Remortgaging a buy-to-let
Everything you need to know before remortgaging a buy-to-let mortgage
How soon can you remortgage a buy-to-let?
There are no strict limits to remortgaging your buy-to-let, and how soon you can remortgage depends on the lender’s conditions. Most lenders, however, require you to have the initial mortgage for at least six months before switching to another deal. Furthermore, you will need to pay an early repayment charge (ERC) if your current mortgage has a fixed term which hasn’t yet ended. Lenders typically contact you six months before your initial mortgage expires, so you can begin the remortgaging process.
It’s always worth speaking to your mortgage provider if you’re unsure about when you should remortgage and the time remaining on your initial deal.
Do I need a deposit to remortgage a buy-to-let?
You don’t need a deposit to remortgage a buy-to-let property (or any kind of remortgage for that matter). Deposits are only required when purchasing a property with a new mortgage. In this case, you would pay a percentage of the home’s value and borrow the rest from the lender.
That doesn’t mean you won’t need to set any additional money aside. You may be required to pay for conveyancing costs, as well as any fees related to the remortgage. Fees may vary between conveyancing firms and lenders, so it’s best to require quotes directly beforehand.
Do I need a solicitor to remortgage?
Even though you aren’t buying a new home, you’ll still need a solicitor when remortgaging. This is because any type of mortgage is a legal agreement with an obligation to pay back the amount borrowed as outlined in the terms and conditions. The solicitor will also need to register the mortgage with the Land Registry, which keeps a record of ownership and other information about every piece of property in England and Wales.
How much does it cost to remortgage a buy-to-let?
The cost of remortgaging a buy-to-let varies depending on several factors, such as your choice of lender, the length of the deal, the amount required and the interest rate. The product fee also plays a significant role (you can often add the amount onto the loan itself), as well as solicitor fees and any valuation costs for the lender to check the property. Indicative quotes for these costs should be available before you apply.
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Buy-to-let remortgaging process
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You have two primary options when remortgaging a property: stay with the current lender or switch to a new one. It ultimately comes down to who offers the best deal with lower monthly mortgage repayments.
When remortgaging, there may be some charges involved, such as ERCs, before switching to your new mortgage. You can find out exactly how much it will cost to remortgage by asking for a redemption statement from your current lender. The redemption statement offers a breakdown of what you need to pay and why.
Remortgage with same lender
Should you decide to stay with your existing lender when remortgaging, you’ll need to speak with them directly regarding how to apply for a new product/rate (sometimes referred to as a product transfer) or if it’s necessary to fill out a new application.
Product transfer
A product transfer involves switching your existing mortgage to a new product offered by the current lender without changing lenders or the mortgage amount. It’s the easiest process and can usually be completed within six months of your existing product or interest rate expiring.
New application
If the lender won’t consider a product transfer (there are several reasons why they might do this, including a change to your financial situation), you’ll need to start a new application should you wish to remain with them. As part of the process, the lender carries out a new valuation on the property, and you’ll be asked to provide new documents to support the remortgage application.
There’s no ERC to pay if you’re not on a fixed-term product or interest-rate mortgage. Instead, you’ll be on the standard variable rate (SVR), which is the default interest rate set by a lender. It’s normally higher than the fixed rate, so you may end up paying more on a monthly basis while on the SVR.
Remortgage to a new lender
You’re not obliged to remortgage with the same lender and can look for a better deal elsewhere. Should you go down this route, you’ll need to meet any new lender’s criteria and check if they can offer the amount you require. Part of the process typically requires completing an application with the new lender. It’s also worth getting in touch with them beforehand to see if you fit the requirements, which you can do by getting a mortgage in principle (MIP) or using a broker.
When applying, you’ll be required to provide information about your existing mortgage balance and to obtain a redemption statement from your current lender. Again, if you are on a fixed-rate period, factor in any ERC that will need paying if your existing deal’s fixed rate hasn’t expired.
New lenders may also want to carry out a valuation of your property. This will likely require solicitors to perform the legal work to ensure everything is ok and the property is suitable for mortgage purposes.
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Remortgaging a buy-to-let as an individual or limited company takes less than 2 mins
How often can I remortgage a buy-to-let
There aren’t any restrictions on how often you can remortgage a buy-to-let property, but there are costs worth considering. For instance, you’ll need to pay an early repayment charge (ERC) if your current deal is still in the initial fixed period. ERCs are usually a percentage of the amount currently being repaid.
