Craig Skelton talks about remortgaging your Buy to Let property.
It’s very similar to a residential mortgage. As your initial two-year or five-year fixed deal comes to an end, it’s time to look at securing a new deal for yourself. It’s pretty straightforward – you speak to a mortgage broker and we look at what’s out there in the market.
We will find out the best rate for you based on your circumstances and your goals. We secure a new deal and it’s a seamless process from there. As soon as your existing deal ends, your new product starts and then you’re back on a two-year, three-year or five-year fixed rate deal.
As with any deal, when your initial fixed rate comes to an end, you’re switched on to the lender’s standard variable rate. That’s generally not the best rate with the lender or the marketplace.
If you don’t do anything with regards to remortgaging, the lender will write to you and state that your mortgage payments are changing. Then you start paying the monthly payments from the date that your existing deal ends.
The main reason to remortgage is a financial one. Your monthly payments are going to increase if you go onto the standard variable rate. Obviously people choose Buy to Let to generate an income. So the less you’re paying out in fees, charges and interest on mortgages, the more profit you’re going to make. That’s why it’s important to remortgage your Buy to Let.
When your initial rate is coming to an end you will get a letter from your current provider, generally about six months before your deal runs out. They will offer you alternative products. A lot of people, especially busy landlords, think it’s easy to just tick a box and get a new deal. That’s called a product transfer – switching to a new deal with the same lender.
One thing to point out is that lenders will never remind you if you haven’t responded to the product transfer. Plus, if you do choose a product transfer, it won’t necessarily be the most suitable deal in the market.
Renew My Mortgage will compare what your current provider will offer to the rest of the market at no cost to you. We will look at your existing deal and tell you what the best rate is out there. If it’s with your current lender, we’ll just switch it for you. We’ll sort everything out for you, do the paperwork and switch to that new deal.
However, if there’s a better rate out there we’ll help with a full remortgage. It’s pretty seamless – similar to what you went through when buying the property but certainly less painful.
If you’re a portfolio Buy to Let landlord with ten or twelve properties out there, it can be hard to keep track of when all these different products are coming into end. So make sure that you’re organised. Six months before the end, reach out to a mortgage broker to see if there is a better deal out there.
A lot of the time there’s no need for a valuation or a new survey to be done. We’ll ask about the value of the property, the outstanding loan amount etc. A lot of remortgage deals come with free legal services or you’ll be offered cashback to cover the cost. Then we go through all the paperwork with you and the deal’s ready for when your existing rate ends.
We recommend starting the process six months before your existing deal ends. It doesn’t take six months, but a lender’s mortgage offer normally lasts for that length of time. We work to make sure that when your deal ends, everything’s in place and ready to go.
It normally takes a couple of months to get everything arranged, but we suggest six months just to make sure there’s no hidden snags.
Stamp duty is only relevant when you’re purchasing the property title. There’s no stamp duty when remortgaging.
In terms of costs involved with remortgaging, there’s not much to it. From a Renew My Mortgage point of view, if we’re just switching with your existing lender, that doesn’t cost anything whatsoever. We’ll do all the paperwork for you and switch that over.
For a new deal elsewhere in the marketplace, generally the survey is free. Solicitors are either free or you gain cashback to pay for them.
When we’re looking at mortgage deals, the main two things we compare are the rate and the application fee that the lenders charge for that particular product. The higher the product fee, the lower the interest rate. If there’s no fee, generally the interest rate is slightly higher.
That’s our job as a mortgage broker, to compare that. We also look at what you’re borrowing. If your mortgage is a small amount, it’s normally better to go with a slightly higher rate with no fee, whereas if your mortgage is a higher amount it’s better to go with the lower rate and pay the fee.
You can add the fee to the loan. So if there is a product fee, you don’t actually pay the £500 or £1,000 – it just gets added to your borrowing.
It’s not common. The only way you could be refused is if the survey on your property doesn’t value it at the original price. You can be refused or be asked to put more money in to remortgage. But generally speaking if you’re just doing a straight mortgage, it’s not something you would usually get refused on.
The main thing is cost. It’s about peace of mind as a landlord that you are on the best interest rate and a mortgage that suits you and your goals.
The deals that are offered by lenders will always be better than their standard variable rates. Standard variable rates are not guaranteed or fixed so they can change at any time. You could receive a letter from your current provider putting the SVR up by 0.2%, so your mortgage payments go up by £50 a month.
So why would you not want to fix that, knowing that you avoid paying more each month? You know what your rent is, so by fixing rates for two, five or 10 years – whatever’s right for your goals – you will have peace of mind.
The main thing is making sure you’re reviewing your Buy to Let mortgage six months before your current deal is going to an end. Don’t go for the easy option of ticking a box and transferring your product with your existing lender.
You might think it’s going to be painful and take time. But it’s well worth it and it’s fee-free from Renew My Mortgage. Then you can rest assured that you’ve got the most suitable deal out there right now.