Are Buy To Let Remortgages Better Than Selling?

Buy to let remortgage is now gaining popularity in the UK as the average house price is increasing constantly and the tenant demand is also growing. Lenders are taking advantage of this trend and are offering many new buy to let remortgage and mortgage schemes. The lenders are reducing their requirements of rental criteria and lowering the Loan to Value ratio to 65% instead of the earlier 85%. 

These incentives are all part of the product flexibility that the lenders are innovating in order to boost buy to let remortgage. The lenders with remortgage packages are also luring property owners with less than perfect credit rating and an adverse credit history, although to a limited extent.

Buy To Let Remortgage vs Selling The Property

If the value of your property is increasing and if it has reached a certain level where you feel that it will give you plenty of surplus money by selling it, should you sell it or go in for a buy to let remortgage. It is worth analysing this aspect in detail. 

Let us take a case where your initial mortgage was an interest only mortgage to the tune of £ 170,000 for a property worth £ 200,000. During the past few years, the property value might have doubled to £ 400,000 but the mortgage debt would remain at £170,000.

If you decide to sell the property, you will get £400,000 out of which you will have to pay £ 170,000 towards the mortgage debt and you will need to cover your initial investment of £ 30,000 so that you will be left with £ 200,000. This is the stage where you will have to consider the capital gains tax that might be around £ 80,000 or at best £ 48,000 if you take into consideration all types of allowances and the fact that you might have owned the property for ten years. Although the net gain would be between £ 152,000 and £120,000, you would be bereft of any future gains due to increases in the price of the house.

On the other hand, if you consider remortgaing, you can easily raise £ 170,000 because the value of your property and the potential rent would also have doubled. You would not need to pay any Capital Gains Tax and the property would remain in tact with you. By remortgaging you can also get enough money to go in for another property. A buy to let remortgage is definitely a better option.