Remortgaging To Buy Another Property

Thinking about using the equity in your home to buy another property? Whether it’s a second home, a buy-to-let, or helping a family member onto the ladder, remortgaging can unlock the funds you need. But before you jump in, it’s crucial to understand how it works, what lenders look for, and whether it’s the right move for you.

This guide will walk you through everything—how to release equity, what costs to expect, and alternative options if remortgaging isn’t the best fit. 

Can You Remortgage to Buy Another Property?

Yes, it’s possible. If you’ve built up equity in your home, you can remortgage to release some of that cash and put it towards another property. People do this for all sorts of reasons:

• Buying a second home – Maybe you want a city pad or a countryside retreat.

• Investing in buy-to-let – Rental properties can generate extra income.

• Helping family – Supporting children or relatives with their first home.

• Buying a commercial property – If you’re looking to expand your business.

The main considerations when you remortgage for this purpose are having enough equity and being able to afford the repayments. Lenders will also want to know the purpose of the new property to offer the right mortgage product.

Will You Need More than One Mortgage?

In most cases, yes. Remortgaging doesn’t necessarily replace the need for a mortgage on the second property. Instead, it provides the funds (usually for the deposit) while a second mortgage is taken out for the rest of the property’s purchase price. 

This is how it could work out, depending on the type of property you’re looking to buy: 

• Residential mortgage + Buy-to-Let mortgage – If you’re keeping your current home and purchasing a rental property, you’ll need a buy-to-let mortgage.

• Residential mortgage + Second home mortgage – If buying a holiday home for personal use, you can get a second residential mortgage. 

• Residential mortgage + Holiday Let Mortgage—If you intend to rent your second property out for short-term breaks (via Airbnb, etc.), a holiday let mortgage would be needed.

• Residential mortgage + Commercial mortgage – If you’re buying premises for your business, you’ll need a commercial mortgage.

How Does It Work?

When you remortgage for the purpose of buying another property, the process could involve two separate home loans - taking out a new mortgage for more money (releasing equity) on your current home and one to complete the second property purchase. 

A standard remortgage usually takes between four to eight weeks to complete. Remortgaging to buy another property might take a little longer as there’s an additional purchase to take into account. But, as long as you follow certain steps, the process can still be pretty straightforward (depending on the complexity of the application). 

Here’s what to expect:

1. Assess your current equity – Equity is the difference between your home’s value and your outstanding mortgage balance. Most lenders allow borrowing up to 80%-95% of your property’s value, depending on the type of property you’re buying.

2. Apply for a remortgage – Find a lender offering a suitable remortgage deal that allows you to release enough funds for your second property purchase. Take the opportunity to compare rates and terms from different lenders to see what works for you.

3. Undergo affordability and credit checks – Lenders will evaluate your income, expenses, existing debts, and credit history.

4. Property valuation – The lender will conduct a valuation of your current home to determine the amount of equity available.

5. Funds release – Once approved, the equity is released as a lump sum, which you can use towards the deposit or full purchase of the second property.

6. Secure a mortgage for the second property – If additional funds are needed, you’ll need to apply for a separate mortgage on the second property.

Is It More Expensive?

It depends. While remortgaging can be a smart move, it’s important to weigh up the following costs against the potential benefits before you make a final decision:

• Interest rates – If your current mortgage has a lower rate, switching to a new deal with higher rates could increase your repayments.

• Early repayment charges (ERCs) – If you're on a fixed-rate mortgage, you may have to pay a fee to exit your current deal early.

• Additional fees – Legal fees, valuation fees, and arrangement fees can add up.

• Higher loan-to-value (LTV) ratios – If you’re borrowing a large portion of your home’s value, the lender may charge higher interest rates.

How Much Can You Borrow?

The amount you can borrow will largely depend on the following:

• Equity in your current property – The more equity you have, the more you can release.

• Income and affordability – Lenders typically allow borrowing between 4 and 4.5 times your annual income.

• Credit history – A strong credit score can help you qualify for the most competitive remortgage rates. 

• Loan-to-value ratio (LTV) – Most lenders allow remortgaging up to 80%-95% LTV, depending on the type of property you’re buying.

Is It a Good Idea?

It can be a great move if:

• You have plenty of equity and can get a low-interest deal.

• The second property is a strong investment.

• You can comfortably afford both mortgage payments.

• Your long-term financial goals align with the decision.

If all these factors check out, remortgaging could be a smart way to grow your property portfolio.

When Might It Be a Bad Idea?

It might not be such a great move if: 

• Your current mortgage has hefty early repayment fees.

• Your income is unstable or you have high existing debts.

• The second property has weak rental demand or poor appreciation potential.

• Remortgaging would leave you with high monthly repayments you can’t afford.

Alternative Options

It’s important to explore all your options so you can make the best choice for your circumstances. If remortgaging isn’t right for you, consider:

• Second-charge mortgages* – A loan secured against your home without changing your main mortgage.

• Bridging loans* – A short-term solution if you need funds quickly.

• Personal loans – For smaller amounts, if only a partial deposit is needed.

• Joint ownership – Partnering with another investor to share costs.

*This service is offered by referral to a third party