More and more people in the UK are thinking of buying a second home. This decision stems from being a peaceful beach retreat or earning extra income through buy-to-let. But why the hesitation? Many are anxious about remortgaging to purchase another property.
But guess what? Remortgaging is one of the best ways to buy another property. That is exactly why so many people in the UK are choosing this popular option. While it might seem complex, the right kind of information can help you make important decisions effortlessly. To make this easier, we have created a guide on getting a second home mortgage.
Can I Remortgage to Buy a Second Property?
It’s actually more common in the UK than you think. Let’s first answer what it means to remortgage to buy another property. In simple terms, you’re tapping into the equity of your current home to secure the funds for another property.
There are two main routes: you can either increase the mortgage you already have or strike a new deal to release the funds you require. This method works amazing if the property’s value has increased over time or if you have already paid off much of the repayments.
Remember that as managing two mortgage payments is more challenging than handling just one, your application may face extra scrutiny by lenders for second home mortgage.
How Can I Remortgage One House to Buy Another
Let’s simplify the process of how to remortgage a house by breaking it down into manageable steps:
- Take a look at your current mortgage.
Carefully review all the details of your current mortgage. Doing so, you will know how much balance is outstanding and how much equity you currently hold. The more equity you have, the better your chances of securing favourable terms.
- Get a property valuation.
After you have an understanding of your current deal, you have to determine how much equity you can release. For this, you need to get an updated valuation of your current home. As the market is changing rapidly, it’s possible that your property will be more valuable than when you initially bought it. This allows you a greater equity release.
- Find a mortgage deal.
You have the option to either remain with your current lender or find a new one. Since remortgaging to purchase another property is a bit different than a typical mortgage, a specialist can help you manage the ins and outs. They can help you shop around for new mortgage deals while focusing on options that allow you to buy additional funds against your home.
- Calculate affordability.
Buying a second home is a smart decision only if you can afford it. Otherwise, it may open a can of debt. Lenders will evaluate your ability by assessing your financial profile. This includes your income situation, credit history, and outstanding debts. You need to calculate affordability yourself in order to understand if and how you can improve your application to prove that you can handle existing and new mortgage payments comfortably.
- Fill out your application.
Make sure all the details are filled correctly with the right attachments. This helps keep your credibility intact. Once you are prepared to provide all necessary documentation related to your income and expenses, you can submit the application.
- Use released equity.
When your remortgage application is successful, you will receive the additional funds. You can then use this money as a deposit or full payment for your second home.
Why Buy a Second Property?
Now you know how to remortgage a house but why do so? People have various reasons to buy a new home. The reason it’s important to be clear about the purpose of your second property is that it may help you decide the type of mortgage you shall aim for. Some may seek a vacation home in the countryside or along the coast, while others are looking for an income opportunity through a buy-to-let investment when residential areas may be preferred.
Depending on the type of house you choose, lenders may change their terms. For example, a house around the coastal region may be more prone to flood risks. That may cause a hike in the deposit amount or interest rate. Therefore, when discussing mortgage options with lenders, you should be clear about the property you are choosing and why.
Things to Do Before Remortgaging
Apart from your application steps, there are a few things you can do to mitigate the possibility of any obstacle coming your way.
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- Please remember to include any extra costs including legal fees, insurance, stamp duty (due to Higher Rates on Additional Dwellings), and maintenance costs.
- Think about possible risks like changes to your income or a drop in property value and make sure to have a backup plan to tackle any unforeseen issue.
- Check the local rental situation if you plan to rent out your second property to see if the income will cover all your expenses and be profitable.
- Look around for the best mortgage deal by considering both fixed and variable interest rates.
- Make sure to check for any early repayment charges on your current mortgage, so you can factor them into your total costs.
Busting the Myths
It’s easy to be put off by the idea to remortgage to buy another property, especially with all the misinformation out there. Don’t fall for these myths and get the facts straight. Confirming certain information with a broker can help you out.
“All your payments of the current mortgage have to be paid off before you remortgage.”
Wrong. As long as you have enough equity, you can remortgage at any point in your term.
“Remortgaging means taking on an entirely new mortgage.”
Yes, remortgaging is a new deal but you are not starting from scratch. You’re simply borrowing money based on the equity.
“Remortgaging will hit your credit score pretty badly.”
Just like any other mortgage deal, credit checks will be conducted. However, remortgaging does not harm your credit score as long as you are being responsible.
Conclusion
A second home mortgage is only complicated if you allow it to be. You may need to make important decisions that affect your financial future, from understanding your equity to managing extra costs. This is where seeking expert advice can benefit you in the long run.
Our team at UK Mortgage Finder has helped many remortgage a home to buy another. Let us also make the process hassle-free for you. Take a step towards a second new home by contacting us today and getting connected to a fully qualified mortgage expert.
