Remortgage to Buy Another Property 

Featured on
 

Maximising Equity: How to Remortgage Your Home to Fund a Property Purchase​​​

​

1. Understanding Remortgaging to Buy Another Property

2. Who Can Remortgage to Buy Another Property

3. Financial Considerations

4. How to Prepare for a Remortgage Application

5. Common Pitfalls to Avoid

6. Using a Mortgage Broker for a Smoother Process

​

Understanding Remortgaging to Buy Another Property

​

When you consider remortgaging your existing property to purchase another one, you are effectively restructuring your current mortgage to release funds that can be directed towards a new home or an investment property. The basic premise is straightforward: you borrow more than your existing mortgage balance - provided you have enough equity, so you can put that extra capital towards your next purchase. This approach can be appealing whether you’re seeking to build a property portfolio, move into a new main residence, or start a buy-to-let venture.

​

Remortgaging can help you avoid other funding routes that might come with higher interest rates or stricter repayment conditions, such as bridging loans or unsecured borrowing. In the UK, many homeowners use remortgages not only to secure better interest rates but also to unlock the value in their home. If your home has increased in value since you purchased it, you may find yourself with substantial equity that can fund a deposit for another property. Alternatively, you might use a remortgage to lower your monthly payments so that you have spare finances to secure a second mortgage elsewhere.

​

If you plan to keep your existing property and let it out while you move to a new main residence, you might switch your current mortgage to a buy-to-let product (or request consent to let if you’re only letting it short-term). That process will involve specific criteria around rental income, mortgage affordability, and lender approval. If, instead, you’re remortgaging your current home simply to pull out equity for a second property purchase, the lender will still want to verify you have the financial means to manage both properties or to cover any new commitments.

​

Remortgaging to buy another property demands a thorough analysis of affordability, both in the short and long term. In scenarios where you plan to rent out one of the properties, you’ll need to factor in rental yield, potential void periods, maintenance costs, and landlord responsibilities. When it’s a straightforward move to a new home, it can sometimes be easier to follow a traditional sale-and-purchase route, but if the market is right, or if you see clear advantages to retaining your original property, a remortgage could be the linchpin in making that transition possible.

​

Keep in mind that lenders will assess your financial position with both properties in the picture. If you’ll hold onto the current property while buying another, the lender wants to know your track record of repaying debt, your income, and any projected rental income if you’re switching to a buy-to-let. If you’re selling your original home simultaneously, you might time the remortgage to avoid early repayment charges, or to capture a better interest rate once you’ve cleared a tie-in period on your existing deal.

​

Although remortgaging can be simpler than taking out an entirely separate loan for the deposit, it carries the fundamental risk that your home is used as security for the new borrowing. Should you fall behind on payments, both your finances and your home could be at risk. It’s wise to evaluate whether you have sufficient contingency funds and a stable income before proceeding. By clarifying your strategy early, residential purchase, buy-to-let, or even let-to-buy, you can better structure the remortgage and improve your chances of a smooth application.

​

Who Can Remortgage to Buy Another Property

​

You can typically remortgage to purchase another property if you own a home with enough equity, meet a lender’s credit requirements, and show that you can afford the enlarged mortgage payment. It doesn’t matter if the second property is intended as your next main residence, a holiday home, or an investment property; lenders focus on equity, affordability, and personal financial stability.

​

Your level of equity is a key determining factor. Equity is the difference between what you owe on the mortgage and the property’s current market value. If your home has risen significantly in value since you bought it, or if you’ve paid off a sizeable chunk of your original mortgage, you could have a substantial equity stake. With that equity, you can borrow above your current mortgage balance to fund your new purchase. However, every lender imposes limits on how much you can borrow, expressed as a loan-to-value (LTV) ratio. For instance, if a lender’s maximum LTV for a remortgage is 85%, you’ll need to leave 15% of your home’s value as equity.

​

You also need to be mindful of your credit profile. Even with ample equity, a poor credit record can stand in your way. Lenders look at payment history, outstanding debts, and any adverse markers such as County Court Judgments (CCJs) or defaults. If you have a strong credit score and a history of responsible borrowing, you’ll be positioned to obtain competitive rates. If your credit has imperfections, your options might narrow to specialist products with stricter terms or higher interest rates.

​

Your employment status and income matter as well. Lenders want reassurance that you can handle the monthly payments on the revised mortgage. If you’re in secure employment with a consistent salary, you’ll likely find it easier to pass affordability checks. Self-employed individuals or those with multiple income streams will have a bit more legwork to do—providing at least one or two years of accounts or tax returns, but they can still qualify, especially if they demonstrate steady or growing earnings.

​

The type of second property you’re buying can also affect eligibility. If it’s a buy-to-let, expect lenders to evaluate its likely rental income and whether it meets their rental coverage requirements. Some lenders stipulate that the rent must cover at least 125% (or more) of the mortgage payment, factoring in potential interest rate rises. If you’re purchasing a second home to use personally, like a holiday home, you may not face the same rental stress test, but lenders will be stricter about your personal affordability because that second property won’t be generating rental income.

