How to remortgage to buy another property to best way to use the equity in your current home is to purchase a second property. You can accomplish this with a remortgage and apply the funds to a down payment on a new home. This is possibly one of the finest financial arguments for remortgaging.
Remortgaging can be used to increase the deposit on a buy to let or second house.
Can I refinance my mortgage to purchase a second home?
Meeting a lender’s requirements is necessary to get approved for a remortgage to buy another property. Lenders will therefore evaluate your situation to determine whether or not a remortgage is feasible. The amount of equity you have will determine the loan the most. A remortgage is probably feasible if there is sufficient equity.
How does it function?
An illustration of how a refinance would operate when purchasing a second home
Real estate cost: £400,000
Amount owed on mortgage: £200,000
LTV at present: 50%
Up to £380,000 may be borrowed (95% loan to value).
Money needed to purchase a second home: £180,000
How will you rate me?
The majority of your remortgage assessment will be devoted to:
- Where you would like to put the money
- Your want to refinance the amount of equity in the property
- Your capacity to pay and creditworthiness
- Your remortgage’s loan to value
It pays to compare lenders because some can offer better rates and refinancing fees. You can compare mortgages with the aid of our consultants as well.
What kinds of properties may I purchase using a remortgage?
With a remortgage, you can buy the following kinds of properties:
- Rental property investment
- Purchasing a second house
- Let to buy
- Buying a vacation rental
- Purchasing commercial real estate
Why is equity required for a remortgage?
Before you can apply for a remortgage, you must determine how much equity you have in your current residence. You must first determine the value of your property in order to compute this.
For a more precise value, you can set up a valuation with an estate agent. Naturally, lenders will conduct their own mortgage surveys, but before applying for a remortgage, it’s crucial to understand how much equity you have.
Simply subtract your outstanding mortgage balance from the value of your home to determine your equity. ‘Unencumbered’ refers to a home that is owned outright. Unencumbered remortgaging is the process of remortgaging a home even if you own it outright.
How much equity do I need in order to purchase a new home?
A remortgage is impossible if you have no equity. Depending on other factors, some lenders will lend up to 95% LTV (loan to value), however the interest rates will likely be high.
What is the loan amount?
Lower LTV ratios will provide you more options and better prices, even though 95% remortgages are still feasible. Additionally, lenders will consider factors including your age, credit score, and the motivation for the remortgage.
A 95% remortgage may be attainable if you want to refinance in order to purchase another house. The maximum LTV for a remortgage to buy a rental property is merely 85%. Even less will be paid for properties abroad at 75%. To determine how much you can borrow, try our refinancing calculator.
Can I afford to purchase a second home?
You will pay more each month if you have a second mortgage. Your capacity to handle the additional cost of having two mortgages must satisfy the lenders.
Typically, mortgage lenders would lend three to five times your annual salary. It’s likely that you’ll want to borrow as much money as possible for a remortgage to purchase another property. The sources of income that different lenders take into account while making assessments also varies. Some lenders will take overtime into account, while others won’t.
For self-employed debtors, the same holds true. Some lenders only want accounts to be open for a year, while others demand three years at the very least. It becomes sense to engage an expert who is familiar with each lender’s requirements when you start to evaluate all the potential outcomes. The finest bargain and the largest mortgage amount are guaranteed by mortgage advisors.
Can someone with bad credit purchase another house?
Even those with poor credit can remortgage. It doesn’t matter all that much that you would use a remortgage to buy a second home. Lenders are more interested in the kinds of credit problems you’ve had and how recently you’ve had them.
Bad credit applicants typically need larger down payments or more equity in the property they seek to refinance. This is not to suggest that you cannot get a remortgage for 90%, though. Simply put, it depends on how severe and recent your credit problems were. Lenders will also determine whether your credit issues were infrequent or whether you have frequently had money issues.
Remortgaging with bad credit is difficult, but there are a few specialised lenders available. When compared to specialised lenders, high street lenders are more likely to reject you. Prior to applying, talk to an advisor. This will guarantee that only appropriate lenders are contacted.
How to remortgage to buy another property in order to grow your portfolio?
It is feasible to use a remortgage for a purchase to let. Leveraging an existing portfolio to purchase more real estate is a frequent tactic for landlords. Landlords will typically have interest-only mortgages. This implies that the capital of the property is not reimbursed until the mortgage is paid off.
As a result, equity is typically lesser than it is for residential properties. This is so because the majority of homeowners pay off both the principal and interest on their loans. 85% mortgages are often available from lenders if you want to refinance an investment property. This is determined by estimating the property’s rental income.
Along with bank statements, lenders could also request to see signed copies of tenancy agreements. For the house you want to remortgage, this is to demonstrate rental revenue.
Remortgaging a portfolio is another option if you want to buy a second house to reside in. To find out which remortgage option will work best for you, ask an advisor for advice.