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Everything you need to know about remortgaging a buy-to-let property

Remortgaging can be a great way to save on your mortgage payments, but only if you find the right deal and you’re looking for the right reasons.

Before you do anything with your buy-to-let mortgage, make sure you speak to an independent financial advisor and consider all the costs and implications of remortgaging.

But first, ask yourself why you need to remortgage your buy-to-let property.

Your current deal has come to an end

As with any mortgage, whether it’s on your own home or a rental property, it’s important to start shopping around when you know your current term is coming to an end.

If you took out a buy-to-let mortgage on a fixed or tracker rate, you’ll probably revert to your lenders standard variable rate (SVR) when the fixed term ends, which could mean your rate jumps by an averge of 2.59%[i], which can have a major impact on your profit margin, even in the short term. Shop around for different rates well in advance and you could find making a switch has a positive effect in the long term.

You need to change the terms of your mortgage

If you bought your buy-to-let property as an investment in your financial future, it’s likely that you’re in it for the long-term. And over time, you may find that your situation changes, or you want to spend some money upgrading your property to ensure you continue to get the best return, which can also lead you to consider a remortgage.

If you've owned the property for a few years, you might have seen the value of the property increase too. This might affect your loan to value (LTV) and could open up more lending options, so you may find you can make a saving on your monthly repayments, even with the associated costs added on.

You want to improve your margin or cover debts

Recently, many landlords have been remortgaging their rental properties in an attempt to increase profit margins and reduce debts after new rules on the amount of tax landlords pay came in to force in April 2017. And while this can be a good short-term solution, it won’t solve all your problems, so think very carefully before taking this option.

As with any debt, it’s important to think about the cost in the long term – if you’ve got a long time still to run on your mortgage, it’s unlikely you’ll save money by adding a debt to the loan. Even if the interest rate is lower, adding a loan with a five-year term to a 25-year mortgage is likely to cost you far more in the long run.

Always get good financial advice and consider your long-term goals before you make a switch. Switching for short-term gain may seem like the best solution right now, but you may find yourself paying for it in the future.

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