Four Suggestions Why You Should Remortgage Your Buy To Let Property
As a landlord, your financial affairs are a vital part of your property business
. Not only do you have to file an annual tax return regarding your property investments but you should also regularly review the mortgages you have on your buy to let properties. Ensuring you have the best mortgage deals can help you increase your income from your property business.One of the biggest expenses as a landlord of a buy to let property will be your mortgage, so it may be worth checking the marketplace to see if a remortgage can save you money on your monthly expenses. What are the reasons for remortgaging your buy to let?
Get a lower interest rate: This is the most fundamental one. Pay less money by getting a better rate. Most people remortgage to benefit from lower rates on their borrowing. If your existing mortgage deal has ended, you might automatically have been shifted on to your lender's higher rate.
Remortgaging allows you to take advantage of a low rate investment mortgage deal with another provider. You will typically have the choice of guaranteeing your repayments for a set period through a fixed rate mortgage or reducing your repayments with a discounted or tracker rate deal. Reducing your repayments also means that you earn more income from the property every month.
Release equity from your properties: Another popular reason that many people remortgage is to release the equity that is ties up in their investment property. As part of the remortgage process you can often apply for additional funds. Depending on the equity in your property and the rental income you may be able to increase your mortgage size when you switch to another lender.
A fundamental reason that investors remortgage to release equity is to build a property portfolio and buy more to let properties. By utilising your current property as security, it is possible to raise cash to use as a deposit on further buy to let properties. This will help you to spread the risk in your portfolio and to increase your rental and capital returns.
Convert the mortgage to a repayment basis: It is quite possible that you took out your buy to let mortgages on an 'interest only' basis rather than on a capital and interest (repayment) basis. Many mortgages have been arranged on this basis in order to keep the monthly repayments as low as possible.
Remortgaging allows you to make changes to your home loan arrangements such as converting the mortgage from an interest only basis to a capital and interest (repayment) basis. This will ensure that the balance of your mortgage decreases over time and so you will ultimately own the property outright at the end of the term. Bear in mind that this will increase your monthly repayment.
Avoid selling the property: A remortgage can also help you avoid selling your property if you are in need of some extra cash. If you need access to some of the equity in your buy to let property - for example to buy another property or for home improvements - a remortgage will help you access cash without the need to sell the asset.
If you decide to sell your property you will have Capital Gains Tax to pay. Either that or you might have to sell in during a market downturn. A better option would be to remortgage your buy to let property; this can help you raise the funds you need without being forced to offload property that may be your key to future prosperity.
by: Howard Ogollegos
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