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Buy to Let Remortgage

Remortgage for a buy to let property can be simple, but if you fall outside of any of the generic criteria used by most mainstream lenders, it can be substantially more complex!

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Finding a remortgage for a buy to let property can be simple, but if you fall outside of any of the generic criteria used by most mainstream lenders, it can be substantially more complex!

It's also imperative you have an overview of the range of deals on the market to ensure you don't end up paying more for your remortgage than you need to.

As specialists in mortgages for rental properties, the Revolution Brokers team has created this guide to help make your buy to let remortgage run smoothly.

Here we'll explain how to find the most competitive remortgage deals and how a lender will assess your application.

For further assistance securing a remortgage for your buy to let or to compare the best deals, please get in touch at 0330 304 3040 or via email at info@revolutionbrokers.co.uk.

The following topics are covered below:

Reasons to Apply for a Buy to Let Remortgage

How Lenders Review Your Remortgage Buy to Let Purpose

Finding Buy to Let Remortgage Deals to Release Equity

Remortgage Buy to Let Release Equity Examples

Can I Remortgage Residential to Buy to Let?

Remortgaging to Buy to Let Advice on Loan to Values

Finding a Remortgage Buy to Let Mortgage With Bad Credit

How Personal Income Impacts Your Buy to Let Remortgage Rates

Rental Property Affordability Assessments to Remortgage Buy to Let Property

How Tenant Types Can Impact Your Best Buy to Let Remortgage Options

Applying for a Buy to Let Remortgage on Different Property Types

Using a Buy to Let Remortgage Comparison to Find the Best Rates

Expert Remortgaging to Buy to Let Advice

Reasons to Apply for a Buy to Let Remortgage

There are many reasons a landlord or property investor might opt for a remortgage - for example:

  • To switch from a more expensive deal to a lower interest rate.
  • To release equity to raise capital for another property purchase.
  • To change the terms of the buy to let mortgage you are currently on.

One of the most common scenarios is that you've come to the end of a fixed-term deal and need to remortgage to avoid paying unnecessarily high-interest rates on your lender's Standard Variable Rate (SVR).

How Lenders Review Your Remortgage Buy to Let Purpose

Why does it matter why you're looking to remortgage a rental property?

A lender will want to know the reason behind the remortgage application.

The circumstances can have a material impact on the kind of deals you'll qualify for and which lenders we'd recommend you apply to.

For example, an equity release remortgage to raise funds for improvement projects, or use as a deposit for another investment, will usually be assessed differently than if you want to find a better interest rate.

Finding Buy to Let Remortgage Deals to Release Equity

An equity release remortgage is an excellent option if you've built up a significant chunk of equity and could use the cash for other purposes.

The challenge is that some lenders have restrictions on why they'll lend.

Below we'll run through some of the potential scenarios to shed a little more light on this area.

Remortgage Buy to Let Release Equity Examples

  • Remortgaging to Raise a Deposit - you can release equity to raise cash for a property deposit, but lenders may impose a limit on the maximum number of rental properties they will finance - usually four investment homes.
  • Property Improvement Remortgages - most lenders will allow you to remortgage a buy to let to raise cash to carry out improvements since this will generally mean the property is worth more and offset the mortgage risk.
  • Debt Consolidation Remortgages - remortgaging to repay debts can be tricky since lenders may set a cap on the Loan to Value (LTV) you can borrow. Some lenders also won't lend for debt consolidation, so it's essential to work with an experienced broker before sending off any applications.
  • Buying Out a Property Investment Partner - another situation could be that you want to buy out a partner from a mortgage, which is usually acceptable with most lenders. That said, you’d need to go through the whole application process again, even if you aren't changing lenders, with the same assessment criteria.

If you're looking at remortgaging a buy to let solely to achieve a more affordable interest cost, the timing is crucial.

Remortgage too early, and you could find yourself with considerable early exit penalties.

Move too late, and you'll have already switched to the SVR and need to cover those extra costs until your remortgage is complete.

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Can I Remortgage Residential to Buy to Let?

Another scenario could be to remortgage your residential home and use the cash to invest in a buy to let property.

This process isn't unusual and is called a let to buy loan, often occurring because partners move in together and want to keep the second property as a rental investment or because they have inherited a home.

There are several options here:

  • Remortgaging from a residential product to a buy to let loan.
  • Requesting consent to let from your existing lender.

Note that taking action is vital; you cannot rent out a property on a residential mortgage without permission from your lender and may need to remortgage onto a specific product designed for rental properties.

Remortgaging to Buy to Let Advice on Loan to Values

The LTV is just as important on a buy to let mortgage as on any other. The lender will need to know how much you want to borrow and how much equity you own in the property.

Every lender is different, so it's wise to consult a broker before applying since your default lender may automatically reject the application if the LTV is too high.

For example:

  • A rental property worth £250,000 with a £100,000 remortgage means you're applying for 40% LTV, which is a low LTV and a reasonably easy prospect.
  • If you want to borrow £160,000 on that same rental investment, the LTV is 64%, and some lenders may not be satisfied with this level of borrowing.

enerally, you can borrow up to 75% or 85% of the property value, depending on the circumstances.

There are also niche lenders who will lend up to 90% LTV, although this is less common in the buy to let market.

