What are top tips for remortgaging?
Re-mortgaging to a new deal can be a sensible option. Follow these tips for a successful switch
- Shop around. It pays to be aware of exactly what type of deals are available at any given time, and at what rates. Shopping around thoroughly is the only way you can be fully informed
- Check the internet. The internet is a great starting point for doing your research. Sites such as www.bbg-dealfinder.co.uk list the latest deals on offer, although they may not give you in-depth information regarding each individual product.
- Take a medium- to long-term view. Most sensible landlords these days invest in property for the medium – to long-term, so it makes sense to look for a corresponding mortgage product. This may mean paying a slightly higher interest rate than the one you are currently on, for example if you wish to lock into the security of a fixed rate, rather than leaving your repayments at the mercy of variable rates.
- Weigh up the rate vs the fee. Most lenders will offer a choice of higher fee, lower rate, or vice versa. Most landlords opt to absorb the cost of a high fee, as a low rate going forward minimises your monthly repayments, which can be tax efficient and good for cash flow.
- Check out existing penalties. If you are on a fixed rate or a special tracker, the likelihood is that you will have to pay an ERC before you can re-mortgage. However, if you are paying your lender’s Standard Variable Rate (SVR) an ERC will probably not apply. Some lenders, such as Mortgage Express, have also waived all ERCs for buy-to-let customers, allowing you to move freely to a new arrangement.
- Find out about new penalties. Make sure you know exactly how much a new ERC might cost you if you want or have to move your new loan within the deal period. This can be particularly important if, for example, you are switching to a longer-term fixed rate.
- Look for flexibility. Check whether any new deal allows you to make over- and underpayments. The best thing you can do with any debt is overpay and shift it as quickly as possible. However, the option to underpay or take payment holidays on a new deal can also be very useful if you encounter rental voids or other problems going forward.
- Choose the right lender. Different lenders currently offer different levels of service to different types of buy-to-let borrower. For example, Birmingham Midshires has recently changed its criteria to discourage big portfolio investors. On the other hand, Paragon Mortgages re-entered the market in September this year aiming specifically at providing finance for professional landlords with larger property portfolios. It can be worth paying a slightly higher interest rate for greater access to finance or better service.
- Put all your eggs in one basket… Or don’t. It is important that you weigh up the pros and cons of holding all of your mortgages with one lender, if you have more than one buy-to-let mortgage. It could make sense to re-mortgage them all wholesale to a new provider, who will then have a 360 degree understanding of your investments. On the other hand, it might suit you to spread your borrowing about by re-mortgaging one or two to a new lender, in order to secure the best available deals.
- Use a mortgage adviser. A good adviser can and will scour the market to find the best type of deal for you, with the most beneficial interest rate/fee combination for your needs. In fact, using an adviser you trust means you could in theory skip the rest of these tips, as they will do the work for you.