What Lenders Consider When You Want to Remortgage a Rental Property

Remortgaging a rental property is common among landlords looking to secure a better rate, raise capital or restructure borrowing. But lending criteria for buy-to-let properties differ from residential mortgages, and understanding what lenders assess can help prevent delays and improve your remortgage options.

This guide explains what lenders look at when you want to remortgage a rental property, how affordability works and how to prepare a strong application. This article provides general information only and does not offer regulated mortgage advice.

---

Why Landlords Remortgage Rental Properties

Common reasons include:

• Securing a new fixed rate as an existing deal ends
• Raising capital for further investment
• Improving cash flow
• Making property improvements
• Consolidating debts
• Structuring ownership differently (e.g., personal to limited company – where permitted by lenders)

Regardless of the reason, lenders undertake a full assessment based on buy-to-let criteria.

---

What Lenders Consider When You Remortgage a Rental Property

1. Rental Income and ICR Calculations

Unlike residential mortgages, buy-to-let lending is based mainly on rental income rather than personal income. Lenders use the Interest Coverage Ratio (ICR) to check whether rent covers the mortgage payments.

Typical requirements:

• 125%–145% rental coverage
• Stress-tested at a rate usually between 5.0% and 7.0%

For example:
If the stressed mortgage payment is £800/month, lenders might require rent of at least £1,000–£1,160/month depending on the ICR.

Some lenders allow “top slicing,” where personal income supports affordability if rental income falls slightly short.

---

2. Loan-to-Value (LTV) Limits

Most rental property remortgages are capped at:

• 75% LTV for standard buy-to-let
• 70% or lower for more complex properties
• 60%–65% for flats above commercial premises or HMOs

The lower the LTV, the more lenders you may have access to.

---

3. Your Experience as a Landlord

Some lenders prefer applicants who:

• Already own a rental property
• Have a proven track record
• Understand tenant management and rental compliance

However, many lenders still consider first-time landlords, subject to rental coverage and property type.

---

4. Tenancy Agreements and Occupancy Status

Lenders require clear evidence that the property is let or suitable for letting. They may review:

• Current tenancy agreement (typically an AST)
• Rental payment history (bank statements may be requested)
• Whether tenants are in place or the property is vacant
• Compliance with safety requirements (gas checks, EPC, etc.)

Some lenders require the tenancy to be a standard Assured Shorthold Tenancy; others accept variations, including corporate lets or holiday lets.

---

5. Property Type and Marketability

The type of rental property affects lender appetite and valuation:

• Standard houses and flats are widely accepted
• New-build flats may have lower LTV caps
• Ex-local authority properties are accepted by some lenders but not all
• HMOs require specialist lenders
• Flats above commercial premises may need specialist criteria
• Non-standard construction may limit lender choice

A valuer will assess market demand, rental suitability and condition.

---

6. Your Credit Profile

Even though buy-to-let affordability is rental-based, lenders still assess:

• Credit history
• Payment conduct on existing mortgages
• Use of overdrafts
• Recent borrowing activity
• Any adverse credit markers

Clean, stable conduct strengthens the application, but some specialist lenders accept minor historical issues.

---

7. Personal Income (Role and Limitations)

While rental income is the primary affordability factor, lenders may still consider:

• A minimum personal income requirement (e.g., £20,000–£30,000 for some lenders)
• Employment status (PAYE, self-employed)
• Debt levels and financial commitments

Personal income is especially relevant when:

• Rental income is borderline
• Top slicing is used
• The property has void periods or inconsistent rental payments

---

8. Portfolio Size and Exposure Limits

For portfolio landlords (typically those with four or more mortgaged buy-to-let properties), lenders may apply additional checks:

• Business plan
• Cash flow forecasts
• Portfolio rental coverage
• Geographic concentration of properties
• Maximum number of properties allowed with the same lender

Portfolio assessments are more detailed and may take longer.

---

9. Condition of the Property

A surveyor may highlight issues that affect lending, including:

• Damp or structural concerns
• Poor EPC rating
• Inadequate fire safety (especially in HMOs)
• Lease length concerns (e.g., leases under 80 years may be an issue)

Lenders want reassurance that the property is lettable and maintains long-term value.

---

10. Reason for Remortgaging

Different goals influence the lender’s approach:

• Rate switch only: usually straightforward
• Capital raising for further purchases: permitted by many lenders
• Debt consolidation: allowed by some lenders with restrictions
• Transferring ownership: may require additional checks or legal steps

Lenders assess risk based on how funds will be used.

---

Common Scenarios and How Lenders Respond

Scenario 1: Rental income just meets ICR

Possible with high-street lenders; specialist lenders may offer more flexibility.

---

Scenario 2: Landlord wants to release equity for a deposit on another property

Often acceptable if LTV stays within limits.

---

Scenario 3: Poor rental demand in the area

Valuer comments may restrict borrowing or reduce rental assumptions.

---

Scenario 4: Minor adverse credit

High-street lenders may decline, but specialist lenders may still consider.

---

Scenario 5: Property above a shop or restaurant

Specialist lenders usually required due to increased risk.

---

How to Strengthen Your Rental Property Remortgage Application

(General Information Only)

Landlords often improve their remortgage prospects by:

1. Preparing rental evidence

Provide a valid tenancy agreement and proof of rent payments.

---

2. Improving property condition

Well-maintained properties often receive stronger valuations.

---

3. Reducing personal debt

Helps meet supporting income requirements.

---

4. Lowering LTV

Using savings or retaining equity can unlock wider product choice.

---

5. Ensuring clean bank statement conduct

Avoid unarranged overdrafts and late payments.

---

6. Checking and updating EPC ratings

Meeting EPC standards is essential for letting eligibility.

These steps are general considerations only.

---

Summary

When you want to remortgage a rental property, lenders focus on:

• Rental income and ICR coverage
• Loan-to-value limits
• Tenancy agreements and property suitability
• Credit history and bank conduct
• Personal income (for some lenders)
• Portfolio size and landlord experience
• Valuation and marketability

Many landlords successfully remortgage rental properties each year, whether to secure a new rate, raise capital or restructure borrowing.

This article provides general information only. For personalised support, regulated mortgage advice is required.