Can I get a new mortgage with a different lender?

Yes, you can, so long as you are able to meet the criteria. The process tends to be lengthier than transferring to a new deal with your current lender (a product transfer). Providers sometimes offer better deals to existing customers, but you could save more by remortgaging with a different lender, so it’s worth comparing all the deals available.

How much can I borrow when I remortgage?

When you remortgage your house, you can either borrow the remaining outstanding balance on your mortgage - usually if you're just changing deals for a cheaper rate or to switch to a new fixed remortgage deal because your previous term has ended. You may also be able to borrow more when you remortgage, but this will depend on your circumstances. Having more equity in your home can make it easier to borrow additional money when you remortgage, but you'll also need to prove you can afford to repay the larger amount.

Why remortgage with a broker?

Remortgage comparisons can be difficult to manage alone, due to the high volume of deals available. Not to mention the fact the every lender has a different set of criteria that you will need to meet. Rates are also changing incredibly quickly in the current market, so deals seen online are not always available by the time you apply. Mortgage brokers with access to the whole market, like those at Mojo, know which lenders can offer the best remortgage rates for your circumstances. They also have access to deals you won't necessarily see online.

How long does it take to remortgage?

Remortgaging usually takes about a month, which is the time you need to complete all the paperwork and have a valuation carried out on your home. When the process is over, you’ll be notified with a completion statement from your lender. If you choose to remortgage with the same lender, this is known as a product transfer. Because the lender already has all your details, product transfers tend to be quicker than remortgaging with a new lender. Some lenders offer digital product transfers which can be completed online very quickly.

Will I have to pay an early repayment charge?

If you’re still locked into a mortgage deal, it’s likely you’ll have to pay an early repayment charge (ERC). An ERC is a penalty for leaving your existing mortgage deal early. It’s usually calculated as a percentage of the amount borrowed, which tends to decrease the closer to the end of the deal you get. Paying an ERC to remortgage before your fixed-rate period comes to an end could take any savings you would make. So make sure you calculate the costs carefully to decide whether it's worth it for you.

Can I remortgage from interest-only to a capital repayment mortgage?

Most lenders won’t need you to remortgage in order to change from an interest-only to a capital repayment mortgage deal with them. In fact, they will usually be happy for you to do this, as it reduces the risk to them. If you wanted to change from a repayment to an interest-only mortgage your options would be reduced, as not all lenders are happy to offer interest-only mortgages for residential homes. However, you may be able to do so as a temporary option under the mortgage charter.

Will applying for a remortgage affect my credit score?

Mortgage lenders carry out a credit check at mortgage application to decide whether to lend to you. If this is a ‘hard search’, which it typically will be at application stage, it leaves a mark on your credit score temporarily, but this shouldn’t affect it too much. The real problem is where you make multiple applications to a number of lenders before being accepted. This makes it obvious that you have been declined by others, but also gives the appearance of desperation, which can discourage future lenders from approving your remortgage application. The best way to avoid this is to speak to a broker who will be able to direct you to those lenders whose criteria you are most likely to meet.

Will I need to have my house valued when I remortgage?

If you remortgage with a new lender, you will need to have a property valuation. Much like you did when you took out the original mortgage. If you use a product transfer to remortgage with your current lender, you won’t usually need to have a valuation, however, you may need to if your house has changed significantly in value.

Can I remortgage if I'm self-employed?

Yes, you can. This will typically be easier if you had the same circumstances when you took out your original mortgage, or have been self-employed for a substantial period of time, however. Self employed mortgage applicants will usually need to demonstrate a lengthier period of stable income than employed applicants, with two to three years of accounts and tax calculations the standard requirement. There are a few lenders who will look at self-employed applicants with as little as 12 months trading history, however.

Can I remortgage with bad credit?

Yes, it’s certainly possible, depending on the level of your credit issue. There are bad credit lenders specifically intended to help people in these circumstances, although the remortgage rates tend to be higher. If you’re concerned about your credit score, another option is to consider a product transfer. Your existing lender is unlikely to check your credit rating or affordability unless you’re increasing your loan amount or extending the term of your mortgage, so a product transfer can be an easier option.

How does the LTV of my property affect remortgaging?

