How to Remortgage to Buy Another Property
Find out how to Remortgage to Buy Another Property and how a Specialist Broker can help you secure the best deal
Firstly, are you looking to remortgage your current property to buy another?
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We’ll explain how remortgaging to buy another house is possible, what types of property are acceptable and why using the services of a specialist broker will help boost your chances of success.
Can you remortgage to buy another house?
Yes. This is possible as long as you qualify for a remortgage and refinancing your property would raise the amount needed to fund the purchase of your new house.
You will also need to convince your mortgage lender that you can afford to pay your refinanced mortgage in addition to the debt secured against the new property.
Assuming eligibility isn’t an issue, there are many different scenarios where you can remortgage to buy a second property, such as…
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How to remortgage to buy a second property
Your first step should be to find a specialist mortgage broker with experience in this area as this will boost your chances of getting approved at the best terms available.
Using our free broker-matching service you can speak straight away to the right broker by simply making an enquiry online.
They’ll be able to help with:
- Calculating your current loan-to-value (LTV) and the additional equity you’ll need for your second property
- Downloading your credit reports – You can then check that all is in order and there’s no inaccurate or outdated information that could affect your application
- Gathering all the necessary paperwork and documentary evidence required specifically for buying a second property
- Finding the right lender and securing the best deal for you
The type of property you’re planning to buy will be the focal point of the negotiations with your lender and is usually a deciding factor when they’re working out which products you qualify for.
There are many different types of property you could potentially buy with the funds you raise, and the main ones include…
- Let to buy properties
This is where you rent out your current home to tenants in order to buy another property
- Buy to lets
Buying a property as an investment to rent to tenants
- Holiday lets
Buying a property to rent to people on a short-term basis for short breaks, holidays or AirBnB
- Holiday homes and second homes
Using the money raised to buy a second property that you intend to use in addition to your current home
- Commercial property
Raising money to buy a property that will be used by a business, such as a shop or an office. If you currently own a commercial property, it will be possible to refinance this in order to buy another property.
In addition to the category your property falls into, your mortgage lender might also be interested in its build type. Most lenders prefer properties made from bricks and mortar as anything else would normally be considered ‘non-standard’ construction.
However, there are mortgage providers who specialise in unusual buildings and offer bespoke deals on them.
Your personal circumstances, including your employment situation, income and credit profile will have an impact on the remortgage deals you qualify for as well as the mortgage products available to you when you’re buying your new property.
While it’s true that some mortgage lenders prefer customers who are in full-time employment, there are mortgage providers who specialise in self-employed customers and bespoke contractor agreements.
If you’re a self-employed professional looking to remortgage your home to buy another property, you’ll want to find a lender who specialises in customers who trade exactly the same way you do, and the best way to track one down is through a mortgage broker who knows the market inside out.
The main difference between a self-employed borrower and someone in full-time employment from a mortgage lender’s perspective is the way their income is assessed and how they will need to evidence it. You can read more about this in our guide to self-employed mortgages.
Income and affordability
The amount you earn will determine how much you can borrow when remortgageing or taking out a new mortgage on your second property. Your new mortgage debts will likely be larger than your existing one, so you will need to show your lender that you can afford the repayments on two loans.
Most mortgage providers cap their lending at 4.5 times your income, while others will stretch to 5 times and a minority 6 times, under the right circumstances. Use our affordability calculator below to see how this could work out for you, based on your own annual income.
Mortgage Affordability Calculator
Simply enter your total household income below and our calculator will do the rest.
You could borrow up to
Most lenders would consider letting you borrow
This is based on 4.5 times your household income, the standard calculation used by the majority of mortgage providers. To borrow more than this, you will need to use a mortgage broker to access specialist lenders.
Some lenders would consider letting you borrow
This is based on 5 times your household income, a salary multiple you might struggle to qualify for without the help of a broker. This income multiple is not widely available to customers who are applying directly with a lender.
A minority of lenders would consider letting you borrow
This is based on 6 times your household income, a salary multiple you will struggle to get without a broker. Six-times salary mortgages are usually only available under very specific circumstances.
