When it comes to buy-to-let remortgages, it’s not uncommon for landlords to borrow more than they initially did. But why might you decide to increase the mortgage amount? Let’s explore the reasons for additional borrowing on mortgage.
Capitalise on property value increases
Over the last 20 years, property prices have generally gone upwards. In fact, they’ve gone up a staggering 207% during this time. If the value of your property increases, so does the equity locked within it.
This equity represents the difference between your property’s current market value and any outstanding mortgage on it. And by opting for a remortgage, landlords may have the chance to tap into this equity and the funds that have accumulated due to their property’s appreciation.
Their reasons could be to purchase another buy-to-let or a second home, one they might eventually decide to rent out as a holiday let. Having a property that’s increased in value provides options and gives you more flexibility for remortgaging.
Expand your property portfolio
For ambitious landlords, their vision often extends beyond the properties they currently own. Perhaps there’s a flat in an up-and-coming neighbourhood that’s caught their attention. Or an HMO opportunity on the outskirts of town.
Whatever their motivations, securing additional properties requires capital, and that’s where the strategy of borrowing more during a remortgage comes into play. This approach can help facilitate the acquisition of new properties while also allowing you to diversify your investments across different locations and property types.
Whether the market is ripe with opportunities or you’re simply aiming to boost monthly rental income, remortgaging can be a financial tool that turns your further property aspirations into tangible assets.
Renovations and property upgrades
Every landlord knows the value of a property in tip-top shape. A standout buy-to-let can give you the edge in a competitive rental market, and even minor touch-ups like a new paint job can make a difference,
But when the time calls for more extensive work to truly elevate a property’s appeal, you can expect a significant outlay. Modern kitchens, revamped bathrooms, or energy-efficient installations all require investment.
Accessing additional funds through remortgaging can help pay for those transformative upgrades that not only enhance your property’s appeal but also potentially command a higher rental price.
Subject to receiving all the relevant information and qualifying for an automated property assessment
Remortgage in 24 hours
Molo offers a range of buy-to-let remortgage deals starting from 80% LTV
Diversify your property investments
The saying “Don’t put all your eggs in one basket” remains relevant. Such wisdom underscores the importance of diversification, especially when it comes to investments. While you might have started with a particular type of property, there may be a case for buying a different type the second time around.
Additional borrowing on remortgage can be the key to unlocking these avenues. Perhaps you’ve always invested in flats but decided a house in a commuter town is also appealing. Of course, each decision taken by landlords needs to be their own and performed after initial research, but having different buy-to-lets in a wide range of markets may lead to success.
You could be spreading the risk while also tapping into multiple rental markets. This strategy can potentially lead to a more resilient income stream and offer exciting growth prospects, and remortgaging to borrow more can help facilitate it.
Find a better mortgage deal
With interest rates currently at their highest in 15 years (5.25% as of August 2023), many landlords remortgaging onto a new rate from their previous one will find themselves on a higher deal. But over the next few years, you might find that better deals are available and ready to be taken advantage of.
In this scenario, remortgaging to a better deal can be beneficial, especially if you’re coming to the end of your initial rate. Lenders are competitive and therefore offer incentives for landlords to get a buy-to-let mortgage with them. This can be lower interest rates, cheaper product fees or something else.
Just remember that any remortgage taking place before your deal is up could result in an early repayment charge. Therefore, you should check the terms of your current buy-to-let mortgage before deciding to remortgage as you may have time left before the initial rate ends.
Prepare for market downturns
Like any other investment avenue, the property market is subject to cycles of boom and bust. While periods of growth are celebrated, it’s the downturns that truly test an investor’s mettle, and the unpredictability of the market underscores the importance of foresight and preparation.
One proactive approach may involve borrowing more during a remortgage. This strategy can provide landlords with a financial buffer, ensuring they’re not caught off-guard during leaner times. Whether it’s an unexpected void period, where a property remains unrented, or a broader market slump affecting rental yields, having additional funds on hand can make all the difference.
A financial cushion could remove immediate cash flow concerns but also provides peace of mind. Just remember that while you’re borrowing additional capital, your monthly repayments will also increase, meaning higher outgoings.
Final thoughts: remortgaging to borrow more
Additional borrowing on mortgage can offer numerous benefits, from capitalising on property value increases to diversifying investment types. As always, do your research and consult with professionals to make informed decisions. With careful planning, you can make the most of your remortgage opportunity.
Thinking of remortgaging? At Molo, we have a range of remortgage deals and can give you a decision within 24 hours.
Check your mortgage eligibility and find the best mortgage deals for you
Subject to receiving all the relevant information and qualifying for an automated property assessment
Remortgage in 24 hours
Molo offers a range of buy-to-let remortgage deals starting from 80% LTV