Lenders have a maximum LTV that they are willing to offer in any given scenario, depending on how well you meet the other lending criteria and how much you need to borrow. As lower LTV borrowing is less of a risk to the lender, the interest rates offered tend to be more competitive. The LTV is the percentage of the total cost of the property that you need to borrow. To calculate it, find out the total outstanding value of your mortgage, your property’s current value and then divide your outstanding mortgage balance by your property’s value: Example: You have £100,000 left to pay on your mortgage Your property is worth £200,000 Divide £100,000 by £200,000 = 0.50.5 x 100 = 50 (or 50% LTV) When you remortgage, the LTV will depend on: How much of the original loan you have repaid Whether your property has increased in value and; Whether you need to borrow more money or are simply remortgaging for a better interest rate

Can I remortgage as an older borrower?

Historically older borrowers have had a harder time remortgaging, especially if they are nearing retirement age, due to the maximum age limits imposed by many lenders. However, in recent years there has been a noticeable increase in flexibility in this area, with some lenders extending their maximum age of borrower and maximum age by which the mortgage needs to be repaid. When nearing retirement age, many people reassess their finances, and a large part of this is likely to be looking at their remaining mortgage balance, and how they can live more comfortably in their later years. People in these circumstances may consider more specialist products, such as: Remortgaging onto a retirement interest-only mortgage (RIO) - often a helpful option for homeowners likely to fall short of repaying the final lump sum balance on an interest-only mortgage. Remortgage onto an equity release product - always take qualified financial advice from an equity release specialist before considering this type of remortgage.

Will I need to arrange a solicitor or conveyancer when I remortgage?

If you're changing lenders, yes you will - although some lenders offer free conveyancing services as part of your remortgage deal. A conveyancing solicitor is required for a full remortgage, but not for a product transfer, as the debt will not change hands when you remortgage with the same lender.

How early can I remortgage?

You can, theoretically, remortgage after 6 months of having most mortgages. There is no legal requirement to stay in a deal period, even if you choose a fixed remortgage deal. However, it's weighing up when you can do so without paying a fee that's important. ERCs (early repayment charges) tend to apply if you leave a fixed length mortgage deal before the end date. How soon can I remortgage before the fixed-rate ends? If your deal has a tie in period, whether that's a fixed rate or an initial deal period on a variable rate deal, you'll usually need to pay ERCs in order to leave before it ends. It is, however, possible select a new deal around six months in advance of that end date. So if you see a cheap remortgage deal, you can lock in that rate and it will automatically begin when your original deal ends. And because you don't leave until it does, you won't have any ERCs to pay.

How does remortgaging work?

When you remortgage, you simply switch your mortgage loan to a different deal. This works by paying off your outstanding balance with the new loan funds, and then repaying the new loan monthly, instead of the old one.

What’s the difference between a buy-to-let and a residential mortgage?

A residential mortgage is a loan you get to buy a property that you’ll live in yourself. A buy-to-let mortgage is when you borrow money for a property you wish to rent out to tenants.

Should I get a repayment or interest-only buy-to-let mortgage?

Most landlords choose an interest-only mortgage and use the rental income to invest or save, paying back the entire mortgage later. If you take this approach, you must make sure you have a payment plan to cover the whole mortgage back when the mortgage term ends, as the lender will want to be confident you will be able to repay the loan. If you choose a repayment mortgage, which is usually used to buy a residential home to live in, you’ll own the property outright at the end of the deal, but your monthly repayments will be higher.

What happens at the end of my interest-only buy-to-let mortgage?

You will need to repay the loan capital (the full amount you borrowed) at the end of the mortgage term, as you will have only paid the interest. Lenders will expect you to have a plan in place for this when you take out the mortgage, and it often involves selling the rental property on. It’s important to consider that if the cost of your property drops, then the resale income may not necessarily cover what you have borrowed. A back up plan is always a good idea, no matter how you plan to repay the capital.

How many buy to let mortgages can I have?

There is no limit to the number of buy-to-let mortgages you can haven assuming you’re able to meet affordability for them all. That said, some lenders are reluctant to lend to portfolio landlords (those with more than 4 active buy-to-let mortgages) and it will get more difficult to borrow, the more properties you own. There are specialist lenders that are able to accommodate portfolio landlords, however, and they are often happy to use existing investment properties in place of, or addition to the deposit, in order to secure your borrowing.

