Remortgage to Buy Another Property

Buying property has become an increasingly popular way for people to invest their money. If you’re looking to purchase a second home for yourself, a buy-to-let property as a rental investment, or invest in some commercial property for your business, you’ll need to consider how you’ll fund the purchase.

Remortgaging your existing primary residence to buy another property is a common solution. But how exactly do you remortgage one house to buy another?

It’s possible to remortgage to release equity so you can buy another property as long as you meet the remortgage criteria set by the lender. You’ll also need to ensure that refinancing your current property will raise enough funds to put down a deposit on the new property or purchase it outright. Mortgage lenders will want to make sure that you can afford to pay your new refinanced mortgage alongside any lending secured against the new property.

The process for remortgaging to buy another property differs slightly when it comes to let to buy — i.e. when you remortgage your existing home on to a buy to let mortgage, while also using the additional funds to purchase a new main residence.  

With let to buy, you’ll be remortgaging with a buy to let lender who won’t focus solely on your personal affordability but will instead consider the potential rental income the buy to let property could generate. This is an important factor in determining whether you qualify for the loan.

Remortgaging your house to buy another property will incur certain fees and costs, for example: 

• Stamp Duty: you pay Stamp Duty when you buy a property in the UK. Buying a second home or buy to let currently requires an additional 3% of Stamp Duty on top of the standard rates for a main residence 
• Mortgage fees: buy to let mortgages often have higher interest rate costs than residential mortgages. You may also have to pay ERCs if you remortgage before your introductory deal period ends and you may face administration costs 
• Other rental fees: if you’re planning on renting out your second property after you've remortgaged, there may be additional fees such as the cost of estate agents 

You may be fortunate and find that remortgaging your first property provides enough funds to cover your outstanding mortgage while releasing enough equity to purchase a second property outright. However, it's more likely that this won’t be the case, and instead, you'll use the additional released equity from the first property to fund a deposit for the new property, leaving you with 2 mortgages. These mortgages will most likely be with different lenders and will be completely separate products. They could both be residential mortgages, or one could be buy to let while the other remains residential.

The timeframe for remortgaging to buy another property can vary depending on which lender you choose. The process typically takes 6 - 8 weeks, but it may take longer if any issues arise during the application process. 

Even though you’re remortgaging to fund the purchase of a second home, commercial property or buy to let property, lenders will treat your remortgage application as a new mortgage. This can include a mortgage interview, credit checks, income and affordability checks and a property valuation. 

Any issues or queries that arise from the property valuation can also hold up your mortgage application. If your property's current value is below what is outstanding on your mortgage, it could delay the process, or you may have to wait until the price recovers before continuing with your application. 

If you need advice on how to remortgage to buy another property, speak to one of our friendly and experienced advisers at John Charcol.