4 Reasons Why Remortgaging Your Buy-To-Let Property May Be To Your Advantage
As a landlord, reviewing your financial arrangements on a regular basis should be a priority. Whether you have one investment or several properties it is vital that you conduct a periodic review of your buy to let mortgages in order to ensure that you are always benefiting from the very best interest rate deals.
Remortgaging buy to let investment properties can present several advantages to you. This handy guide outlines the four main reasons why you should review your finances and consider remortgaging your properties.
Get a lower interest rate: One of the most popular reasons why landlords remortgage their investment properties is simply to secure a better interest rate on their borrowing. If your original buy to let deal has ended you could switch to a preferential rate with another provider rather than remaining on your lender’s standard variable rate (SVR).
Remortgaging allows you to take advantage of a low rate investment mortgage deal with another provider. You will typically have the choice of guaranteeing your repayments for a set period through a fixed rate mortgage or reducing your repayments with a discounted or tracker rate deal. Reducing your repayments also means that you earn more income from the property every month.
Release equity from your properties: Another popular reason that many people remortgage is to release the equity that is ties up in their investment property. As part of the remortgage process you can often apply for additional funds. Depending on the equity in your property and the rental income you may be able to increase your mortgage size when you switch to another lender.
A common reason that landlords remortgage their houses and flats is to raise capital to allow the purchase of further investment properties. You can use your existing property as security to allow further borrowing which can provide the deposits for additional buy to let purchases. You don’t have to use your savings or other capital to expand your portfolio.
Convert the mortgage to a repayment basis: Many landlords took out their buy to let mortgages on an ‘interest only’ basis. Whilst this minimises your repayments and maximises your net rental income it also means that your loan size remains the same and that you don’t pay anything off the mortgage each month.
When you go through the remortgage process you can convert your buy to let mortgage to a repayment basis. This will ensure that your mortgage balance reduces over time and so you will own the property outright at the end of the term. Bear in mind that this may have the effect of increasing your monthly repayment and so reducing your net rental income.
Avoid selling the property: A remortgage can also help you avoid selling your property if you are in need of some extra cash. If you need access to some of the equity in your buy to let property – for example to buy another property or for home improvements – a remortgage will help you access cash without the need to sell the asset.
Having to sell your property may result in a Capital Gains Tax liability or you may have to sell in a bad market. Remortgaging can give you a way of raising the cash that you need without having to sell an asset which may prove profitable in the medium to long term.
Timothy Frodsham writes for JustRemortgages.com one of the UK’s
top sites for the latest remortgage rates and best remortgage deals.