Can you remortgage to buy another property?

Whether you’re looking to invest in another tangible asset, you would like to purchase a buy-to-let house, or it would make practical sense for you to have a second home elsewhere, you might be wondering whether you can remortgage to buy another property. It can be a complex process, though, so there are lots of factors you need to consider, and it’s also a good idea to enlist the help of an expert mortgage broker who can help you at every step of the way.

Here at The Mortgage Genie, we’ve helped countless clients release equity from their properties to buy a second home, and we’re here to do the same for you! If you are considering going down this route, call us today on 033 33 44 33 72 so we can help you on your journey.

It’s important that you understand the complexities that you’ll encounter when you remortgage to buy a second property, too. So, we’ve also put together this guide to highlight everything you’ll need to consider. We’ll cover:

Read on to find out more, so you can make an informed decision about whether this is the right decision for your circumstances, and you know what the process will look like if you go ahead.

Can you remortgage to buy another property?

Yes, it is possible to remortgage your existing property to buy another. In fact, many people who buy a second home raise the cash to do so by remortgaging the one they already own. Refinancing your mortgage will provide you with the chance to release some of the equity you’ve built up so far, so you can use it to fund your next property purchase.

Just because you can remortgage your house to buy another doesn’t mean it’s easy, though — compared to taking out your initial mortgage on your original home, it can be a lot more complex. That’s why it’s vital that you hire an expert mortgage broker to help you navigate the progress, ensure you have all your paperwork in order, and ensure everything goes smoothly.

What kind of property can you buy when you remortgage?

It’s important that you know exactly why you would like to remortgage and what kind of property you’re looking to buy once you do. This is because this will be the focal point of your negotiations with your chosen lender. And, it will determine which mortgage products you will qualify for.

Here are some of the most common reasons you might be considering remortgaging your current home:

  • To invest in a buy-to-let property: This will involve remortgaging your current home to buy another that you plan to rent out to tenants.
  • To buy a holiday let: Perhaps you wish to purchase a property that you can rent out on a short-term basis to people who are on a short break or holiday.
  • To purchase a holiday or second home: Whether you spend time working elsewhere or visit a particular area for frequent breaks, you may decide to purchase a property you intend to use alongside your current home.
  • To invest in commercial property: You could also release equity from your home to purchase a property that will be occupied by a business. This could be your company or you might decide to rent it out to another business owner.

As well as why you’re planning to buy a new property, your mortgage lender will typically take an interest in its construction. Most providers look favourably upon properties built from brick and mortar — anything else will usually be considered to have a “non-standard” construction. However, there are some lenders that do offer mortgages and even bespoke deals if you’re looking to buy an unusual building.

Can I remortgage to buy a holiday home?

Yes, you can remortgage to buy a holiday home. You just need to ensure that your mortgage broker and lender are aware of your plans, so they point you in the direction of the mortgage product that’s going to be most suitable for your needs.

Can I remortgage my house to buy a property abroad?

Yes, it is possible to remortgage your current home to purchase a property abroad. Lenders will typically allow you to use the equity you release to be used for this and the criteria you need to fulfil will generally be the same as if you were buying another property in the UK.

However, it is worth noting that, if you can’t raise enough money to buy your property abroad outright by remortgaging your current home, you may need a specialist mortgage to cover the rest of your purchase.

Should I remortgage to buy another property?

Whether you should remortgage your current home to buy another property will entirely depend on your goals and circumstances.

Before deciding to remortgage your current home to purchase another one, you need to ensure you’re going to be comfortable with the new repayments, which are likely to be larger than you’re used to. Plus, you’ll need to commit to paying off your new mortgage(s) for longer. This means it may not be the best move if you’re hoping to retire in the near future or you aren’t confident that your income is stable.

You will also be subjected to all of the usual affordability and credit checks associated with taking out a mortgage if you decide to take the plunge. So, it’s vital that you ensure you’re in a strong position to remortgage your property and buy another one. If your credit score isn’t the strongest at the moment, it could be worth working on this before you take the leap to give yourself the best chance of being accepted and ensure you get access to the best possible deals.

How to remortgage to buy another property

As long as you’ve built up sufficient equity in your current home, remortgaging can unlock some of this capital so you can put down a deposit on a new property. Or, if you’ve paid enough off your existing mortgage, it could even allow you to buy your next house outright.

Before you remortgage to buy a second home, it’s important that you speak with a mortgage broker who has plenty of experience with handling cases like yours. They will help you to find the best deals when you’re remortgaging and purchasing your new property. Plus, they’ll provide you with their expert advice at every step of the way, ensuring your application is watertight and that you feel supported throughout the process.

When remortgaging your home and buying your new property, the process will look much the same as when you initially bought your first property. Your chosen lender(s) will assess your eligibility, credit report, and whether you’ll be able to afford the repayments. And, if all is well, they’ll set you up with the loans you need to cover what’s left to pay on your current and new home.

What do you need to consider when remortgaging to buy another property?

There are a number of things you’ll need to consider before you decide to go ahead and remortgage your property to buy another. Firstly, when buying a second home, lenders will usually require you to put down a bigger mortgage deposit — often 15–20%. So, you’ll need to ensure that you’re going to be able to cover this with the equity you release when remortgaging.

It’s also worth keeping in mind that your monthly repayments are likely to rise quite significantly. So, it’s vital that you budget carefully and really consider whether you’re going to be happy covering the costs each month.

Of course, your chosen lender(s) will conduct their own affordability checks to determine whether they think you’ll be able to comfortably make the repayments. Plus, they will carry out the usual credit checks associated with taking out a mortgage. It can be more difficult to qualify for a second mortgage due to the higher costs and elevated level of risk but, as long as you know you have a stable income that can comfortably cover the necessary repayments and your credit score is strong, it’s likely your application will be accepted.

How much equity do I need to remortgage to buy another property?

How much equity you need to have in your existing property before you can remortgage to buy another one completely depends on your current situation and your plans. Plus, there will be other factors to consider, such as the loan-to-value (LTV) of your mortgage, how old you are, and how strong your credit rating is.

You’ll also need to consider how big your new mortgage deposit will need to be, and this will typically depend on the type of property you’re looking to buy. For instance, you’ll usually be able to take out a 95% LTV mortgage on a house you plan to live in, which means you may only need to pay 5% of the value upfront. But, if you’re investing in a property to rent out, this will be a buy-to-let property and lenders will usually require you to pay a deposit of at least 15% and allow you to borrow the other 85%. So, you’ll need to have enough equity in your existing property to cover this.

You should now have a much better idea of whether it will make sense for you to remortgage to buy a new property, and what the process will look like if you decide it’s going to be the right move for you.

At The Mortgage Genie, we have a team of expert mortgage brokers who can help you to find the best mortgage products to suit your needs, and they’ll also support you throughout the application process to help give you the best chance of success. If you would like our help with this, get in touch now by calling 033 33 44 33 72 — we’ll be waiting!