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If you own a property and want to purchase another, either as an investment or a second home, a remortgage could be the answer. Here, you'll learn whether remortgaging for this purpose is an option, how to do it, and how we can help.
Can you remortgage to buy another property
Yes. You can remortgage a property you own, and hold equity in, to finance the purchase of another one. When you refinance, you may have the option to release some of your equity, and this can be used to raise a deposit for the new property, or buy it outright.
Provided you have built up enough capital to satisfy the lender’s loan-to-value criteria and other requirements, you could remortgage your home to raise finance to buy:
- A buy-to-let property
- A second home or holiday home
- A commercial premises
- A semi-commercial property
Although there are only a minority of lenders who won’t let you refinance for this purpose at all, the providers who will allow it have varying criteria and offer a range of different rates.
Speaking to a mortgage broker is the best way to find the right solution for you.
LTV requirements and other criteria
Most mortgage lenders will insist on a loan-to-value (LTV) cap of 75-85% if you are remortgaging to release capital for purchasing another property. This means that you will need to hold 15-25% equity to get approved, but a minority of lenders accept less.
You will also need to meet the following requirements:
- Time in the property: You will need to have had your original mortgage for at least six months before most (but not all) lenders will let you remortgage.
- Age: Seek specialist advice if you will be aged 75 or over during the mortgage term. Not all lenders are keen on offering remortgages that run into your retirement.
- Credit history: Bad credit remortgages are available, but whether you are approved for one will depend on the age, severity and reason for any credit problems you have.
- Property type: Specialist advice is recommended if the property you are remortgaging has unusual features or non-standard construction. Not all lenders will let you refinance to release equity if this is the case.
Keep in mind that some lenders have more flexible criteria than others, so if you don’t fit the above requirements, get in touch to discuss your options with a mortgage advisor.
How to remortgage to buy another property
Follow these steps to get started on your remortgage journey:
Do your calculations: Work out how much equity you will need to release for your onward purchase, add it to your outstanding mortgage balance and divide the total by the value of the property. Multiplying the total by 100 will give you your LTV.
Compare remortgage deals: Now that you have your LTV, you can get an idea of the kind of remortgage rates and deals you will qualify for. You can compare them for free on Teito and secure an agreement in principle through us in minutes.
Speak to a remortgage broker: We have mortgage brokers who specialise in arranging remortgages for people who need to release equity to buy another property. Once you have chosen the product you want, they will check over your case to offer bespoke advice and make sure you are getting the best deal.
Ready to compare remortgage rates and speak to a mortgage broker who can help you refinance to buy another property? Get started here.
What if you need a mortgage for your new property?
Some borrowers might hold enough equity to purchase their new property outright, but others will be raising a deposit from their existing equity to secure the onward purchase.
You don’t need to use your existing lender to take out a mortgage on the new property. In fact, it pays to shop around and see what kind of deal other providers might offer.
One thing to keep in mind, though, is that you will be subjected to another round of eligibility checks when taking out your new mortgage. The lender will be keen to see that affordability isn’t an issue when you have two mortgages to repay simultaneously.
On top of that, the criteria for the new mortgage will depend on the property type. You can find out more about the requirements for each type through the links below:
Let-to-buy mortgages
If your plan is to rent out your existing property and move into a new one, there’s a special type of agreement called a let-to-buy mortgage that could help. With let-to-buy, you can refinance your home onto a buy-to-let mortgage and release equity for the onward purchase. Some lenders offer package deals, but it’s possible to use two different providers.
You can read more in our standalone guide to let-to-buy mortgages.
How to calculate your new mortgage payments
Add the amount of equity you need to release to your existing mortgage balance to tally up the size of your debt after you’ve remortgaged. You can enter that total into our calculator below along with example rates and terms to get an idea of your new repayments.
If you need a new mortgage to finance your additional property and know how much you need to borrow, you can enter that amount above to crunch the numbers too.
Available mortgage lenders
Only a minority of lenders, such as Nationwide and Proportunity, will decline remortgage applications because the borrower is releasing equity to buy a new property.
Below you will find examples of the remortgage lenders who will allow this and the specific criteria you might encounter from them:
- Suffolk Building Society: Will consider applications as long as completion on the remortgage and onward purchase are completed simultaneously.
- Aldermore: Is open to applications where the LTV on the remortgage is 90%, higher than many other mortgage lenders for this type of arrangement.
- Coventry Building Society: Will can the LTV at 75% for employed homeowners who are remortgaging for this purpose, and at 65% for self-employed.
- Halifax: Will lend for this purpose with no specific caveats compared to remortgages where equity is being released for other general purposes.
You can browse remortgage rates from these lenders and more for free through Teito, or have one of our brokers do it for you, below:
Find the best remortgage rates & deals on Teito
Should you remortgage to buy another property?
It is one of several options but is often a viable one under the right circumstances. Speaking to a mortgage broker before you release equity to buy another property is highly recommended, as they can help you establish whether it’s cost-effective in the long run.
There are times when the alternatives are worth weighing up. For example, if you are locked into a fixed-rate mortgage, there could be significant early repayment charges (ERCs) to pay when you refinance, and they need to be factored into the overall cost.
There are alternatives you could consider if you need to avoid ERCs. They include:
- Secured loans: These are secondary mortgages that sit behind the residential mortgage on your home, secured against the equity. This type of finance could provide you with capital for a deposit on a new property, but keep in mind that you’d have multiple loans to pay. Read more in our guide to secured loans.
- Further Advance: It is sometimes possible to borrow more from your existing lender without refinancing. If you are happy for the terms of your agreement to remain unchanged, this could be an option, but expect any additional borrowing to be charged at a higher rate. Read more in our guide to further advances.
- Bridging loans: These are short-term loans that can be arranged quickly. They have high rates but can be useful for ‘bridging’ the gap between a debt and a longer-term type of finance becoming available, in this case the deposit to buy a new property and a mortgage on said property. Read more in our bridging finance guide.
A mortgage broker can go through each one of these options with you and explore which one is the best fit for you, based on your goals and the overall cost involved.
Refinancing to expand a buy-to-let portfolio
The majority of buy-to-let lenders will allow you to remortgage an investment property to purchase another, and this is a popular way for landlords to expand their portfolios.
Expect the mortgage provider to place scrutiny on the interest cover ratio across your portfolio with the new property’s percentage factored in. A common LTV ratio cap that applies across most of the market is 75%, meaning you will need to hold 25% equity.
Lenders who allow landlords to refinance to buy another property include:
- Barclays
- Aldermore
- Accord
- BM Solutions
- HSBC
You can compare rates from these lenders and more for free through Teito and access support from a buy-to-let mortgage broker.
Why use Teito for your remortgage needs?
You can compare remortgage rates and for free through Teito, as well as access advice from a broker who specialises in helping people refinance to buy another property.
Here are just some of the reasons why our customers choose us:
- Exclusive rates and deals are available
- We have brokers who specialise in capital raising remortgages
- You could secure an agreement in principle in minutes
- We are 5-star rated on leading review websites
Ready to compare remortgage rates and take advantage of a free, no-obligation chat with a mortgage specialist? Get started here.
FAQs
Yes. This would be one option for buying an overseas property, but you will need to make sure your lender of choice can arrange mortgages in the country you’re buying in (unless you are buying the property outright). Specialist advice is highly recommended for this.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.