Generally speaking, yes, you can remortgage your home to buy another property. Eligibility criteria for a remortgage will vary, but you can usually find a lender that will accept your application.
Remortgaging an existing property to purchase another is often one of the best ways to generate a deposit since you can use the equity you have. Getting a good deal depends on your affordability and how much equity you have, but with help from the right mortgage advisor, you should be able to find a suitable lender for this purpose.
If you’re thinking about remortgaging your home to buy another property, here’s a guide on how remortgaging works, what properties you can buy when remortgaging and how to arrange a remortgage of your home.
What Properties Can I Buy When I Remortgage My Home?
Most lenders aren’t picky when it comes to what property you can buy when remortgaging your home. Generally, the funds from remortgaging can be used to purchase a:
- Buy to let
- Second home
- Holiday home
To purchase another property by remortgaging, you’ll need to meet the lending criteria in a similar way to if you were getting an entirely new mortgage.
What is the Eligibility Criteria for Remortgaging?
Each lender will have different criteria for who they will accept a remortgage application from. Speaking to a mortgage advisor is the best way to determine whether you’re eligible and what the best deal on the market is for you.
Generally, the remortgaging assessment of your eligibility will largely focus on:
- What property you plan on purchasing – Whether it’s an eligible property and what the associated risks are with buying the property.
- How much equity you have in the property – Your equity can be used as a deposit on another property, so lenders will want to know how much equity you have. Remember, a buy to let property usually requires a deposit of around 25%.
- Whether you can afford to remortgage – Like all applications for a new mortgage, lenders will assess your affordability to determine whether you can meet the monthly repayments. This usually includes looking at your income, expenditure and employment status.
- Your credit score and history – Lenders will look at how good your credit score is as a factor in determining how much you can borrow and what interest rate they’ll offer you. If you have bad credit, you can still remortgage but you may be charged a higher interest rate.
- The loan to value ratio of remortgaging – Calculating the loan to value ratio can be done by comparing how much you need to borrow with the property’s value. Usually, if you have a low ratio and amount you need to borrow, you can get better interest rates.
How to Remortgage a Property to Buy Another
1. Arrange a Valuation
Speak to a few estate agents to arrange a valuation of your home. This will tell you how much your property is currently worth, which will help you calculate the equity in the property. Remember, lenders will still complete their own valuation before accepting your application.
2. Calculate Your Equity
Once you know the value of your property, you can calculate how much equity you have. You can do this by deducting your outstanding mortgage balance from the property value amount. If you don’t have an outstanding mortgage, the property’s value is your equity.
3. Speak to a Mortgage Advisor
Knowing how much equity you have can give you a better idea of whether you can afford to buy another property through remortgaging. To proceed with remortgaging your home, it’s best to speak to a mortgage advisor for help exploring your options. A good advisor can help you find the best deal for your situation by comparing offers from multiple lenders.
Need an Expert Mortgage Advisor?
Remortgaging your home to buy another property is common – but it’s essential to make sure you can afford to remortgage before you apply. Speaking to an expert mortgage advisor is the best way to determine your affordability and what the best deal on the market is for you.
If you’re considering remortgaging your home to buy another property, please get in touch today for a chat on 01179635777 or via email at matthewbingham@northwooduk.com to see how I can help.
