Why I'm remortgaging

I'm sat here in bed waiting for a nice cheque of about £35,000 to land on my doorstep.  In times gone bye the prospect of such a relatively large amount of money hitting my bank coffers would have got me jittery with excitement.  These days I take it a little more in my stride.  In a sense it's not real money....but just numbers, which leads me onto why I have chosen to remortgage now.

Why am I remortgaging my BTL now?

Like a lot of things in life it's a combination of push and pull.  My current mortgage on the one bed apartment in question is a repayment mortgage which has dwindled nicely to a mere £20,000.  I could leave it to run it's course and pay the whole thing off over the next few years.  However, I do now have better things to do with my capital.  I'm paying a mere 2.25% interest currently but I'm mindful that interest rates will not stay at there current levels for ever.  I'm therefore looking at locking into the current extraordinary low rates.  By seeking the advice of a good BTL mortgage broker I've managed to find a 5 year fixed rate with the Mortgage Works that gives me 75% of the current £75,000 valuation  and as I've said should leave me a nice fat cheque of £35,000 even after all the legal and set up fees.  Why the Mortgage Works? Well this is on the advice of my mortgage brokers who very helpfully highlighted the fact that the Nationwide BS owned specialist lender will lend without you having to go through all the hassle of providing 3 years proof of earning backed up by your SA302.  Given that as ever I'm going to be doing my tax return right up to the last minute. I will not have the SA302 for 14/15 until probably next week.  No good if I need to remortgage now.

Lets be honest I need the money

Some would say it is not prudent to remortgage my buy-to-let when it's ticking along nicely and I'm now swapping for a higher rate.  They may be right but as is the case for all landlords we all have our own personal financial goals to meet.  This is what makes the sector so varied and exciting. When looking at my calculations even with a 75% LTV I am still covering my repayment costs on the loan even at the higher rate of interest and higher gearing.  The reality is I'm actually expanding my property portfolio for the first time in over a decade so in simple terms I need the 'cash' to finance the purchase of another property. This is lucky because it's one of the few categories that lenders like when seeking a justification of why they are remortgaging.  It's not a good idea to tell a prospective lender that you need the cash because you want to blow it on buying a Ferrari or once in a lifetime holiday.

So when `I say I need the cash it's a business decision where I'm recycling my assets into a new set of mainly property assets which will earn me way more than the 4.09 % I will have to pay in annual interest payments.  It's a pain that my cost of borrowing will go up in the short term but given the projections on future interest rates then my current cost of 2.25 % was likely to rise shortly anyway.

Should landlords remortgage now?

It's a classic dilemma for many landlords at the moment of whether to try and lock in the currently historically low interest rates.  Let's be honest many forecasters have been wrong to date with their forecasts of rapidly rising mortgage rates.  For me it's clear cut because having the capital is more important than paying the absolute minimum on interest charges.  Not all landlords are in this position and therefore for them it may be wiser to sit on their current historically low rates until mortgage rates make a dramatic movement.  The difficultly here is that the attractive longer term fixed rates would start to disappear way before rates do start to move.  There is as always when it comes to being a landlord no clear right or wrong answer.  Happy landlording!

Buy-to-let mortgages explained