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How to Remortgage your buy-to-let property the right way

Monday 18th December 2023 | 8 minute read

Remortgaging is pretty simple. The process is much faster and smoother than applying for a new mortgage. If you’re planning to remortgage your buy-to-let property, there are details you need to watch out for to ensure you don’t get tripped up.

Most people remortgage to save money when their introductory buy-to-let mortgage deal comes to an end. You don't want to find yourself in a position where a buy-to-let remortgage is costing you. That’s what we’re going to look at in this article. We’ll cover:

• What is a buy-to-let remortgage?
• How to remortgage your buy-to-let property (the process)
• Can you remortgage your buy-to-let before the mortgage term ends?
• Switching from residential to buy-to-let mortgage (and vice versa)
• The main reasons for remortgaging a buy-to-let
• Fees involved in remortgaging your buy-to-let property
• How to find the best buy-to-let remortgage

So, let’s get into it…

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What is a buy-to-let remortgage?

Let’s start with the simple definition of remortgage. A remortgage is when you switch an existing mortgage to a new deal or new lender. So, a buy-to-let remortgage (or BTL remortgage), is what you apply for when you have an existing buy-to-let mortgage on a rental property and wish to switch lenders or find a better mortgage deal.

You can also remortgage your buy-to-let property to a different type of mortgage if you need to. E.g. If you wish to make the buy-to-let property your main residence you’d need to swap from a buy-to-let mortgage to a residential mortgage. And we’ll look at that in a little more detail in a moment.

In the meantime, let’s take a look at the full buy-to-let remortgaging process…

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What’s the process for remortgaging a buy-to-let property?

You may think that remortgaging your buy-to-let property would be faster than applying for a new mortgage. But the steps are pretty much the same whether you stay with your new lender or switch. You still need to reapply and go through the steps you did when you first applied for your buy-to-let mortgage.

But most people find remortgaging easier as they already have all the existing buy-to-let mortgage paperwork, so filling out a remortgage application is much faster and easier. 

We’ll take a brief look at the remortgage process here. Want to see the full mortgage application process? We’ve got a detailed article on that here.

The 4-step buy-to-let remortgaging process

Step 1 - Compare buy-to-let remortgage offers

Step 2 - Get your mortgage agreement in principle

Step 3 - Fill out the buy-to-let remortgage application

Step 4 - Complete the buy-to-let remortgage

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Step 1 - Compare buy-to-let remortgage offers

The first step in the remortgage process is to shop around for the best buy-to-let remortgage deal available to you. You can do this by using comparison sites or talking to a buy-to-let mortgage broker.

Using a mortgage broker can help save you a lot of time on this step as they will sieve through the best offers that meet your specific needs for the remortgage for you. All you have to do is pick the one you like the most.

When you’re comparing your buy-to-let remortgage offers you should always look at the costs involved in doing it. Each lender (including your existing lender) will have certain charges for a buy-to-let remortgage. Here’s what to look at:

• Arrangement fees - You paid these when you first arranged your buy-to-let mortgage. And it probably cost you around £1,500. So make sure you look at each lender’s arrangement fees for your remortgage. Some lenders call arrangements fees “set-up fees” or “application fees”.
   
• Interest rate - The main figure you should compare is the interest rate. Each lender has their own way of calculating their interest rates. The average interest rate for buy-to-let mortgages is 5.81% (as of April 2023). 
   
• Valuation fees - As part of the application process, your lender will get a standard valuation on your property. You should check the fee they charge for this as some lender's valuation fees are much higher than others. This is a surprising area you could save money on when comparing very similar offers from lenders.
   
• Exit fees - If you’re remortgaging now, it’s likely you’ll remortgage again in future - especially if you always want the best deal available to save money. So you should take a look at any exit or early-repayment fees the lender has to see what it’ll cost to get out of the deal. Some lenders have low fees for this whilst others have high costs.
   
• Solicitor fees - You’ll need a solicitor or conveyancer to overlook the mortgage switch. You can use your own or check if your lender offers this as a free service. If they do, this is another place you can save some pennies.

Great! You’re now ready to effectively shop around for the best remortgage deal available to you. Now it’s time to pick one. And when you do this, the following steps will be very similar to your initial buy-to-let mortgage application process.

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Step 2 - Get your mortgage agreement in principle

When your buy-to-let mortgage introductory offer (usually 2 or 5 years) is coming to an end, your lender will send you a letter explaining that your mortgage will revert to their STV (Standard Variable Rate) once the term ends. This will usually be higher and more expensive. So it's a good idea to shop around and find better remortgage terms and deals.

You’ll need to go through a mortgage application process again whether you stay with your existing lender or choose to switch. The process is the same either way. So don’t let thinking it’ll be easier just to stay make you miss a better deal that could save you thousands of pounds.

We recommend you shop around for a better deal even if your existing lenders' offer looks good. If they’re able to offer you good terms, it’s likely you’ll also be able to find competitive offers from other lenders too.

If you’re switching mid-term, you’ll also need to shop around to find a lender that would be willing to lend the remaining money left on your mortgage before you begin the remortgaging process.

