Buy-to-let remortgage tips for landlords

Landlords who have buy to let mortgages which are shortly coming to an end will no doubt be worried about what will happen when the current deal ends. The usual route of comparing any new products offered by your existing lender with what others will offer is not as straight forward as it used to be. As they try to cut back on lending, many lenders are deliberately offering expensive deals or no deals at all to their existing customers.. So what can be done to stop paying more than absolutely necessary? And what avenues are open to those landlords who have low equity in their buy-to-let property?

Matt Dagworthy of Logic Financial Services, ludlowthompson preferred mortgage suppliers, offers the following comments and tips:

There are a number of possibilities, most of which should be discussed with a financial adviser before making a decision.

1) Do your research
The very first thing you should do make sure you have definitely checked the market thoroughly to see if anyone can offer you a better deal than your current lender. Rates are higher (typically 2% more than 2 years ago for an 85% mortgage), as are fees so it is vital that all avenues are explored and full comparisons are made. The easiest way to do this is to contact a 'whole of market' broker. They will do the leg work for you and all the calculations to see of you have any choices for switching your mortgage. Some lenders are more relaxed than others about rental income; some may let you use your own personal income when underwriting the deal. Others may have various rate and fee options to give you a better chance of making the deal fit. Either way, an experienced broker will point you in the right direction.

2) Reduce the loan
You should be able to open up a lot more avenues if you reduce the amount you owe on your buy-to-let mortgage. For example, the number of products available increases significantly if you can go to 75% or lower loan to value. So if you have access to other funds it may be worth considering using these to reduce the buy-to-let loan. If cash isn’t available but you own other properties then consider refinancing those. While most people want to keep their residential mortgages as low as possible it is worth remembering that rates are generally much lower on these loans. Borrowing the money to reduce a buy-to-let mortgage could reduce the overall cost of the investment debt. Of course this does have tax implications so, again, always discuss this with your financial adviser.

3) Switch to interest only
If you are currently paying capital and interest on your mortgage most lenders will allow buy-to-let loans to be changed to interest only. This will reduce your monthly payments and potentially benefit you from a tax perspective as you are only able to claim tax relief on interest payments NOT capital. Of course your debt will not be reducing so the consequences of this also need to be considered.

4) Increase the rent
One positive impact of the credit crisis is that more people are looking to rent rather than buy. This demand means you should seriously consider renegotiating the rent you charge on your buy-to-let property. Not only will this help towards any increase in your mortgage cost it may also enable you to access more products as lenders demand higher rental cover - discuss this strategy with your letting agent. 

For financial advice contact Logic Financial Services -
For a free consultation email mortgages@ludlowthompson.com or call                0845 450 7590        

Disclaimer: Investments can go down as well as up. This is an information only article. Always seek advice from a qualified financial advisor. Calculation used for gross yields (£Annual rent/£Purchase price) x 100 = gross rental yield per annum.