Can I change my residential mortgage to a buy-to-let mortgage?

Yes, you can. It’s possible to remortgage a residential property onto a buy-to-let mortgage, so long as the lender feels that both yourself and the property meet the criteria of buy-to-let lending. It’s also possible to use a let-to-buy arrangement, which is where you take out two mortgages at the same time. This involves remortgaging your current home to a buy-to-let so that you can keep it as a rental property, whilst taking out a new mortgage to buy another home to live in.

Can I rent out a property on a residential mortgage?

No you can’t. Residential mortgages are intended for the purchase of a home you are going to live in yourself. If you ignore the terms of your mortgage and let out a property that has a residential mortgage without speaking to your lender, you’ll be committing ‘mortgage fraud’. In these circumstances, it’s possible that your lender will demand that the mortgage is repaid immediately, or repossess the property if you’re unable to do so. If you would like to try out being a buy-to-let landlord with your residential home before committing to it for the long term, it’s possible to look at getting a consent to let on your residential mortgage. This will give you a short term (usually 6-12 months) allowance to let out your home before you need to remortgage onto a buy-to-let product.

Do I need a buy to let mortgage if I rent my house through AirBnB?

It really depends on how you intend to offer your home on AirBnB, but you may not always need a buy-to-let mortgage. Some lenders will allow you to rent part of your home, perhaps a room or two, on an AirBnB basis with a standard residential mortgage. This is as long as you keep to their terms on the maximum number of days per year you can do this. It’s important to speak to your lender first, as this may still be breaching the terms and conditions of your mortgage. Whether you need a holiday let mortgage or a buy-to-let mortgage will depend on: If you intend to offer your property as a whole How long you intend to let it out to any one individual How many maximum days you will offer your property to let throughout the year

How much can I borrow with a buy-to-let mortgage?

Loan size is usually based on the potential rental income from the property that you’re buying, rather than your personal income. But you'll still have an income assessment to ensure you'll be able to repay the loan when your property is vacant. An ARLA registered letting agent should be able to advise you about local rental property prices in the area you’re looking to buy, or you could research this on property rental sites, such as Zoopla.

Can I get a buy-to-let mortgage as a first time buyer?

It can be more difficult, as some lenders prefer that you have experience of property ownership before you move into BTL mortgages. However, there are certainly lenders out there that will approve buy-to-let mortgages for first-time buyers. Keep in mind that you won't benefit from the first-time buyer stamp duty relief if you're purchasing buy-to-let property.

Can I live in a buy-to-let house that I own?

No you can't, this would be breaking the terms of a BTL mortgage. Buy-to-let mortgages are only suitable for property that you intend to rent out as a landlord. Most mortgage terms will even restrict you living in them during the renovation period.

Is a buy-to-let mortgage cheaper than a residential mortgage?

No it isn't. In fact, as a BTL mortgage is a commercial product, buy-to-let interest rates are typically higher than that of an equivalent mortgage on a residential property. The confusion may lie in the fact that most landlords use interest-only mortgages for buy-to-let purchases, which is cheaper to repay monthly. However, this means that at the end of the mortgage term you'd still owe the full loan, as you'll only have been repaying interest, not capital.

How can I compare the best buy-to-let mortgage rates?

The best way to compare BTL mortgage rates is going to be to cast your net as wide as possible. Each lender will have different criteria, so not every buy-to-let mortgage will necessarily be suitable for you. Then of course, the more lenders you consider, the more chance you have of finding a competitive rate that does suit your needs. A broker with experience in this area, like our partners at Mojo mortgages, will be well-placed to help you.

Is a BTL mortgage worth it in 2024?

There's no doubt it's become more difficult for landlords to make a profit in recent years. Independent landlords in particular have not only been subject to higher buy-to-let interest rates, but also enjoy fewer tax benefits than portfolio landlord businesses. That said, if you know where to invest, it's still perfectly possible to make a living from residential rental property. Speaking to a broker who specialises in buy-to-let mortgages can help. You could also check out our buy-to-let facts and statistics article for guidance.

