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Can I Remortgage to Buy a Second House?
Many people remortgage their home as a way to free up capital to put towards a second property.
If you’ve been repaying your mortgage for many years, you’ll have built up a chunk of equity in your home that you can’t really access – unless you remortgage to release it.
A popular strategy is to put the money you release from your home towards a new property – either as an investment or for personal use.
This guide covers the pros and cons of remortgaging to buy another property, why you might want to do it, and the criteria you’ll need to meet to do so.
In this guide:
Why Remortgage to Buy Another Property?
Can I Let My Property and Buy Another?
Eligibility Requirements for Remortgaging to Buy a Second Property?
Why Remortgage to Buy Another Property?
Here are 5 common reasons for remortgaging to buy another property.
- Buying a second house that’s closer to work or family
- Purchasing a buy to let investment property to rent out for an income
- Buying a property for a family member
- Buying a holiday property or second home
- Financing a commercial property purchase
Lenders will take your reasoning for remortgaging into consideration when you apply, as it helps them determine how viable it is to give you a loan.
Here’s a more detailed breakdown of some of the above reasons:
Purchasing a property to become a landlord
You may be looking to start letting property to become a landlord, and remortgaging one property could free up cash to purchase another for these purposes.
One option is to let out your current home and move into another property that you purchase after remortgaging.
Or, you could stay in your current property but remortgage it to buy another for letting purposes. This gives you multiple different options to consider, such as a holiday let mortgage.
If you’re unsure which option is best for you, speaking to an expert adviser at Clifton Private Finance could provide the clarity you need.
Buying a second home
Perhaps you have a long commute to work and want to make life easier by purchasing a property close to your office. Or you could be buying a holiday home for your family, or even a property close to your current one to move some relatives to so you can support them.
All these options are acceptable to a mortgage lender depending on the specifics of your situation.
Purchasing a property for business or commercial use
Needing a second property for business or commercial use is another reason you may wish to remortgage – many lenders will be open to giving you a loan on this basis.
If you need a second mortgage to raise enough funds for the commercial property, you’ll need to justify to your new lender you can afford to repay it.
If you intend to use your business’s profits to do this, you’ll need at least two years of accounts as evidence (but the more history you have, the better).
Can I Let My Property and Buy Another?
Letting your current property to buy another is called a ‘let to buy’. This means turning your current property into a rental property, allowing you to purchase a second property to live in.
Usually, this process involves turning your first property’s mortgage into a buy-to-let mortgage—often using the rent from tenants to cover the costs—and taking out a second mortgage for the new property.
You’ll most likely end up with two mortgages unless remortgaging your first property raises enough funds to cover the second property purchase outright.
For this reason, the equity from your first property will usually be used as the deposit for your second house purchase.
Remember that the LTV (Loan to Value) ratio on your second mortgage will most likely not be as high as your first mortgage, depending on how much capital you’ve raised through remortgaging.
What are the Requirements for Remortgaging to Buy a Second Property?
There are lots of things lenders consider when deciding if they’ll offer you a remortgaging loan – here are a few of the main ones:
Your credit status
Your credit history can have a big effect on your mortgage offers. We highly recommend taking a look at your credit score before making an application.
Our tips on getting a mortgage explain how to boost your credit score.
Your current property equity
There are two main options available when it comes to remortgaging a property. You can either get a complete remortgage, which totally replaces your original mortgage, or you can get a second mortgage as a separate loan against the same property.
Your strategy and the value of each property will determine how likely you are to be accepted.
Your income
Lenders will always look at your income when determining if they can give you a loan. However, this doesn’t always just mean your base salary. Often, lenders will look at benefits and reliable work bonuses as a part of your income.
If you have complex forms of income, such as bonus income or company dividends, you might need a specialist mortgage.
Your expenses
Just as lenders assess your income, they also look at your expenses.
They’ll need to know how much your usual expenses are eating away at your income to determine what you can actually afford.
This is especially important when considering a second mortgage or a remortgage, as your second mortgage repayments add further outgoings to your financial responsibility.
If you’re unsure if remortgaging is the best option for you or have any more queries, speaking to one of our expert mortgage advisers might help.
All our advisers at Clifton Private Finance are fully qualified and have the most up-to-date information on the best deals on the market.
Here's our full guide to remortgaging and our services for more information.
Get Access to the Best Deals
We can help you compare mortgage products and their costs to find the best deal for your specific situation from a wide range of lenders nationwide.
If you’re unsure what kind of product is best for you, having a conversation with one of our trusted mortgage advisers will give you peace of mind that you’re making the right decision.
We can help you decide on the type of mortgage that's right for you. We can also negotiate the best interest rates with lenders and access some fixed-rate deals that aren’t available to customers going direct.
Working with a mortgage adviser can get you access to the best rates on the market and ensure that you have the right guidance when choosing products
To see what we can do for you, give us a call at 0203 900 4322 or book a free consultation below.