​

Age and length of term are further considerations. If you’re older, some lenders cap the upper age limit for mortgage terms, meaning you might have to repay the mortgage on a faster schedule. That can increase monthly payments. Younger borrowers, on the other hand, might have more flexibility in spreading repayments over a longer term. Each lender has its own policies here, so if you don’t fit the standard age bracket or you want a longer term that goes beyond retirement age, you might need a specialist lender or a broker’s help to find the right product.

​

Finally, if you’re hoping to let out your current home while purchasing another property to live in, you may need to switch your existing mortgage to a buy-to-let product or gain formal consent to let. Not all lenders will grant consent to let indefinitely; some require a specific buy-to-let remortgage. Also note that letting out your former residence often brings tax implications, such as new Stamp Duty rates on additional properties or capital gains considerations if you sell in the future. Checking these details with a financial or tax adviser ahead of time can prevent unwelcome surprises.

​

Financial Considerations

​

When you remortgage with the intention of buying another property, understanding the financial dimensions is crucial. By planning your budget carefully, you increase your likelihood of approval and reduce the risk of unexpected costs.

​

Start with loan-to-value (LTV). Lenders typically have more favourable interest rates for lower LTV mortgages, so the more equity you have in your existing home, the better your potential deal could be. For instance, borrowing 60% of your home’s value might unlock more attractive products than borrowing 85%. This is because lenders see less risk when you have a considerable stake in the property. Conversely, if you stretch your borrowing to a high LTV, you might face higher interest rates and a narrower pool of lenders.

​

Your monthly repayments may shift if you remortgage to a new rate or borrow a higher amount. A larger balance might mean increased outgoings each month. Even if you lock in a lower interest rate, the total sum borrowed can raise your monthly payment. It’s also important to factor in potential early repayment charges (ERCs) on your existing mortgage if you’re still within a fixed or introductory period. Some homeowners wait until they’re free from ERCs to remortgage, while others determine that the potential savings or strategic benefits of securing a new property sooner outweigh the cost of the ERC.

​

There are also various supplementary costs to account for. These can include arrangement or product fees from the new lender, valuation fees for the remortgaged property, and legal fees for the conveyancing work. Some remortgage deals incorporate a free valuation or free legal package, but make sure you understand the terms and whether these incentives genuinely reduce your overall costs. Another point is whether your new mortgage product allows overpayments without penalty - if you plan to make lump-sum reductions in the future, that flexibility might prove valuable.

​

If you’re looking at a buy-to-let purchase, your financial calculations expand further. You must consider landlord expenses such as letting agent fees, property maintenance, landlord insurance, and the possibility of void periods with no rental income. Lenders usually require that the monthly rent comfortably exceeds your mortgage payment, often by a certain percentage. Failing to meet that requirement can mean you qualify for a smaller loan or face higher rates.

​

You should also consider tax implications. Owning a second property could mean additional Stamp Duty if it qualifies as a second home rather than a direct replacement for your main residence. In a buy-to-let context, rental income is taxable, and you may need to declare it through self-assessment. When it comes time to sell one of the properties, you might be subject to Capital Gains Tax. These factors don’t necessarily prohibit a remortgage, but they can influence how much money you have available month to month, so it’s wise to factor them into your long-term financial plan.

​

Finally, evaluate how interest rate fluctuations might affect you. If you choose a variable rate, your monthly repayments can climb if the Bank of England base rate rises. A fixed rate offers predictability but can come with tie-in periods and early repayment charges. Consider a stress test of your finances under less favourable conditions, like a 2% increase in your mortgage rate, to check if you could still manage the repayments.

Likewise, if your new property is an investment, assess whether you can cover the mortgage if the rental market weakens or if repair costs spike unexpectedly. With a clear financial roadmap, you’ll be better placed to choose the right remortgage product.

​

How to Prepare for a Remortgage Application

​

Preparation is key to navigating the remortgage process smoothly. By organising documents and clarifying your finances, you’ll not only increase your chances of approval but also position yourself to secure a product that meets your goals.

​

1. Check Your Existing Mortgage
   Begin by reviewing the terms of your current deal. If you’re in a fixed or discounted period, look out for any early repayment charges (ERCs). These can sometimes be significant, so weigh whether paying an ERC is worthwhile compared to waiting for the penalty period to end. Also, verify your current lender’s conditions regarding additional borrowing or letting out the property if that’s part of your plan.

2. Organise Your Documents
   You’ll typically need:

   • Proof of identity (passport or driving licence)

   • Proof of address (recent utility bills or council tax statements)

   • Proof of income (payslips, P60s, or if self-employed, SA302s and tax year overviews)

   • Recent bank statements showing your income, outgoings, and any existing debts
     If you’re buying a second property to let, gather evidence of rental potential, such as a letting agent’s estimate or data on market rents. Having these documents readily available can speed up the underwriting process.

3. Review Your Credit Score
   Lenders scrutinise your credit history, so it’s wise to check your credit report first. Ensure it’s accurate, address any errors, and try to reduce existing debts if possible. If your score is lower than you’d like, consider steps such as registering on the electoral roll, clearing credit card balances, or limiting applications for new credit in the months before you remortgage.

