As a buy-to-let landlord, your mortgage is likely your largest monthly expense. With interest rates fluctuating and your financial circumstances evolving, remortgaging can be a powerful tool to reduce costs, release equity, or better align your mortgage with your investment strategy. But timing is everything, and the process requires careful consideration.
In this guide, we’ll walk you through when to remortgage your buy-to-let property and how to navigate the switching process successfully.
Why Remortgage Your Buy-to-Let?
Before diving into the when and how, let’s consider why landlords choose to remortgage:
- Lower monthly payments – Switching to a more competitive rate can significantly reduce your mortgage costs, improving your rental yield and overall profitability.
- Release equity – If your property has increased in value, remortgaging allows you to access this equity for renovations, purchasing additional properties, or other investments.
- Switch mortgage types – You might want to move from a variable rate to a fixed rate for payment certainty, or vice versa to take advantage of falling rates.
- Avoid SVR charges – When your initial deal ends, you’ll typically move to your lender’s Standard Variable Rate, which is often considerably higher than available fixed or tracker rates.
When Should You Remortgage?
Your Fixed Term Is Ending
The most common trigger for remortgaging is approaching the end of your fixed-rate period. Most buy-to-let mortgages come with an initial fixed period of two, three, or five years. Once this expires, you’ll automatically shift to the lender’s Standard Variable Rate, which can be 2-3% higher than competitive deals.
Action point: Start researching remortgage options six months before your fixed term ends. This gives you time to find the best deal and complete the application before you’re moved to the SVR. Your mortgage broker will also assess the product options available to you, from your existing lender.
Interest Rates Have Dropped
If interest rates have fallen since you took out your mortgage, remortgaging could save you substantial amounts each month. Even a reduction of 0.5% can make a meaningful difference to your annual costs.
However, remember to factor in any early repayment charges (ERCs) if you’re still within a fixed term. These can be hefty—typically 2-5% of the outstanding mortgage balance in the early years—and may outweigh any savings from a lower rate.
Your Property Has Increased in Value
Property appreciation can work in your favour when remortgaging. A higher property value means a lower loan-to-value (LTV) ratio, which often qualifies you for better interest rates. Lenders typically offer their most competitive rates at 60% or 75% LTV.
For example, if you purchased a property for £200,000 with a £150,000 mortgage (75% LTV), and it’s now worth £250,000, your LTV has dropped to 60%, potentially unlocking significantly better rates.
Your Financial Circumstances Have Changed
Perhaps your rental income has increased, you’ve paid down debt, or your credit score has improved. These positive changes can qualify you for better mortgage products than were available when you first purchased the property.
Conversely, if you’re facing financial difficulties, remortgaging to extend the term and reduce monthly payments might provide breathing room, though this will increase the total interest paid over the life of the loan.
You’re Expanding Your Portfolio
Experienced landlords often remortgage existing properties to release equity for deposits on additional buy-to-let investments. This strategy allows you to grow your portfolio without needing to save large sums for deposits.
How to Remortgage Your Buy-to-Let: A Step-by-Step Guide
Step 1: Review Your Current Mortgage: Start by understanding where you stand. Check your current mortgage statement for the outstanding balance, current interest rate, remaining term, and any early repayment charges. These details will form the baseline for comparing new deals.
Step 2: Assess Your Property’s Value: Get a realistic estimate of your property’s current market value. You can use online valuation tools, check recent sales of similar properties in your area, or commission a formal valuation. Remember that mortgage lenders will conduct their own valuation, which may differ from your estimate.
Step 3: Calculate Your Rental Coverage: Buy-to-let mortgage lenders use a rental coverage ratio to assess affordability. This typically requires your rental income to be 125-145% of your mortgage payment, calculated at a stressed interest rate (usually around 5.5-6%).
For example, if you’re applying for a mortgage with payments of £800 per month, lenders might require rental income of at least £1,000-£1,160 per month. If your property doesn’t meet this threshold, you may struggle to remortgage or need to consider products with lower LTV ratios.
Step 4: Check Your Credit Score: Your credit score plays a significant role in the rates you’ll be offered. Before applying, obtain your credit report from agencies like Experian, Equifax, or TransUnion. Address any errors and, if possible, improve your score by paying down debts and ensuring all bills are paid on time.