Get Started with an expert broker to find out exactly how much you could borrow.
If you aren’t earning enough to qualify for the mortgage amount you need, there are lenders who specialise in low-income customers. These mortgage providers may allow you to declare supplemental sources, such as benefits and assets, in addition to your annual salary to beef up your borrowing potential.
They are also known to be more flexible and judge applications on their overall strength, rather than just the numbers on the borrower’s wage slip.
Affordability on buy to let and let to buy
If you are remortgaging to buy a second property that you intend to rent out to tenants, or you intend to let your current property with a let to buy mortgage, affordability is based on the rental income the property can achieve, amongst other factors
On a buy to let mortgage, the rental income needs to cover a certain percentage of the mortgage payments. Every mortgage lender has their own rules on what percentage needs to be, with around 125-145% being standard.
Bad credit, loans and credit cards
There are specialist mortgage lenders who have experience helping people with bad credit.
These lenders are usually happy to take the age, severity and reason for your bad credit into account and offer tailored deals based on these factors, and the best way to find them is through a mortgage broker who knows the market.
Having outstanding loans and credit card debt will only be considered bad credit if you’ve missed payments on them, but owing a significant amount in either one might affect your borrowing potential, especially if your lender is unsure whether you can keep on top of your debt repayments in addition to your mortgage
If you think this may affect your chances of approval take a look at our in-depth article about how to secure a remortgage with bad credit.
How much equity you might need
This will depend on your mortgage lender’s remortgage requirements and how much you need to borrow (assuming you aren’t buying outright) to buy your second property. The level of equity you have is equal to the valuation of your property minus the balance of your existing mortgage, and refinancing is one way of accessing this.
Try our calculator below to find out how much equity you could release for your property purchase and what your new repayments on your existing mortgage will look like.
Our remortgage calculator can tell you what your new loan-to-value (LTV) ratio and repayments will be after you've remortgaged, with or without releasing equity from your property.
After you have remortgaged your new LTV ratio will be and your new mortgage payments will be as indicated below…
New Monthly Repayments:
Get started with an expert broker to find out how much they can help you save on your remortgage.
One factor that determines how much a mortgage provider will be able to lend you is your loan to value (LTV) ratio. This is basically the balance of the mortgage that is secured on your home, expressed as a percentage of the value of the property.
If you’re remortgaging to buy another property, there are currently lenders that will be able to lend up to 90% loan to value, depending on your creditworthiness.
Lenders are generally more comfortable with lower LTV loans and so you will have fewer options, and can expect to pay a higher rate, if you want a mortgage with a higher LTV. The maximum LTV you can borrow also depends on your situation, such as your age and credit history, and the purpose of the loan.
For example, the maximum LTV on a standard residential mortgage is 90% (unless you’re applying under exceptional circumstances or through a scheme like Help to Buy) , whereas the maximum LTV for a let to buy or buy to let mortgage is 85% and holiday let mortgages are often only available up to 75-80% LTV.
If your home is currently worth £500,000 and you have a mortgage of £200,000, your current loan to value is 40% and you have £300,000 of equity in your property.
If you wanted to release this equity to buy another property, you could potentially borrow up to £450,000, which would provide you with enough capital to take your LTV to 90%.
Help with my second mortgage
Our broker got in touch really quickly. They understood the situation and what we needed to get both mortgages over the line, and kept me up to date with the options. They quickly set up a deal with another lender for the BTL and that went through easily we didn't lose any time in the process!
I was stuck on an interest only deal with Alliance & Leicester and they refused to help me in spite of my excellent credit rating The thought of possibly having my house repossessed in two years time was very stressful I first spoke to James on 10th Feb and my remortgage was completed on 19th March.
Malcom my mortgage advisor has been excellent
I haven’t completed my remortgage yet, but I will say that so far Malcom, my appointed mortgage advisor, has been excellent! He’s kept me up to date and has replied to any questions I’ve had within hours not days, which has not always been the case with previous services I’ve used.
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Using other income sources for the application
You might want to use additional sources of income to show that you can afford the new loan. Some lenders are able to consider 100% of additional sources of revenue, such as regular bonus, overtime, second jobs or investment earnings.