4. Assess Your Affordability
   Conduct your own affordability check. Tally your monthly income and deduct your regular outgoings (including any current mortgage, bills, credit card payments, and other loans). Then factor in the potential new mortgage payment. If you’re seeking a buy-to-let, estimate rental coverage and remember you might face periods without tenants. Being honest about your finances now helps you avoid rejection later.

5. Plan the Timing
   Remortgages can take anywhere from a few weeks to a couple of months. If you need the funds released by a certain date-perhaps to coincide with the purchase of another property - start the process early. Delays can arise if valuations come in low or if additional paperwork is required, so give yourself a buffer. Communicate with conveyancers and keep track of key deadlines.

​

By tackling these steps proactively, you set the stage for a smoother and more efficient remortgage application. Even with all these preparations, you’ll want to be aware of potential pitfalls that can derail your plans if left unaddressed.

​

Common Pitfalls to Avoid

​

Remortgaging to buy another property can be a strategic move, but there are pitfalls that catch people off guard. By anticipating them, you can avoid disruptions and extra costs.

​

1. Overestimating Your Property’s Value
   It’s easy to assume your home has increased in value more than it actually has. If the lender’s valuation comes in lower, you might not be able to borrow as much as you hoped. This can push your LTV higher and potentially affect your interest rate. To mitigate this, do your homework on local sale prices or get an estate agent’s opinion before applying.

2. Ignoring Hidden Costs
   Interest rates are an important aspect, but so are arrangement fees, legal fees, valuation fees, and possible exit fees from your current lender. Sometimes a deal with a slightly higher headline interest rate but lower fees can be more cost-effective overall. Understand every fee attached to the product and factor in how long you intend to keep it.

3. Failing Affordability Checks
   Even if you have significant equity, lenders will analyse your income, outgoings, and credit commitments. If you’re taking on a second property, your debt-to-income ratio must be reasonable. Buy-to-let mortgages involve additional stress tests on projected rental income. Calculate carefully, and if the numbers are tight, consider waiting until you’ve improved your finances or reduced other debts.

4. Focusing Solely on the Interest Rate
   The lowest rate might look attractive, but you should also consider product flexibility, overpayment options, tie-in periods, and overall cost across the mortgage term. A deal that locks you in for longer than you’d like, or one that penalises you heavily for early repayment, could end up being unsuitable, even if the rate seems favourable at first glance.

5. Underestimating Rental Risks
   If you’re shifting to a buy-to-let model, remember that rental markets can change. You might face void periods with no tenants or unexpected maintenance bills that can impact your cash flow. Having a financial cushion is crucial so that you’re not struggling to cover the mortgage if rental income isn’t consistent.

​

Avoiding these pitfalls lays the groundwork for a successful outcome. The final consideration is whether you can benefit from expert assistance to steer you through the maze of products, criteria, and regulations involved in remortgaging to buy another property.

​

Using a Mortgage Broker for a Smoother Process

​

Working with a mortgage broker can significantly simplify and streamline your remortgage journey, especially if you’re juggling the demands of purchasing another property at the same time. At Manor Mortgages Direct, for instance, an experienced team can guide you through each step, from assessing your eligibility to finalising the paperwork. By leveraging market-wide insight and a strong grasp of lender criteria, a broker can help you identify products you might otherwise miss - particularly if your situation involves let-to-buy, multiple income sources, or a high loan-to-value ratio.

​

One of the main advantages of using a broker is expert guidance on lender requirements. Different lenders vary in their approach to affordability, credit history, and property type. If your case is complex- perhaps you’re self-employed, have fluctuating income, or need a particular structure for a buy-to-let - a broker’s knowledge can point you towards the lenders most likely to offer favourable terms. This saves you from applying blindly to multiple lenders and risking a string of rejections on your credit file.

​

Brokers also offer comprehensive cost comparisons. Rather than focusing on the headline interest rate alone, they can calculate the total expense of each product, including arrangement fees, valuation costs, and any early repayment charges. Sometimes, a product with a slightly higher interest rate and lower fees ends up being more economical over your intended timescale. Having a professional sift through these details can be invaluable when you’re making a major financial decision.

​

The administrative support provided by a broker can be equally important. Remortgaging often involves extensive paperwork- proof of income, bank statements, valuations, and more. If you’re simultaneously managing a property purchase, the workload doubles. A broker can help you gather documents, liaise with lenders, and expedite the underwriting. They’ll keep you informed of any requests from the lender and any deadlines, reducing the risk of delays. This coordination is particularly beneficial if you need the remortgage funds to complete on a new property within a specific timeframe.

​

If you’re moving into or expanding in the buy-to-let market, a broker’s insight is even more significant. Buy-to-let affordability calculations differ from those used for residential mortgages, often involving stress tests of rental coverage. A knowledgeable broker can advise you on expected rental yields, how they align with lender criteria, and whether you need a certain type of product (such as fixed-rate vs. variable) to pass a lender’s checks. This is especially helpful if you plan to remortgage your current home onto a buy-to-let product while also applying for a residential mortgage on your new home.​