What are the top tips on buy-to-let remortgaging?
Remortgaging to a new buy-to-let deal can be a smart move for landlords looking for a fixed rate or possibly lower interest payments. And it is essential if you want to borrow more or release equity. Follow these tips for a successful switch
- Shop around. It always make sense to do your research thoroughly when it comes to your property investment. It pays to be aware of exactly what type of deals are available at any given time, and at what rates.
- Check the internet. The internet is a great starting point for doing your research. Sites such as www.bbg-dealfindler.co.uk provide an online tool to help you search the mortgage market to find the latest deals on offer.
- Take a medium- to long-term view. Look a for a suitable mortgage product that will serve your needs best beyond the short-term. This may (or may not) 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. Buy-to-let mortgages nowadays come with hefty fees. It is not unusual to be charged anything from a flat fee of £ 1.999 to 3% of the mortgage balance. Most lenders will offer a choice of higher fee, lower rate, or vice versa. Do your maths carefully to ascertain which is best for you.
- Check out existing penalties. Before you move to a new mortgage lender or deal. you must check with your existing lender whether there are any Early Repayment Charges (ERCs) payable on your current arrangement. If you are on a fixed rate or a special tracker. the likelihood is that you will have to pay an MC. However. if you are paying your lender's Standard Variable Rate (SVR) an ERC will probably not apply.
- Find out about new penalties. Make sure you are aware of any ERCs or other charges that apply to your new mortgage. We live in economically uncertain times, when flexibility and the ability to change your financial arrangements can be very important to landlords.
- Look for flexibility. Check whether any new deal I 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. and this particularly applies to mortgages when interest rates are relatively low. 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 in the future.
- Choose the right lender. Different lenders currently ()offer different levels of service to different types of buy-to-let borrower. Many of the big names tend to cater for landlords with smaller portfolios, while others such as Paragon Mortgages, for example, aim specifically at providing finance for professional landlords with larger 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 could make sense to re-mortgage all of your buy-to-let mortgages 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 around by re-mortgaging one or two to a new lender, and place some on a fixed rate while leaving others on a lender's variable rate — effectively hedging your bets.
- 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. although most buy-to-let landlords like to do their own homework (see point 2) and be as informed as possible before they speak to an adviser.