Why Remortgage a Buy-to-Let?
The most common reason to remortgage a buy-to-let is to avoid slipping onto your lender's standard variable rate (SVR) when your current deal ends. BTL SVRs are often higher than residential ones, so the savings from switching to a new deal can be substantial.
Other reasons include releasing equity to fund further property purchases, consolidating landlord debts, or switching from an interest-only to a repayment mortgage. Some landlords remortgage to move from a personal name into a limited company structure, though this involves a sale and repurchase rather than a straightforward remortgage.
How BTL Remortgage Affordability Works
Buy-to-let lenders assess affordability primarily through the rental coverage ratio — the relationship between your rental income and the mortgage payment. Most lenders require rental income to be at least 125% to 145% of the mortgage payment at a stressed interest rate, typically around 5.5% to 6%.
This stress test means that even if the actual mortgage rate is lower, your rent must cover the payment at the higher stressed rate. For higher-rate taxpayers, many lenders increase the required coverage ratio to 145% or even higher, reflecting the reduced net income after tax.
When to Start the Process
Start looking for a new BTL mortgage deal at least three to six months before your current rate expires. Many lenders allow you to lock in a rate up to six months in advance, protecting you from rate increases while you complete the switch.
If your current deal has already ended and you are on the SVR, you can remortgage at any time without early repayment charges. The sooner you act, the sooner you start saving on the rate difference.
Costs Involved
Typical costs include an arrangement fee (often £1,000 to £2,000 for BTL products), a valuation fee, and potentially legal fees — though many lenders offer free legal work and valuations as part of their remortgage packages. If you are leaving a current deal early, check for early repayment charges.
Factor these costs into your comparison. A slightly higher rate with no arrangement fee can sometimes work out cheaper than a lower rate with a £2,000 fee, particularly if your mortgage balance is relatively small or you plan to remortgage again in two years.
Important: Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice. The actual rate available will depend on your circumstances. Think carefully before securing other debts against your home.