- Personal Finance
A Buy to Let Remortgage When Interest Rates Rise
A Buy to Let Remortgage
When most people think about a remortgage they usually think of it as a way to take advantage of falling interest rates but if you own a rental property you can also take advantage of a buy to let remortgage as a way of dealing with rising interest rates. This will not work in all cases but in most situations it is entirely possible.
Usually when landlord buys a property that they intend to rent out they structure the deal so that the rent they earn can cover the cost of owning the property and ideally provide a small profit each month. Normally this requires being able to rent the property out at 150% of the amount that is required to pay the mortgage. The extra money is required to pay for taxes, estate agents, maintenance and a whole host of other expenses that come up when you own a property. The problem occurs when interest rates rise, if you are on a variable rate mortgage so will your monthly payment. Many landlords find that when this happens they can no longer cover the mortgage payment with the rent they are collecting. A buy to let remortgage can help them to deal with this problem.
One of the advantages of a buy to let remortgage is that it allows you to spread your payments out over a longer period if you need to. This would be a bad idea if you were living in the home since you would end up paying far more in interest over the length of the mortgage. The situation for a rental property is a little bit different. Although you would still end up paying more in interest, for the landlord having a positive monthly cash flow is usually more important. A buy to let remortgage will allow you to lower the monthly payments by extending them over a longer period. This will allow you to cover the cost of owning the property with the rental payment and help ensure that you have a positive monthly cash flow.
A buy to let remortgage is not the ideal solution in every case and you will need to make sure that you factor in the fees involved in a remortgage when you are calculating whether or not it is a good idea. A broker who specializes in buy to let remortgages can be a huge help in this regard, he can also help make sure that you get a good deal.