However, other lenders may cap the level of additional income they accept at 75% or even 50%. Similarly, some lenders can consider any benefits you receive, such as child tax credits, working tax credits and child benefits to contribute towards the affordability calculation, while others will not.
This is an area where criteria can vary from lender to lender so it’s best to speak to an advisor to get a better idea of what you should do.
Can you remortgage to buy another property with cash?
Yes. If you are able to raise enough money from remortgaging your home to pay cash for a second property, then this is certainly possible. In fact, you might find that maximising borrowing on your current mortgage is cheaper than a buy to let or second home mortgage.
If you cannot raise enough to buy the second property, you may need to get another mortgage. The type of mortgage you take on the second property depends on how you intend to use it. If you are planning to rent the property to tenants, then you should look into buy to let mortgages, but there are also specialist products available if you intend to use the property as a second home or holiday let.
Remortgaging if you are moving house
Moving to a new house without selling your existing property is certainly possible. There are lenders that offer let to buy mortgages, which enable borrowers to let their existing property to tenants and raise the funds to buy, or put down a deposit on, a new home. If you have a good rate on your current mortgage, you could also look at porting your mortgage to the new property.
Our broker got in touch really quickly
Our broker got in touch really quickly. They understood the situation and what we needed to get both mortgages over the line, and kept me up to date with the options available. They quickly set up a deal with another lender for the buy to let and that went through easily, meaning we didn’t lose any time or sleep in the process!
Speak to a remortgage expert to discuss buying another property
Sit back and let our free broker-matching service do all the hard work in finding the advisor with the right expertise for your circumstances. We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.
Get in touch or give us a call on 0808 189 2301.
Yes. This shouldn’t be a problem as long as you can demonstrate that you can afford the new mortgage in addition to your current financial commitments.
Yes, there are lenders that will consider your application if you have recently started a new job. This is another area where criteria can vary greatly from lender to lender. Some will ask for a minimum of 12 months’ employment history while others are happy with 6 months, some lenders will insist on you completing any probationary period and some lenders are happy to lend from your first day in a new role.
There are even lenders that will consider a future contract within 3 months of the start date of a new job. A specialist broker will have a good understanding of the options available and the best lenders for your circumstances.
The minimum age for most lenders is 18. For older borrowers who are considering remortgaging to buy a second home, there are now a number of options. Lenders may stipulate a maximum age at application or a maximum age at the end of the mortgage term, but there are lenders that do not have a maximum age. The key is affordability again and, if you are looking to take a mortgage that will stretch into retirement, then you may need to demonstrate that you will be able to afford repayments based on your retirement income.
You can, but if you have Early Repayment Charges on your current mortgage you will need to think about whether it is worth paying those charges or waiting until there is no longer a penalty for remortgaging. There may be times when you decide that it is worth paying an Early Repayment Charge and there will be times when it is not. A conversation with the advisors that we work with will help you to understand these considerations.
Yes, remortgaging one property to release equity that is used to help buy another property is a common method that landlords use to grow their portfolio. Some buy to let lenders will lend up to a maximum loan to value of 85% and affordability is based on the level of rental income that can be achieved by the property.
Recent changes to the regulation of buy to let mortgages means that lenders have to apply a minimum stress test when they calculate how much to lend and the level of this stress test depends on whether you are a higher rate or basic rate taxpayer.
Yes, it is possible to remortgage to buy a holiday home abroad. Lenders are usually happy for funds to be used for this purpose and criteria is generally the same as remortgaging to buy property in the UK.
If you are thinking of remortgaging to buy property abroad you may be able to raise enough money on your existing home to purchase the property in cash, but if you need to raise further funding you might need a specialist mortgage.
Remortgaging an inherited property is usually not a problem as long as probate has taken place and you have become the legal owner of the property. Lenders will usually insist that you have been the owner of the property for at least 6 to 12 months, but there are some lenders that will allow a remortgage sooner than 6 months. All beneficiaries and owners of the property will need to be on the mortgage, unless you are buying their share of the property as part of the remortgage.