Making your buy-to-let business as self-financing as possible involves two things: maximising your rental income, and minimising your mortgage commitments. When buying a new property to let, trying to get the best possible mortgage deal is a given. But equally important is to keep the mortgage on the best deal at any given time; for many buy-to-let landlords, that can mean periodically remortgaging the property to get a better deal.
What is Buy to Let mortgage?
A Buy to Let Remortgage works in a similar way to a traditional remortgage on a residential property. When you originally take a mortgage secured on a property it will more often than not have a rate which will be valid for a set time period, usually 2, 3 or 5 years.
After the initial time period for the rate expires the mortgage lender will usually transfer the mortgage to a higher rate. An ideal time to do a Buy to Let Remortgage is usually a few months before the rate is due to increase. The idea is to start looking at alternative lenders that will be willing take on the mortgage and offer you a better rate than what your current Buy to Let mortgage lender will increase your rate to.
So, to summarise, a Buy to Let Remortgage is the process and completion of looking at alternative lenders to take on your current Buy to Let mortgage with a view of offering you a better rate than you currently have or about to increase to.
What is the stress test for Buy to Let mortgages?
When you last applied for a Buy to Let mortgage, the lender likely assessed affordability by checking that the projected rental income was at least 125% of the mortgage interest payments. However, new lending guidelines set down by the Prudential Regulation Authority (PRA) in early 2017 mean that lenders must now go further to ensure that Buy to Let mortgage applicants will be able to afford mortgage repayments even in the event of an interest rate increase. Expect a more stringent rent-to-interest cover requirement in the order of 145%, or as high as 170% for Houses in Multiple Occupation (HMOs).
For portfolio landlords – defined by the PRA as those with four or more mortgaged properties, the underwriting requirements for lenders are even tougher. Buy to Let remortgage applicants with a portfolio of properties should be prepared for lenders to review their entire portfolio and cashflow – including other sources of income – in order to assess affordability.
Buy to Let remortgage advice
Getting the right Buy to Let mortgage advice is more important than finding the best rate. When most people think about getting a Buy to Let Mortgage, they will usually try and find the best rate available. Unfortunately, this could end up costing you a lot more in the long run. When sourcing a Buy to Let Mortgage it is important to take into account all the associated fees (hidden and upfront), the product type, your short and long term goals etc. Along with the costs, it is important to understand the lending criteria that lenders use to determine whether lend or not. While the high street lenders do have some Buy to Let products available, most lenders that specialise with Buy to Let Mortgages are available off the high street and usually via mortgage brokers like us.
If you are looking for a Buy to Let Mortgage or Remortgage then get in touch with us of our specialist Buy to Let Mortgage Adviser at Managing Mortgages who will not only advise you on the most suitable lender and product, but could also end up saving you a small fortune in the long run.
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Not all Buy to Let Mortgages are regulated by the Financial Conduct Authority
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