Finding a Remortgage Buy to Let Mortgage With Bad Credit

If you have bad credit, it's often difficult to secure a buy to let remortgage with a high street bank since they have strict eligibility rules.

However, Revolution Brokers regularly works with landlords, negotiating favourable remortgage rates even with an adverse credit history.

There are many reasons you might struggle, including a low credit score, history of late payments or more severe credit issues including CCJs, IVAs or bankruptcy.

The key to finding a bad credit remortgage is to work with a broker with whole-of-market access and experience dealing with specialist lenders who will focus on rental income and profitability over and above an arbitrary credit score.

How Personal Income Impacts Your Buy to Let Remortgage Rates

Lenders always have their own eligibility rules and criteria, so you must understand whether you qualify for the buy to let mortgage you want, based on your personal income.

Requirements vary but could include:

  • A minimum annual income of £25,000 for a first-time landlord.
  • Meeting a threshold rental income capacity against the mortgage interest (more on that shortly!).
  • Having a certain number of years of experience managing buy to let properties.

Buy to let remortgages usually consider rental potential as a primary factor, rather than a separate income stream.

Still, most lenders will want to check out your debt to income ratio before approving a remortgage application.

Rental Property Affordability Assessments to Remortgage Buy to Let Property

The rental income generated by your asset will depend on many factors, including the condition of the accommodation, location and size.

Lenders need to ensure that any remortgage they offer is affordable, so they'll look at your personal income, anticipated rent and the property's value.

In most cases, you need to demonstrate that the property will return 125% in rental earnings against the interest payable on your mortgage.

For example, if you earn £18,750 in rent per year, you can usually take out a buy to let mortgage with annual interest costs of up to £15,000.

Note that the required rental income will increase if you are a higher or additional rate taxpayer, usually stipulating that the earnings need to be 140% or 160% of the monthly interest cost.

A buy to let lender will also stress test your affordability to verify whether you'd still be able to afford the interest payments if rates increase.

Most lenders use a 5.5% interest rate to see if the rental income will still meet the 125% cap based on these theoretical higher monthly costs.

How Tenant Types Can Impact Your Best Buy to Let Remortgage Options

Some lenders will only approve buy to let remortgages for properties with a specific type of tenant.

Examples of potential tenant types that may need specialist advice include:

  • Student tenancies - student rentals often cost more to maintain, so some lenders won't lend against this type of rental property.
  • Benefits tenants - again, some lenders consider tenants on benefits a risk, although most will waive that restriction if your tenant receives disability benefits.
  • HMOs - houses of multiple occupation are often also more exposed, but lenders will consider the remortgage more favourable if the tenants are professionals.
  • Sitting tenants - this can make a buy to let remortgage much more complex since a lender will recognise the potential for the tenant to call on their right to remain in the property for life and pass the tenancy onto a beneficiary.

Please get in touch if you need a buy to let mortgage for a property with sitting tenants. The scenario is more challenging because the 'fair rent' rules may mean a mainstream lender won't consider the application.

However, specialist mortgage providers may be happy to help with support and negotiation from the Revolution Brokers team.

Applying for a Buy to Let Remortgage on Different Property Types

The next factor is the nature of the buy to let property you wish to remortgage. You'll likely not encounter any problems if it's a standard brick building with a slate roof.

However, anything considered non-standard can be more difficult, including:

  • Flats and high rise buildings.
  • Home with a thatched roof.
  • Properties built from stone, wood frames or metal frames.
  • Accommodation with solar panels.
  • Roofs constructed from tin or felt.

That doesn't mean you can't remortgage this type of rental property, but you usually need to approach a niche lender with less rigid property eligibility requirements.

Mainstream lenders tend to restrict lending only to those lowest-risk properties since anything less conventional has a higher chance of incurring extensive maintenance costs and potentially impacting the borrower's ability to keep up with the interest payments.

Using a Buy to Let Remortgage Comparison to Find the Best Rates

There are thousands of potential remortgage products to choose from, and a lot depends on your income, credit history, deposit value, and equity ownership.

The best way to find a competitive buy to let remortgage deal is to work with a broker with an in-depth knowledge of the market.

Our team assesses your circumstances and the remortgage scenario in detail before making any recommendations, which is key to avoiding rejected applications or using a lender whose eligibility criteria you can't meet.

We wouldn't advise relying on any rates tables or online calculators for anything other than a rough indication of how much you might be able to borrow.

That's because calculators only display results from lenders paying to advertise their buy to let deals.

Likewise, published rates are only ever estimated, and the actual rates quoted will vary considerably depending on all of the criteria we've discussed here.

Expert Remortgaging to Buy to Let Advice

As we've seen, there are all sorts of reasons you might want to remortgage a buy to let property, and several criteria a lender will assess before they decide whether to make an offer and, if so, at what interest rates.

The right buy to let remortgage deals will often vary between landlords.

For example, if you have a bad credit history, a specialist lender in this field may be the fastest way to secure the lending you need to release equity for debt consolidation.

Alternatively, suppose you want to remortgage to reduce your interest costs and own a significant number of portfolio rental properties.

In that case, another lender might be far better placed to accept your application.

Please contact Revolution Brokers at info@revolutionbrokers.co.uk to arrange a good time to discuss your rental property remortgage, and receive independent advice from the sector experts.

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature. We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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