- Five years may require 5% of the mortgage amount
- Four years could require 4%
- Three years equates to 3%
- Two years is 2%
- One year is 1%
These figures may vary depending on the lender. You should check the terms of your current mortgage deal to see the exact ERC charges for leaving the deal early.
Can I remortgage in a fixed-rate period?
The short answer is yes. You can remortgage during your fixed-term, although an early repayment charge (ERC) may be applicable if remortgaging while you’re still in your fixed-rate period.
Can I remortgage a buy-to-let early
Yes, you can remortgage your buy-to-let early but you can expect to pay fees for doing so, such as the ERCs detailed above. Refer to your mortgage offer if in doubt.
Remortgage to release equity or borrow more
When remortgaging to “release equity” or “borrow more”, the lender must be comfortable with your reasoning. Some reasons typically include home improvements, debt consolidation and investment opportunities such as another buy-to-let property.
Remortgage to buy another property
Some lenders allow you to remortgage your buy-to-let to purchase another property, as long as they are comfortable with your intentions with the two properties. For instance, a lender may be comfortable with you releasing equity to purchase an investment property but may not be comfortable with you releasing equity to purchase a second home.
Take a new mortgage or remortgage to buy-to-let
what’s best for you?
Applicants often wonder if they should take out a loan or remortgage to buy a new property. In most cases, people choose to remortgage a property they already own to buy another property because the available interest rate on a mortgage is often lower than the rate you get on a loan. Subsequently, you’ll pay back less with a mortgage than you do for a loan.
It’s also easier to get a longer term with a mortgage than a normal loan, meaning you can repay the amount over a longer period. This helps with keeping the monthly payments as low as possible.
When considering a remortgage instead of a loan, it’s important to determine if the lender you’re applying with requires a simultaneous transaction or if they are open to you searching for a property after the mortgage has been completed.
Remortgaging can potentially affect your credit score, but the extent of the impact depends on various factors.
Depending on the lender, a decision in principle doesn’t usually affect your credit score as it only leaves a soft footprint that normally lasts for 30 days. You will need to check with the lender you are placing your case with to confirm.
When it comes to the full mortgage application, the lender will usually perform a hard search on your credit report. This will show on your credit file, meaning it’s visible to other lenders and financial institutions. Should your mortgage be declined or you don’t proceed with the application, your credit score may be affected as a result.
It’s also not recommended that you make multiple finance applications at the same time. Doing so will make it look like you’re trying to accumulate credit, which could have a negative impact on your score.
What is the average credit score to remortgage a buy-to-let?
There isn’t an industry standard credit score, as such. Each lender has their own criteria and carries out credit checks for different reasons. For instance, some will want to see if you’re eligible while others use an internal score that is unique to them.
A number of different factors are taken into account when applying to a lender and their credit scores. As mentioned above, they are unique to each lender which is why lenders can’t confirm an average credit score.
Generally speaking, the higher your score, the more chance you have of being accepted for favourable interest rates. But even if you don’t have a good credit score, all is not lost. Some lenders are specialist adverse lenders who deal with applicants that have bad credit or low credit scores.
Can you remortgage a buy-to-let with bad credit?
There are lenders that specialise in remortgaging for applicants with bad credit. They may use a tier system offering products based on a certain level or type of adverse credit.
Bad credit or adverse credit can include defaults, county court judgments (CCJ’s), missed payments, arrears and late payments. Some lenders will accept a mortgage application from applicants who have had any of the above.
If you are an applicant with a bad credit history, it’s worth looking at lender acceptance criteria before applying to see if they can consider applicants with bad credit.
Some lenders may also only allow an application to be submitted if you are going to pay off certain debts, as this results in a better loan offer for your circumstances as you are debt consolidating and paying off credit as part of the application. This generally results in you being better off, as the new mortgage payment could be less than you are paying for the commitments in the background currently.
Author: Gemma Hermans, 2022
Gemma is CeMap qualified by the IFS University and is our Product owner. She’s essentially the heart of Molo, using her experience to make sure our customers get the best service available.
Remortgage deals
Molo offers a range of buy-to-let mortgage deals starting from 80% LTV.