Four Convincing Reasons to Consider Remortgaging Your Buy-To-Let Property
If you are a landlord and you own one or more investment properties, reviewing your financial arrangements on a regular basis is essential. Not only do you have to declare your income each year on your tax return but you should also regularly check that you are benefiting from the best mortgage deals on your buy to let properties.
Remortgaging your buy to let investments can offer several advantages. Our guide outlines four good reasons why you should consider reviewing your finances and remortgaging your investment properties.
Get a Lower Interest Rate
One of the main reasons that many people remortgage is to benefit from a lower interest rate on their borrowing. If your buy to let mortgage deal has ended, you may be on your lender’s higher ‘standard variable rate’.
By remortgaging to a new lender, you can often take advantage of another mortgage deal. You may be able to fix your repayments for a period of time or benefit from a discount/tracker deal. Reducing your monthly payments also has the effect of increasing your net rental income from the property.
Release Equity from Your Properties
If you have equity in your buy to let property or portfolio, remortgaging can allow you to release equity from these houses or flats. When you remortgage you may be able to borrow additional funds depending on the rental income and the equity in your property. Lenders are often happy to allow you to raise capital as long as the loan remains affordable based on the rent and your income.
One of the main reasons that investors remortgage to release equity is to purchase further buy to let properties. By using your existing property as security, you can raise cash to use as the deposit on further investment properties. This helps you spread the risk in your portfolio and to maximise your rental and capital returns.
Convert the Mortgage to a Repayment Basis
When you took out your ‘buy to let’ mortgage you may have done so on an ‘interest only’ basis. This will have minimised your monthly repayments but it also means you aren’t paying off any of the loan amount that you borrowed.
As part of the remortgage process you can convert your investment property loan from an ‘interest only’ to a capital and interest (repayment) basis. Whilst this may result in higher monthly repayments, it will ensure that the balance of your mortgage will decrease over time, leaving you with a property that you own outright at the end of the mortgage term.
Avoid Selling the Property
If you are in need of cash—perhaps to get you through a tricky rental period or to purchase another property—selling your investment property may seem like the only option. However, if there is equity in your home, a remortgage may be better than selling your asset.
When you sell your property you may have Capital Gains Tax to pay or you may have to sell in a subdued market. Instead, remortgaging your buy to let property can help you raise the cash that you need without having to offload an asset you may wish to keep for the long term.
James McHeggins writes for JustRemortgages.com, one of the UK’s top sites for the latest remortgage rates and best remortgage deals.