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Release equity to invest in buy-to-let property

How to release equity to invest in buy-to-let property

Written by Kellie Steed, Mortgage Content Writer12 June 2024

If you’re looking to invest in rental property, remortgaging to release equity could be a viable path to raise enough cash for a deposit or possibly to buy an investment property outright. While remortgaging can be a great way to release equity, there are many factors to consider before deciding if this is the right choice for you.

The image shows a close up of a bay window on a Victorian terraced property and there is a green to-let sign hanging from just above the window. There are also a row of further terraced houses, some pavement and some trees in the background

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How can you remortgage your home to invest in property?

If you’re looking to purchase a buy-to-let property, you'll typically need at least a 25% deposit. As this can be difficult to pull together, many people look at remortgaging an existing property to aid them.

Whether you remortgage your own home, or another investment property, the equity held can be used as the deposit for your new purchase.

Equity is the difference between the value of the property and how much you owe on the mortgage. For example, if you have £100,000 left to repay on your mortgage, and your property is worth £250,000, your equity is £150,000.

When you remortgage, you switch your current mortgage to a new deal – which could be with a new provider or the same one you’re currently with.

The new mortgage is used to repay your existing mortgage, and you can release the equity, essentially re-borrowing the money that you have already repaid - as well as any natural gain from a rise in property prices.

So, how do you get the best buy-to-let mortgage rates? If you have a very large level of equity it may be possible to buy an entire investment property outright. But in most cases, you can use the equity as a deposit for a new buy-to-let mortgage deal. The larger the deposit, the better the rates that are generally available to you.

How much can you borrow?

Aside from your personal financial circumstances, the amount you can borrow when you remortgage to release equity depends almost entirely on how much equity you have in the property.

Each lender has a maximum LTV (loan to value) they are willing to lend. As releasing equity will increase the LTV of your borrowing, you'll likely be limited to around 75% of the property value. That said, there are some lenders that will lend a slightly higher LTV for this purpose.

It’s also important to note that not all lenders allow you to remortgage your personal home if you’re releasing equity for business purposes, i.e a buy-to-let purchase. For example, NatWest don't allow equity release from a residential home for commercial purposes, whereas Halifax do*.

*At the time of writing, please note that individual lender criteria can change at any time

How to access your equity

If you're looking to invest in buy-to-let property, there are a number of routes you could take to use existing equity, including:

Selling your home

It can be simpler to sell your property and downsize to a cheaper home than remortgaging to release equity. Any profits from the sale of your original home, once you've purchase the downsized property can then be used as a deposit on a buy-to-let investment.

Remortgaging to release equity from your home

It’s unusual that you could purchase a new property outright by remortgaging to release equity from your own home, but possible if it's very high value and you hold a large percentage of equity.

In most cases, however, the equity held can be used as a deposit for a new buy-to-let property mortgage. When you remortgage, you increase the loan size to cover both repaying your existing loan and borrow enough for the buy-to-let deposit.

It's a good idea to have the rental income on your new investment cover the cost of your larger residential mortgage, as well as the repayments on your buy-to-let mortgage.

Remortgaging to release equity from a buy-to-let property

It’s fairly common for portfolio landlords to remortgage their buy-to-let properties to purchase additional buy-to-let property, expanding their portfolio. Of course, this is also less risky, as you’re not using your own home as collateral.

The common issue here is that buy-to-let properties are generally lower value than personal residential properties, which means that you may have less equity to release.

Some investors find that a portfolio mortgage, which consolidates all your buy-to-let properties onto one mortgage, helps them to manage their finances. When you take out a portfolio mortgage deal, it’s possible to release equity at the same time.

Should you remortgage to invest in buy-to-let property?

Whether this is the right option for you will depend on your individual circumstances. While remortgaging to release equity can make it possible to finance a buy-to-let mortgage, there are benefits and drawbacks to every form of borrowing.

For example:

You may need to pay ERCs (early repayment charges) on your existing mortgage to leave the deal if you're within a fixed period of any type. These fees apply to most mortgages, unless you’re on your lender's SVR (standard variable rate)
You may not have enough equity in your existing property to finance the buy-to-let property
Unless you're using the equity released from remortgaging to buy an investment property outright, you'll have two mortgages to repay
If you borrow more against your existing equity, you could be faced with higher interest rates on your original mortgage - as the more equity you leave in your home, the cheaper the mortgage rates available to you