On a £130,000 terrace refurbished to a £210,000 value, the remortgage hands back about £54,000 and leaves roughly £24,000 of your cash in the deal, under the five-year assumptions below. On a two-year fix the rental stress test cuts the loan and, for a higher-rate landlord, leaves over £56,000 stuck. Here is the refinance, using illustrative costs and criteria checked on 14 October 2026.
New to BRRR? Start with what the BRRR method is. This post covers only the refinance.
What does the deal look like before the refinance?
This fictional deal is a three-bed East Midlands terrace, bought for £130,000 with an unusable kitchen and bathroom and original wiring. The plan: buy with a refurbishment bridge, spend £28,000 on a light refurb, let it, then remortgage after six months of ownership.
Stamp duty on the purchase
As a UK-resident buyer of an additional property in England, you pay standard SDLT plus a 5% surcharge on the whole price. The surcharge rose from 3% to 5% for effective dates from 31 October 2024, subject to transitional relief (gov.uk) and the nil-rate band has been £125,000 since 1 April 2025 (current rates).
| Slice of the £130,000 price | Rate (0% or 2%, plus 5%) | SDLT |
|---|---|---|
| First £125,000 | 5% | £6,250 |
| Next £5,000 | 7% | £350 |
| Total | £6,600 |
Those are the rates as at October 2026. The Autumn Budget is scheduled for 28 October 2026, so recheck before completion.
The bridge and the cash going in
The bridge advances 70% of the purchase price on day one. You fund the works yourself. Assume 0.9% monthly simple interest on the advance, plus arrangement and exit fees of 2% and 1% of the advance, paid at redemption. The bridge runs seven months: three months of works, a month of snagging and letting, then the refinance completes at the end of month seven. How those costs work in detail is in our refurbishment bridging guide.
| Your cash in | Amount |
|---|---|
| Deposit (30% of £130,000) | £39,000 |
| SDLT | £6,600 |
| Legals, searches, survey, bridging valuation and lender legals | £3,400 |
| Refurbishment | £28,000 |
| Holding costs for four empty months (council tax, insurance, utilities) | £1,600 |
| Total cash in | £78,600 |
| Bridge redemption at month 7 | Amount |
|---|---|
| Day-one advance | £91,000 |
| Interest (0.9% x £91,000 = £819 a month, x 7) | £5,733 |
| Arrangement fee (2%) | £1,820 |
| Exit fee (1%) | £910 |
| Owed at redemption | £99,463 |
The tenant moves in at the start of month five on £1,100 a month (£13,200 a year). The £3,300 gross rent collected before refinancing is excluded below; ongoing costs and tax reduce that buffer.
How much can you borrow when you remortgage a BRRR property?
You can borrow the lower of two caps: a percentage of the new valuation (here 75% loan to value; TMW offers up to 80% with an EPC of C or better) and the loan the rent can support under the lender's stress test. The surveyor values the finished house at £210,000, so the LTV cap is 75% x £210,000 = £157,500.
The rental cap comes from the interest cover ratio (ICR). The lender takes the annual rent and asks it to cover the interest at a stressed rate by a set margin:
Maximum loan = annual rent ÷ (ICR x stress rate)
The PRA's SS13/16 expects relevant PRA-regulated lenders to assess affordability, costs and tax. It describes 125% as an industry ICR standard, not a statutory borrower band. For the rate stress, lenders allow for rates rising by at least 2 percentage points over the first five years, with a 5.5% floor. Fixes of five years or more escape that rate stress, but not the affordability check itself. The Bank of England reported 145% higher-rate testing in 2023.
The Mortgage Works uses the higher of 5.50% or pay rate plus 2 points for two-year capital-raising fixes, and 4.50% or pay rate for five-year fixes above 65% LTV. Its higher-rate ICR is 160%, not the 145% assumed below; at 5.5%, that caps borrowing at £150,000.
Higher ICRs reflect tax, including Section 24. Individual landlords get mortgage interest relief only as a 20% basic-rate tax credit (gov.uk), so a higher-rate taxpayer needs more rent to stay level after tax. Companies are outside this restriction and TMW tests standard company lets at 125%; read the criteria.
Which cap bites first: LTV or the rental stress test?
Under these assumptions, the stress test bites first on a two-year fix for every borrower type, while on a five-year fix the LTV cap binds at £157,500. The working below assumes a two-year fix at 5.25% (stressed to 7.25%) and a five-year fix at 5.5% (tested at the pay rate). Which? reported a Moneyfacts average of 5.79% at the start of October 2026. These pay rates are assumptions, not quotes; rental caps are rounded down to whole pounds.
| Borrower and product | Test | Rental cap | LTV cap | Loan cap |
|---|---|---|---|---|
| Basic-rate, 2-year fix | 125% at 7.25% | £145,655 | £157,500 | £145,655 (ICR binds) |
| Higher-rate, 2-year fix | 145% at 7.25% | £125,564 | £157,500 | £125,564 (ICR binds) |
| Limited company, 2-year fix | 125% at 7.25% | £145,655 | £157,500 | £145,655 (ICR binds) |
| Basic-rate, 5-year fix | 125% at 5.5% | £192,000 | £157,500 | £157,500 (LTV binds) |
| Higher-rate, 5-year fix | 145% at 5.5% | £165,517 | £157,500 | £157,500 (LTV binds) |
| Limited company, 5-year fix | 125% at 5.5% | £192,000 | £157,500 | £157,500 (LTV binds) |
To check one: £13,200 ÷ (1.45 x 0.0725) = £13,200 ÷ 0.105125, rounded down to £125,564. Our mortgage stress test calculator runs the same sum on your own rent.
