Remortgage to Buy Another Property

Investing in property is regarded by many to be a good way to invest your money. However, there are extra taxes and fees that the government charge to those who buy second properties.

House prices are expected to remain stable or increase over time, which applies to both homeowners and potential property investors. This proves that they can be a good investment.

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Author: Carl Shave - CEO and co-founder
Last updated: 21 Jun 2024

Can I remortgage to buy another property?

Yes, it’s entirely possible to do so. Raising money through remortgaging gives you extra capital to carry out a purchase of another property. Of course, you will need to have enough equity in the property to enable you to raise sufficient capital.

Something to note is that if you require a mortgage on the new property, deposit requirements are often higher. Furthermore, any additional borrowing could therefore result in higher monthly commitments. This is because you will be paying two mortgages.

So, it’s essential that you understand what you can afford. Speaking to an expert mortgage broker can help you do this.

One final thing to note is Early Repayment Charges. This is a fee charged to you by your lender if you decide to leave your mortgage term early. The details surrounding these will be highlighted in your mortgage contract.

An introduction to Remortgaging

Remortgage topics

Useful Information

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.

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How to remortgage to buy another property?

To put yourself in the best position when looking to remortgage, it’s best to keep in mind the following:

  • How much equity you have in your current property will influence your borrowing capabilities. The more equity you have in your home, the more you can use as a deposit; or, in some cases, this could pay for the new property in full.
  • Your credit situation plays a big part. During their affordability assessments, lenders carry out their own credit checks to assess the risk of lending to you. The better your credit the more likely they are to lend to you and give you a favourable rate.
  • Your income will also be considered during the affordability assessment. This is a very key element as it gives the lender an indication of what you can comfortably afford.

There are also some other factors that you should consider when thinking about buying a second property:

  • Mortgage Fees – Check what fees you might have to pay. Often, a Buy-to-Let mortgage will incur higher costs than a comparable residential. You should also be aware that you might have to pay early repayment fees.
  • Stamp Duty – This can be a high proportion of any house-buying costs. Currently, second home buying will require you to pay an extra 3% on the property’s value in stamp duty. This is only if the property is over £250,000.
  • Other renting fees – For those who are planning on renting out a property there may be other fees to consider. This could be the use of agents or property maintenance costs etc.

Buying a property as a second home, or to rent as a Buy-to-Let investment, can give a worthwhile return on your finances. Make sure you thoroughly research how you are going to fund it and have a contingency for when things may not go to plan. The best way to ensure this is to speak to a qualified mortgage advisor such as our experts here at Just Mortgage Brokers.

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Frequently Asked Questions

Yes, it’s possible to remortgage your home and buy a holiday home. There are actually several mortgage options open to people buying abroad.

By remortgaging you can raise equity to carry out a purchase overseas, which can be a lot more straightforward than you think. This is because the lending is secured against your UK property.

However, finding the right lender to do this through isn’t always straightforward. That’s why using an experienced broker can be an essential part of the process, so that they can guide you all the way and ensure that you get the most favourable deal. Get in touch today and we can pair you with one of our experienced brokers.

While it may be difficult, it is possible to do so. However, it will depend on the type of bad credit event and the time since it happened. You may also be restricted on the lenders and remortgage rates available, which could end up costing you more.

At Just Mortgage Brokers we have access to a range of lenders, including specialist bad credit lenders. Certain lenders aren’t available on the high street and can only be accessed through brokers or intermediaries. This means that your best bet may be through a broker. Get in touch today and organise a free no-obligation consultation.

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