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Buy-to-Let Remortgage

With a buy-to-let remortgage, you are switching your old BTL deal to a new one. While you will usually need a deposit of about 25% (although it can vary between 20% and 40%), and you can expect to pay higher interest rates and higher fees than on homeowner mortgages, the process of taking out a buy-to-let (BTL) loan is fairly straightforward.

As long as you have a deposit worth, generally, about 25% of the equity, you can either remortgage to a new home loan with your current lender or search the market to find the best deal among those offered by other lenders. The BTL remortgage process is longer if you are switching lenders because you are applying for a new mortgage all over again and the lender will want to run credit and affordability checks and carry out a valuation of the property.

 

Why remortgage your buy-to-let?

There are lots of reasons why landlords choose to remortgage. The most common are to:

• Save money

If you have a fixed BTL mortgage and the deal ends, it is likely you will be moved onto your lender’s standard variable rate (SVR) onto which lenders tend to move their customers at the conclusion of, say, an introductory or discounted deal. This means your mortgage payments could go up. To save money, you could remortgage to a new, lower interest rate.

Since tax deductibility of mortgage interest only applies to first owner-occupier homes, it means you cannot deduct any of your mortgage interest expenses from the rental income to reduce your tax bill, hence saving money on your money even becomes more crucial.

 

• Carry out property improvements

Ghana is one of the places where house prices almost always increase by double-digits, and if you are one of the homeowners whose main asset has gone up in value, this could boost your ability to release the money needed for, among other things, home improvements.

Example:

Say your we originally gave you a 75% loan on a purchase price of GHS350,000, then that 75% is the loan to value (LTV) – the equity in the property not covered by your deposit – and you would be paying back GHS262,500.

But if you remortgage, your home is revalued and you find it has now risen in value by even a conservative rate of 8%, then your property would now be worth GHS378,000, then that loan-to-value figure, based on the GHS262,500 payment, will now be lower at 69%.

In other words, your share of the equity would have gone up and that reduction in the LTV will boost your ability to negotiate a lower interest rate (or even qualify for a larger home in case you want to upgrade your owner-occupier) – because the lender is now taking less risk – or it could allow you to unlock that equity to borrow money for expensive outlays such as home improvements.

By upgrading the property, you could charge higher rents too. This is a common reason to remortgage and is accepted by most lenders (including DCANS Mortgage).

 

• Raise another deposit

In line with the above, you could release some of that extra equity to buy another buy-to-let property, to grow your property portfolio - a useful inflation-hedge, better than existing any other pension packages. Depending on how many BTLs you already have, you may need to remortgage to a lender that specialises in landlords (like DCANS Mortgage) with a portfolio of properties.

Remember that landlords face higher stamp duty bills – on top of the normal rates of stamp duty – on each transaction. But you can raise the money to cover stamp duty along with the deposit.

 

• Consolidate debt

Releasing equity to pay off personal and business loans is a simple way of reducing your outgoings. Debt consolidation, however, could be a signal that you are in financial difficulty, so some lenders will refuse while others will offer a lower LTV.

 

• Buy out a partner

If you own your buy-to-let property with someone else, you can remortgage to raise money to buy them out. You will have to complete a new BTL mortgage application by yourself so the mortgage lender can check it is affordable. As long as you meet the lender’s income and affordability requirements, there should be no LTV restrictions.

 

• Pay a tax bill or invest in a business

It is possible to remortgage to pay off a tax bill – or you might want to invest in a commercial opportunity. Remortgage reasons such as these are accepted by DCANS Mortgage, but may not be acceptable by most traditional banks.

 


 

Related Pages

Buy-to-Let Mortgage

Farmer Mortgage

• Healthcare Mortgage

Near Zero Mortgage

Ghana-UK Combo Mortgage

All Residential Mortgages

All Commercial Mortgages

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