Can I remortgage my house to buy another property?

Dreaming of owning a holiday home on the south coast? Or buying an investment property to rent out or Air BnB? Or simply ready to upsize and fancy keeping hold of your trendy little city pad?

If you’ve been on the same mortgage deal for a while and have built up some equity in your current property, it might be worth looking at your remortgaging options.

How does remortgaging work to buy another property?

Saving up a deposit for a house can be tricky, particularly in this age of rising costs and decreasing wages, at least in real terms. And if it’s a second property you’re after it might be even more difficult?

That’s why remortgaging could be a great option to release a lump sum of money, where for instance property prices have risen or you’ve been paying off your initial mortgage for a number of years.  

What do we mean by equity release?

Unless you’re on an interest only mortgage, with every month that passes you’ll be paying a little bit more off of the mortgage loan you originally took out. That means that over time you own a larger proportion of your house outright.  And the loan that is set against it is a smaller in relation to the overall property value. This difference between the value of the property and the amount you owe can be termed ‘equity’.

And as this equity increases, you can begin to consider releasing an amount of it to put towards other things, perhaps home renovations or, in this case, the purchase of another property.

Many people looking to enter the buy-to-let market find this is a great way to get together a deposit for their second property. In the process using money that would otherwise be tied up in the market.

If you think equity release may be an option for you, talk to us about remortgaging and we’ll help you to work out if it’s the right path for you.

Will equity release be affordable?

Of course, releasing equity from your property will mean that the amount you’re borrowing will be higher when compared to the value of the property. This will usually mean that your repayments increase.

In order to check whether you would be able to borrow the new amount required, your mortgage adviser will go through some affordability checks with you. You will also be required to submit income statements or payslips to prove that you can afford to make the new monthly payments on your current salary.

If you are taking out a buy-to-let mortgage on the second property, it’s likely this will be assessed in a different way taking into account the expected income the property can generate.

It’s vital that you are completely transparent about your income, expenditure and plans to ensure your mortgage adviser can help you to make the best decision possible. If for any reason you can’t meet the payments you sign up to, you could be at risk of losing not just one but both properties.

Self-employed

If you are not employed in the traditional sense, perhaps you’re a contractor, freelancer or the like, you might be worried that the remortgaging process will be complicated.

Our specialist mortgage advisers are experts in finding and applying for self-employed mortgages, putting them in the perfect place to offer the advice and guidance you need to made an informed decision about remortgaging.

They will ask questions about your income and expenditure and your plans for the future. Then they’ll talk you through all the options to help you make the decision that’s right for you.

If you want to know more about remortgaging or buying a second property, get in touch. We can help you to simplify those tricky decisions.