How To Remortgage To Buy Another Property

Can you remortgage to buy another property? 

Yes, it’s possible. It’s actually quite common to remortgage a property you already own and borrow more money to buy another. This could be for investment purposes, such as a buy-to-let, to purchase new business premises, to help another family member, or purely for you to use as a holiday home. 

If your home has enough equity to cover the total cost of buying a second property, a remortgage to borrow this additional amount would be all you’d need. If it doesn’t quite cover the full purchase price, you can still remortgage for part of the amount needed and consider taking a further mortgage on the new property for the remaining balance. 

The typical reasons for wanting to remortgage to buy another property would be: 

• You want to become a landlord and purchase a rental property or add to your existing buy-to-let* investment portfolio

• You’re buying a second home for personal use - this could be a holiday home or a smaller property closer to where you work, avoiding a long commute

• You want to rent out your existing home and move to another property (known as ‘let-to-buy’)

• You’re looking to start your own business and want to buy commercial premises 

• A family member, your son or daughter, for example, needs financial assistance to get on the property ladder

*The Financial Conduct Authority (FCA) does not regulate some forms of Buy-to-Lets

How much can you borrow when releasing equity to buy another property? 

This will vary from lender to lender, but the maximum loan-to-value ratio (LTV) for remortgaging to buy another property could be as high as 95%, including your existing mortgage balance plus the additional amount you want to borrow. 

Whether remortgaging up to 95% on the value of your current property gives you enough money to buy another will depend on its purchase price and several other key factors, such as:  

The amount of equity in your current home

The current equity in your home will obviously play a big part in determining whether you can buy a second. It will also help you decide whether you need just one mortgage or two to complete the purchase. 

For example, if the value of the second property you want to buy is £200,000 and the available equity in your current home is £100,000, a remortgage will only cover part of the borrowing you’ll need, meaning a further mortgage will be required. 

Reason for buying a second home and its intended usage

A mortgage lender will have different criteria for how much additional money you can borrow on your remortgage based on what you’re looking to use the new property for. Lenders will see some types of usage as less (or more) risky than others.

If you want to raise equity to purchase a buy-to-let property or a holiday home, some mortgage lenders, such as Kent Reliance, will allow you to borrow up to a maximum of 95% loan-to-value (LTV). For commercial premises, the maximum LTV will typically be up to 80%. 

So, for example, if your home is worth £300,000 and your current mortgage balance is £150,000 (50% LTV), you could possibly borrow up to an additional £135,000 for a buy-to-let (£150,000 + £135,000 = £285,000 = 95% LTV). But for commercial premises, the maximum could be up to an additional £90,000 (£150,000 + £90,000 = £240,000 = 80% LTV). 

Income and affordability

A mortgage lender will use a multiple of your annual income (typically up to 4.5 x salary) to assess how much you can borrow for your remortgage. In addition, a lender will also look at your outgoings to decide whether you have enough disposable income to comfortably keep up with your mortgage repayments. 

This is particularly relevant if you’re remortgaging to buy another property as you’ll be borrowing more money and, therefore, your mortgage repayments will increase. A mortgage lender will want to ensure your new repayments are affordable. 

Employment status

Whether you’re employed or self-employed could impact how much you can borrow, as mortgage lenders assess your earnings differently. If you’re employed, a lender will look at your annual gross salary. Most lenders want to see at least two to three years of certified accounts if you’re self-employed. 

If you’re self-employed, this could reduce the number of mortgage lenders willing to consider your remortgage application, particularly if you have accounts less than two years old. However, an experienced mortgage broker - like us! - would be able to help you find the right mortgage lenders who would look more favourably at your employment status.  

Your credit history

Mortgage lenders will review your Credit Report before deciding how much you can borrow. If you have a low credit score, this could reduce the number of lenders willing to consider your application and, ultimately, affect your chances of securing the lending you need. 

Speaking to a mortgage broker before applying

Remortgaging to buy another property can be a tricky process, particularly if you’ll need more than one mortgage to complete the purchase. This is why it’s wise to speak with an experienced mortgage broker before you approach any lenders. 

They can help you determine how much you need to borrow and if this can be covered by a remortgage or if further lending is necessary. If it is, they can also identify the mortgage lenders who will look more favourably on your application, saving you a lot of time and, potentially, some money too. 

If you get in touch, one of our Mortgage Experts will contact you straight away to discuss your situation and help you to get started.  

Can you remortgage to buy another property with bad credit?

Yes, it’s possible. If you’ve had bad credit since you first applied for your original mortgage, this could make releasing equity to buy another property a bit more complicated, depending on how much of an impact this has had on your credit score, when it happened, and the amount involved. 

Several mortgage lenders (all of which have strong working relationships with us) specialise in helping people with bad credit and assess applications case-by-case. You may have to pay a slightly higher interest rate and accept a lower loan-to-value (LTV). However, it’s still possible to remortgage to buy another property in these circumstances. 

Before you apply, it’s highly recommended that you download your credit reports and check the information to see if anything is registered that could have had a negative impact on your score. If there are any inaccuracies or outdated information, you can also arrange to have this removed. 

What are the alternatives to remortgaging to buy another property? 

If remortgaging isn’t a viable option - perhaps there isn’t enough equity available in your current home, or there’s a sizeable early redemption charge applying on your existing deal, for example - there are several alternatives available, depending on why you want to purchase another property, such as: 

• Second Charge Mortgage**

• Holiday-let Mortgage

• Buy-to-let Mortgage

• Commercial Mortgage  

**This service is offered by referral to a third party