Once you find the deal you’d like to take, you should request a mortgage agreement in principle from your selected lender.

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Step 3 - Fill out the buy-to-let remortgage application

Completing your new application will be much easier than when you first did it, as you can use your existing buy-to-let mortgage details to help you complete the answers. Before you start, you should make sure you have the following to hand:

• A valid form of ID - like a passport or driving licence
• Proof of address - A utility bill with your current address is good
• Last 3-months bank statements - to show your outgoings
• 6 months of payslips - to prove your income (most lenders won’t accept buy-to-let mortgages from anyone earning less than £25,000pa). If you're self-employed, you'll likely need to provide your HMRC self-assessment tax printouts for the last 3 years.
• Property details - The property address, the estimated value,  the estate agent, and the solicitor you're using for purchase conveyancing

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Step 4 - Complete the buy-to-let remortgage

After receiving your remortgage application, your lender will check over the details, complete a credit check on you, and send out a survey to complete a standard valuation. It’s much the same as applying for a new buy-to-let mortgage.

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Can you remortgage your buy-to-let before the mortgage term ends?

Yes, you can remortgage to another lender by leaving your existing buy-to-let mortgage early. Each lender has their own fees and rules around doing this. So make sure to check any exit fees or early repayment fees your lender charges before you start looking around. That way you can factor the fees into the total cost of remortgaging.

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Switching from residential mortgage to buy-to-let mortgage

If you’d like to rent out your residential property, you’ll need to remortgage your residential mortgage to a buy-to-let mortgage. You can ask your existing lender if they can help you with this. Or you can shop around other buy-to-let mortgage specialists to find the best deal available. 

If you intend to rent out your residential property short-term, your existing lender may accept a Consent-to-let agreement for the period which could help you avoid remortgage costs.

Buy-to-let mortgages and Consent-to-let agreements are usually more expensive than residential mortgages as they have higher interest rates and arrangement fees.

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What are the reasons for remortgaging a buy-to-let?

There are many reasons to remortgage your buy-to-let mortgage:

Remortgaging because your current deal is coming to an end

Most introductory buy-to-let mortgages are 2-year or 5-year fixed-term mortgage terms. When this fixed term period comes to an end you’ll need to remortgage your property either with your existing lender or with another lender.

Remortgaging a Buy to Let to save money 

If you’re looking to keep mortgage repayments as low as possible, a better buy-to-let mortgage deal could help.

If you can find a better deal with lower interest rates, your monthly repayments will go down. This will help you make more money from your rental income without having to raise the monthly rental costs for your tenants

Remortgaging to release equity

Releasing equity in your property (what you’ve already paid) can put money back in your hand. You can then choose what you’d like to do with that money to improve your landlord business:

Repairs and renovations

Maybe you couldn’t afford minor repairs and renovations on the property when you purchased it. But now you want to do them so you can raise your rental income. 

Debt management

If you have debts to pay and want to reduce your monthly outgoings, releasing the equity you have in a property can be a great way to do it.

Buy more property to expand your portfolio

If you want to raise money for a deposit on another property to expand your portfolio, remortgaging to release equity, can help you raise the funds you need (depending on how much equity you have).

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What are the fees you pay when remortgaging a buy-to-let property?

There are two areas to look at regarding the fees when remortgaging a buy-to-let property:

1. Fees from your existing lender -  Your existing lender may charge exit fees or early repayment fees if you leave your mortgage early. 

• a. An exit fee will usually be between £50-£300
• b. Early-repayment charges are between 1% - 5% of whatever you still owe on the mortgage

2. Fees from your new lender - Your new lender will have fees too - the same ones you paid when you applied for your buy-to-let mortgage originally”

• a. Arrangement fees average around £1,500
• b. The average standard valuation costs £320 

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Do you need a deposit for a buy-to-let remortgage?

You won’t need to save for another deposit for a buy-to-let remortgage if you have enough equity remaining in the property you can use as the deposit. Your buy-to-let property equity is the difference between what your property is worth and how much you owe on the mortgage. Here’s an example:

If your buy-to-let property is worth £100,000 and you owe £60,000 on the mortgage, you have £40,000 equity on the property.

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Do you have to pay stamp duty when remortgaging to buy-to-let?

Good news! No, you don’t have to pay stamp duty if you’re remortgaging your buy-to-let property or remortgaging to a buy-to-let mortgage. Stamp duty is only paid on new purchases of property or land. As you already own the property, you don't need to pay stamp duty again.

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How to find the best buy-to-let remortgage

To find the best possible deal for your buy-to-let remortgage you should use a specialist buy-to-let mortgage broker. There are many benefits to using a mortgage broker. Amongst them are saving time, saving money, and access to offers you otherwise may not be able to get.

Mortgage brokers offer a bespoke service that makes the buy-to-let remortgage process much easier for you. This makes the small broker fees well worth it - especially when they save you money finding a better deal too!

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Speak to a Buy-To-Let mortgage expert today

If you’re looking to remortgage your buy-to-let property, do it the right way. Speak to one of our buy-to-let mortgage specialists today for a free and no-obligation quote. Call us on 01202 612934.