Just as those with residential mortgages should regularly review their mortgages to see if they can cut costs, landlords should also check whether remortgaging could reduce their monthly payments.
This is particularly important following the introduction of tax relief changes in April this year, which will reduce the amount of tax relief landlords can claim on mortgage interest payments.
Relief is gradually being cut back so that by 2020 it will be basic rate (currently 20%) for all tax-paying landlords, which means many higher and additional rate taxpayers will face steeper tax bills.
Remortgaging could help offset some of these additional costs, and with interest rates still at rock-bottom, there are plenty of competitive deals to choose from.
Lenders have had to tighten up their buy-to-let mortgage rules due to Prudential Regulation Authority (PRA) requirements which were introduced to prevent landlords taking on too much debt.
How easy is it to remortgage?
The good news is that lenders will often take a more flexible approach if you’re remortgaging.
If you’re borrowing more money they will look closely at affordability when assessing your buy-to-let mortgage application, and will factor in all costs not just mortgage interest, when working out how much they will lend.
Lenders will also want to see if you can cope financially if interest rates rise, so they’ll apply a ‘stress test’ to make sure you could withstand higher payments.
However, if you’re simply refinancing on a like for like basis, they might be more flexible and offer a lower stress test. Some lenders can also impose a lower stress rate if you’re applying for a longer-term fixed rate deal of five years or more, as payments won’t change over this time.
Some lenders’ criteria will now also account for the fact that basic rate tax payers will not be hit by the tax relief changes.
Don’t delay, remortgage todayRemortgaging is often easier than many landlords think, despite the introduction of stricter lending rules.
If you haven’t reviewed your mortgage for a while, check the rate you are on and see if you might be able to remortgage to a better deal. It needn’t cost a lot either as many deals will cover switching costs with incentives like free valuation and free basic legal work for remortgages.
If you’re not sure which mortgage to go for, seek professional advice.
Our advisers will be able to tell you which mortgages you might be eligible for, and which lenders may be prepared to take a more flexible approach based on your individual circumstances.