Remortgaging to buy another property

If you’re thinking of remortgaging to buy another property, our guide explains how it works, so that you can make an informed decision about your future.

In this article:

Can you remortgage to buy another property?

Yes, you can! Remortgaging to buy another property, as a second home or a buy-to-let investment, are common reasons to remortgage. There’s no reason why you can’t use the equity you’ve built up in your current home to purchase another.

The most typical property types that are purchased from a remortgage are buy-to-let investments, second homes or holiday lets, but you can also buy a Let to Buy or invest in a commercial property.

Mortgage lenders have certain criteria that you will have to meet to approve your remortgage, and the largest factor is the amount of equity you have in your current home. Other factors include:

If you are unsure, we suggest that you speak to a mortgage adviser to see if you are eligible, or read our guide which explains how remortgaging works.

How does remortgaging to buy another property work?

Remortgaging your home to buy another negates the need to save for a deposit, as you use the equity from your current home instead.

Taking equity out of your house to buy another property

With every month that you pay towards your mortgage, you are building up equity in your home by reducing how much you owe on your mortgage. As the equity in your home increases, so does amount you can release, which you can put towards other things, like home improvements or buying another property, through a remortgage.

If you are unsure about home much equity you might have built up in your home, you can get a valuation and just deduct your outstanding mortgage balance. A mortgage adviser will be able to help you with this calculation.

Is it a good idea to remortgage to buy another property?

When remortgaging your current home to buy another property, you monthly repayments are likely to be significantly larger than they were – you will have a second mortgage to repay!

We advise that you speak to a mortgage adviser to make sure it makes financial sense. They’ll go through some affordability checks with you, including a credit check and how much you could potentially borrow. They will also discuss with you whether you can afford to pay the higher repayments on your current wage, as failure to do so may result in loss of both properties.

You can also find more helpful information in our article 'Should I remortgage'.

Remortgaging when you are self-employed?

If you are self-employed, you may be concerned about whether you will be approved to by a second property be remortgaging your current home. The process is actually very similar, however, some lenders may require accounts from the last 3 years as part of your affordability check. Your mortgage adviser will look at your whole situations, including your incomings and outgoings, to help you make the most informed decision.

Can you buy another home if you have bad credit?

If you have bad credit, you will generally require a higher deposit or additional equity in your home if you want to remortgage. It depends on the severity of your credit issues and how recent they were; if it is a one-off or you have consistently had financial problems.

Remortgages with bad credit aren’t straight forward, however there are a number of specialist lenders that may be able to help. We recommend speaking to your mortgage adviser to guide you in the right direction.

How to remortgage a buy to let property to expand your investment portfolio

Remortgaging current buy to let properties to purchase more is a common strategy for most landlords.

The majority of landlords will have interest-only mortgages, where the capital of the property isn’t paid back until the end of the mortgage. As a result, lenders typically offer 85% mortgages if they wish to remortgage an investment, which is calculated by assessing the rental income of the property.

Lenders may wish to see signed tenancy agreements, as well as bank statements to show evidence of income for the property you wish to remortgage.

Find out more about investment properties.

Ready to take the next step?

If you decide to take the plunge and buy that second property, don’t forget you’ll need a conveyancer to deal with the legal side of your remortgage and the purchase of the second property.

Get a step ahead

Get a personalised conveyancing quote for your remortgage today.

Get a quote