How should I refinance my buy-to-let property?

admin
6 July 2015

Q

I have a buy-to-let (BTL) property and I need to find a new mortgage in two years. I'm not tied into the current deal but I am now retired and wonder whether I will still be considered for a new BTL mortgage? We owe £63,000 on the property, which is worth about £80,000. We have a long-term tenant who pays £475 a month. Our own property is worth around £200,000. Would it be possible to remortgage this house and pay off the £63,000 on the buy-to-let property?
From
PN/Cheshire

A

The fact you are retired should not necessarily preclude you from switching to another BTL mortgage when your current deal comes to an end, or even before if it's advantageous. There will be a few things for you to look out for when considering your options.

Lenders, both for mainstream owner-occupier mortgages and BTL, have tended to bring down the maximum age to which they will lend.That can be as low as 70 or 75, so could limit the mortgage term available. However, BTL lenders can be slightly more accommodating on maximum age than in the mainstream market. For example, The Mortgage Works allows borrowers up to the age of 70 at the point of application.

BTL lenders will generally want there to be a minimum income level other than rental but can use pension income to meet that requirement.The amount they can lend will then be largely determined by the rental income covering the mortgage interest, typically by at least 125%.

For a remortgage of your home, you would need to demonstrate that you had adequate income to meet the lender's affordability criteria. The loan-to-value ratio, at 79% of the property value, is at the higher end of what buy-to-let lenders will offer and many will limit lending to 75% of the property value.

The very lowest mortgage rates are on offer for those with larger deposits, so it makes sense to get a more accurate valuation of your property to understand the options.

In summary, both avenues could be open to you and there's no need to assume that a BTL can't be done. Speak to an independent broker who will be able to go into more detail about how you should proceed.