Step 5: Research the Market: The buy-to-let mortgage market is competitive, with numerous lenders offering different products. Key factors to compare include interest rates, fees, flexibility (such as overpayment options), and any restrictions on the type of tenancy allowed. Consider both high street banks and specialist buy-to-let lenders. Specialist lenders often have more flexible criteria and may accept properties that mainstream banks won’t, such as HMOs or properties with non-standard construction.
Step 6: Decide Whether to Use a Broker: A mortgage broker can be invaluable when remortgaging a buy-to-let property. They tend to have access to comprehensive range of mortgages, including exclusive deals not available directly to consumers, and understand the nuanced criteria different lenders use. Brokers can also navigate complex situations, such as portfolio landlords with multiple properties or limited company ownership structures.
Step 7: Gather Your Documentation: Buy-to-let remortgage applications require substantial documentation. Prepare the following:
- Proof of income (last three years of tax returns for self-employed landlords, or payslips and bank statements for employed)
- Details of existing mortgages and properties in your portfolio
- Rental income evidence (bank statements showing rent received)
- Identification and proof of address
Having these ready will speed up the application process considerably.
Step 8: Submit Your Application: Once you’ve chosen a product, submit your application either directly to the lender or through your broker. The lender will conduct a property valuation and assess your financial circumstances. This process typically takes two to six weeks, though it can be longer for complex cases.
Step 9: Complete Legal Work: You’ll need a solicitor to handle the legal aspects of remortgaging. If you’re switching lenders, the new lender will pay off your old mortgage and register the new charge against the property. Some lenders offer free legal services as part of their remortgage package. If you’re releasing equity or making other changes to the mortgage structure, additional legal work may be required.
Step 10: Complete and Review: Once everything is finalised, your new mortgage will begin. Make sure you understand your new payment amount, payment date, and any terms or conditions attached to the mortgage. Set up your direct debit and keep all documentation safe.
Common Pitfalls to Avoid
- Ignoring early repayment charges – These can run into thousands of pounds. Always calculate whether the savings from remortgaging outweigh any ERCs you’ll need to pay.
- Focusing only on interest rates – A low rate with high fees might cost more overall than a slightly higher rate with lower fees. Compare the total to pay over the new product period.
- Leaving it too late – Don’t wait until the last minute. Remortgage applications, from enquiry through to completion, can take several months, and you don’t want to end up on the SVR while your application is processing.
- Overextending yourself – Releasing too much equity or reducing payments by extending the term might feel good short-term but consider the long-term implications on your investment returns and retirement plans.
- Not reviewing rental income requirements – Rental yields have come under pressure due to rising mortgage rates. Ensure your property will meet the lender’s rental coverage calculations at current market rents.
Special Considerations for Portfolio Landlords
If you own four or more mortgaged buy-to-let properties, you’re classified as a portfolio landlord. Since 2017, lenders must conduct a more thorough assessment of your entire portfolio, not just the property you’re remortgaging.
This means providing comprehensive information about all your properties, including rental income, void periods, and management arrangements. Some lenders specialise in portfolio landlords and have streamlined processes, so working with an experienced broker is particularly valuable in these situations.
Limited Company Buy-to-Let Mortgages
Many landlords now purchase properties through limited companies to mitigate the impact of Section 24 tax changes, which restrict mortgage interest tax relief for personally-owned properties.
Limited company mortgages can have different criteria and rates compared to personal buy-to-let mortgages. Some lenders specialise in this area, while others don’t offer limited company products at all. Again, specialist advice is invaluable here.
The Bottom Line
Remortgaging your buy-to-let property isn’t just about securing a lower interest rate, though that’s certainly a key benefit. It’s about actively managing your property investment to maximise returns, maintain flexibility, and align your mortgage with your broader financial goals.
The key is to stay proactive. Review your mortgage situation regularly, keep an eye on the market, and don’t simply default to your lender’s SVR when your fixed term ends. With careful planning and the right support, remortgaging can significantly enhance the profitability of your buy-to-let investment.
Whether you’re a first-time landlord with a single property or an experienced investor with a substantial portfolio, taking control of your mortgage strategy is one of the most impactful financial decisions you can make.
At 3mc, we have a team of expert advisers who can discuss all your mortgage requirements. If you would like to discuss your options, give the 3mc team a call on 0161 962 7800.
All calls are recorded for training and monitoring purposes. 3mc for intermediaries only.
*Your home may be repossessed if you do not keep up repayments on your mortgage. 3mc (UK) Ltd is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register https://register.fca.org.uk/s/ under reference 302992. Please note: The FCA do not regulate Business Buy to Let Mortgages.
