Remortgage to Buy Another Property

How much equity do I need in my current property?

This will depend on the cost of the property you are looking to buy and the lender’s requirements. Typically, a lender will want you to have a minimum of 10% equity in your home. This is to ensure that, once you have released the capital, you can still afford the new, typically more expensive, mortgage payments.

What type of property can I buy when I remortgage?

When looking to buy a second property there are usually two types that are the most common: a second home for yourself or family, and an investment rental property.

Some people may remain in their current home after purchasing another property. However, others do the opposite by moving into a new home but retaining their previous one as the second or investment property. Both of these are viable options.

Remortgage to buy a second house

If you’re looking to buy a second property, you may want to remortgage to raise part, or all, of the amount required. This will give you equity from your current home, providing you with a lump sum towards the new purchase.

If both properties are to be used personally or by relatives, lenders will have to be satisfied with your income in relation to supporting the total debt when assessing affordability.

Some people will want to rent out their current property and move into a new one. This is commonly referred to as a “Let to Buy”. If this is the case for you, lenders may factor in the potential rentable value of the current property. This is to assess the overall risk concerning the total lending.

Remortgage to buy a rental property

Remortgaging to buy a rental property can be a great method to raise funds. This is because you raise any necessary funds at residential rates. These rates will be lower than those offered for Buy-to-Let mortgages.

Of course, with a remortgage, your repayments are going to increase on your current mortgage. Furthermore, the criteria for residential borrowing may differ from Buy-to-Let criteria. For example, an interest-only repayment method may not be available. Therefore, this will need to be considered when deciding if this is the right method for you.

Your Buy-to-Let property may be periodically empty, and tenants may not pay rent on time. It’s important to remember these possibilities as well.

A lender will consider this when they carry out their affordability assessments. It’s also important to have a contingency fund in place. This is to make sure that you can still make repayments and not risk losing your property.

Getting in touch with a mortgage broker can help to streamline the whole process. They will advise you on the most suitable path to take and can help you access competitive remortgage deals. Reach out today and we will pair you with one of our expert advisors.