The five-year fix allows £31,936 extra borrowing here; check its early repayment charge period in the offer. Our buy-to-let remortgage guide covers ERCs and timing.
Fee rules vary. TMW lets you add the product fee on top of its maximum LTV, within its maximum loan and affordability limits; here the fee is paid from the proceeds to keep the sums simple.
How much money is left in the deal?
About £24,000 stays in, assuming a higher-rate landlord borrowing personally on the five-year fix.
| Refinance | Amount |
|---|---|
| New mortgage (75% of £210,000) | £157,500 |
| Less bridge redemption | -£99,463 |
| Less product fee £1,995, valuation £395, legals £900, broker £500 | -£3,790 |
| Cash back to you | £54,247 |
| Money left in (£78,600 - £54,247) | £24,353 |
Then a fully let, interest-only year; figures assume £1,500 of actual deductible insurance and repairs, not an unspent reserve:
| Annual cashflow | Amount |
|---|---|
| Rent | £13,200 |
| Interest (5.5% on £157,500) | -£8,662.50 |
| Letting and management (12% incl. VAT) | -£1,584 |
| Insurance and deductible repairs | -£1,500 |
| Net cashflow before tax | £1,453.50 |
Cash-on-cash before tax is £1,453.50 ÷ £24,353 = 6.0%. Assuming all £10,116 of profit before finance costs is taxed at 40%, with full eligibility for the 20% interest credit, tax is £4,046.40 minus £1,732.50 = £2,313.90. After tax, the property costs you about £860 a year to hold. A landlord whose rental profit sits wholly in the basic-rate band stays positive, and so does a company before extraction tax and extra admin, which is why the ownership decision belongs before the purchase, not at the refinance. From 6 April 2027, legislated property rates for England, Wales and Northern Ireland rise to 22/42/47%, with 22% finance-cost relief; rerun the tax calculation.
What happens if the valuation comes in low?
A 10% down-valuation leaves about £40,000 in the deal instead of £24,000, because each pound off value takes 75p off the loan while LTV binds. Here is how money left in moves when the inputs move (higher-rate landlord, personal ownership):
| Scenario | Loan | Cash back | Money left in |
|---|---|---|---|
| Base: £210,000, 5-year fix at 5.5% | £157,500 | £54,247 | £24,353 |
| Valued 10% low at £189,000 | £141,750 | £38,497 | £40,103 |
| 5-year rate 1 point higher (6.5%) | £140,053 | £36,800 | £41,800 |
| Valued low and rate 1 point higher | £140,053 | £36,800 | £41,800 |
| 2-year fix at 5.25% instead | £125,564 | £22,311 | £56,289 |
A one-percentage-point rise hurts more than a 10% down-valuation here, because at 6.5% the stress test (£140,053) drops below even the reduced LTV cap. And when both go wrong, only the tighter cap counts, so the damage does not stack.
If the valuation disappoints, ask your broker to challenge it with comparable sales or try another lender. Our 70% rule post shows how to set the offer price so a soft valuation still leaves you whole.
When can you remortgage after buying?
Timing depends on the lender: TMW requires six months' ownership, and also six months of letting for inexperienced landlords. This example assumes an experienced landlord; there is no universal six-month valuation rule.
If a lender instead capped month-five borrowing at purchase price plus works, it would give 75% of £158,000 = £118,500. After a £97,825 bridge redemption and £3,790 of costs, you would get back £16,885 and leave £61,715 in.
Some lenders accept current-value remortgage applications from day one. Aldermore, for example, announced in November 2024 that it would size remortgages of recently bought properties on current market value up to 75% LTV, subject to underwriting, an arm's-length purchase, price/funds evidence and full Land Registry registration before completion. Criteria move, so confirm on the day. Bank Rate is 3.75% as at the Bank of England's 17 September 2026 decision, with the next on 5 November (Bank of England).
What will the valuer and lender want to see?
They want evidence of the improvements and a legally lettable property, because money spent on works does not guarantee a higher valuation.
- Proof of the works: a schedule of works, invoices and receipts, and before and after photos.
- Certificates: appropriate building control sign-off, plus an EICR or valid Electrical Installation Certificate for a full rewire under England's electrical safety rules (gov.uk).
- Gas safety record for landlord-provided gas appliances and flues, checked annually by a Gas Safe engineer (HSE).
- EPC of E or better, unless a valid registered exemption applies, for covered lets in England and Wales (gov.uk).
- The tenancy agreement. Since 1 May 2026 new private assured tenancies in England are periodic, not ASTs (gov.uk), so do not hand over an old fixed-term template.
- Purchase evidence: the completion statement and proof of where your deposit came from.
Does any of this change in Scotland, Wales or Northern Ireland?
The refinance arithmetic is the same across the UK, but lender coverage, tax and tenancy rules differ. In Scotland, LBTT plus the 8% Additional Dwelling Supplement applies from 5 December 2024 (Revenue Scotland); ADS alone on £130,000 is £10,400. In Wales, the Land Transaction Tax higher rates start at 5% up to £180,000 from 11 December 2024 (Welsh Government), so this purchase would cost £6,500. Northern Ireland uses SDLT at the same rates as England.
Put your own price, works budget, valuation and rent into the BRRR calculator and test both fixes before you offer. Allow for voids, overruns and weaker valuations before deciding the deal works.
General information, not legal, tax or financial advice. Rates and lender criteria are as at October 2026 and may change at the 28 October 2026 Budget; speak to a whole-of-market broker before you commit.
