment mortgages, extending the term can reduce the required monthly payment but can increase the overall period during which interest is charged.

For interest-only borrowing, a longer term means the capital remains outstanding for longer unless it is repaid earlier.

The mortgage term should therefore fit the landlord's longer-term plans rather than simply being selected to minimise the immediate monthly payment.

Can I Remortgage a Limited Company Buy to Let?

Potentially, yes.

A property owned through a limited company may be refinanced with an appropriate lender.

The lender may assess:

• the company;

• directors;

• shareholders;

• personal guarantees;

• property value;

• rental income;

• mortgage balance;

• company structure; and

• wider property portfolio.

The fact that the existing lender accepted the company structure does not guarantee another lender will apply identical criteria.

Can I Move a Personally Owned Property Into a Limited Company When Remortgaging?

This is more complicated than an ordinary remortgage.

Moving a property from personal ownership into a limited company can involve a legal transfer of ownership rather than simply changing the name on the mortgage.

There may be:

• tax implications;

• legal costs;

• mortgage requirements;

• valuation considerations; and

• accounting implications.

This should not be treated as a routine remortgage.

Appropriate tax and legal advice should be obtained before proceeding.

Can I Remortgage an HMO?

Potentially.

HMO remortgages can involve specialist lender criteria.

The lender may consider:

• number of letting rooms;

• rental income;

• licensing;

• property configuration;

• valuation method;

• landlord experience; and

• wider portfolio.

An HMO that was acceptable to the existing lender is not automatically acceptable to every new lender.

Can I Remortgage a Holiday Let?

Potentially.

Holiday-let lenders may assess the property differently from conventional Buy to Let lenders.

Expected income, occupancy, property type, location and applicant circumstances can all be relevant.

If the property has an established trading or booking history, the lender may request information relating to its performance.

Criteria vary between lenders.

Portfolio Landlords and Remortgaging

Portfolio landlords may face additional underwriting when remortgaging.

A lender might assess not only the individual property being refinanced but also the wider portfolio.

This can include:

• property values;

• outstanding mortgage balances;

• rental income;

• mortgage payments;

• portfolio LTV;

• ownership structures; and

• other borrowing.

A property that works well individually may therefore still form part of a wider portfolio assessment.

Should I Remortgage Several Properties at Once?

Not necessarily.

Landlords with several properties may have mortgages with different:

• product end dates;

• lenders;

• rates;

• Early Repayment Charges; and

• mortgage terms.

Refinancing everything simultaneously may create unnecessary charges or complexity.

It can be more appropriate to review each mortgage as its deal approaches expiry while keeping the wider portfolio strategy in mind.

Keep a Mortgage Portfolio Schedule

For landlords with multiple properties, maintaining accurate records can make remortgage planning significantly easier.

Consider recording for each property:

• current lender;

• mortgage balance;

• monthly payment;

• interest rate;

• repayment method;

• product end date;

• Early Repayment Charges;

• mortgage term;

• estimated property value;

• current rent; and

• ownership structure.

This can help identify which mortgages need attention well before their existing deals end.

What Documents Might Be Needed?

Requirements vary between lenders, but a Buy to Let remortgage may involve documents such as:

• proof of identity;

• proof of address;

• bank statements;

• evidence of income;

• current mortgage information;

• property details;

• tenancy or rental information;

• portfolio information;

• company documents where applicable; and

• information about the purpose of any additional borrowing.

The lender may request further documents depending on the application.

What About My Credit History?

Credit history can still matter when remortgaging a Buy to Let property.

The new lender may carry out credit checks and assess your existing financial commitments.

Issues such as:

• missed payments;

• defaults;

• County Court Judgments;

• high unsecured borrowing; and

• recent credit commitments

can potentially affect lender choice.

Maintaining your credit position can therefore remain important even if you already own the property.

Avoid Taking New Credit During a Remortgage

If you are arranging a remortgage, it can be sensible to avoid unnecessary changes to your financial position before completion.

Taking new borrowing could alter your commitments and potentially affect the information on which the lender assessed the application.

Examples can include:

• personal loans;

• car finance;

• credit cards;

• significant increases in existing credit balances; and

• Buy Now Pay Later commitments.

If your circumstances change during an application, tell your mortgage adviser.

The Buy to Let Remortgage Process

Although every case is different, a typical remortgage may involve the following stages.

1. Review the Existing Mortgage

Check the mortgage balance, interest rate, product end date, repayment method and Early Repayment Charges.

2. Review the Property

Consider the estimated property value, current rent, property type and tenancy position.

3. Establish Your Objectives

Decide whether you simply want a new mortgage deal or whether you also want to raise capital, reduce borrowing or change the mortgage structure.

4. Assess Rental Affordability

Consider whether the current rent is likely to support the mortgage required.

5. Compare Existing Lender and Remortgage Options

Depending on the circumstances, both product-transfer and remortgage options can be considered.

6. Submit the Application

If moving lender, the new mortgage application and supporting documentation are submitted.

7. Property Valuation

The new lender may arrange an appropriate valuation.

8. Underwriting

The lender assesses the property, applicants, rental affordability and supporting documentation.

9. Mortgage Offer

If the application is approved, the lender issues a formal mortgage offer.

10. Legal Work and Completion

Where required, the legal process is completed and the new mortgage repays the existing lender.

Buy to Let Remortgage Checklist

Before reviewing your Buy to Let mortgage, it can help to establish:

• current lender;

• mortgage balance;

• current interest rate;

• product end date;

• Early Repayment Charges;

• mortgage term;

• repayment method;

• estimated property value;

• current monthly rent;

• tenancy position;

• ownership structure;

• whether additional borrowing is required;

• purpose of any capital being raised;

• personal income;

• credit position;

• wider property portfolio; and

• longer-term plans for the property.

Having this information available can make the review much more productive.

Speak to Cambs Ely Mortgages About Your Buy to Let Remortgage

Whether your existing mortgage deal is approaching its end, you want to review your current rate, release equity or restructure borrowing across a property portfolio, we can discuss your circumstances and help you understand the mortgage options available.

Cambs Ely Mortgages provides Buy to Let and property finance advice to landlords and property investors in Ely, Cambridge, Cambridgeshire and across England, with remote appointments available.

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Important Information

The information contained in this guide is intended for general educational purposes and does not constitute personalised mortgage, investment, financial, legal, accounting or tax advice.

Buy to Let remortgage availability, interest rates, rental affordability calculations, loan-to-value limits, capital-raising options and lender criteria depend on individual circumstances, the property, ownership structure and relevant lender and may change.

Remortgaging may involve fees and Early Repayment Charges. These should be considered when comparing the overall cost of changing mortgage.

Releasing equity increases borrowing secured against the property.

Property investment involves risk. Rental income and property values are not guaranteed.

Your property may be repossessed if you do not keep up repayments on your mortgage.

The Financial Conduct Authority does not regulate some forms of Buy to Let mortgage.