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How to remortgage to buy another property

By
Anya Gair
Last Updated 4 January 2024

Many homeowners choose to remortgage their current home to purchase another property, either to buy a second home or become a landlord. In this article, we’ll explore the ins and outs of remortgaging to buy another property.

In this guide

Can I remortgage my existing property to buy another?

Yes, you can remortgage your existing property to buy another. Normally, you will remortgage your property to unlock the equity you have built in your current home. These funds will then be used as the deposit to secure a new mortgage for a second property, such as a rental property you want to let out. 

How does remortgage to buy another property work?

To remortgage your current home and buy another property, you need to follow these steps:

1. Work out how much equity you have

First off, work out the amount of equity you have in your current property. Equity is the difference between your property's market value and the outstanding mortgage balance. If you’ve been in your home a number of years, it’s likely to have gone up in value, meaning you will have more equity that you can unlock (although this isn’t guaranteed).

Read more: Are house prices rising?

2. Work with a mortgage broker

Mortgages differ from lender to lender. While one may reject your application, another might accept it. Mortgage brokers are experts in affordability and the eligibility criteria of different lenders. This is why they can help you find the best remortgage deal for you from across the market.

For example, here at Tembo we find our customers the best deal for them from over 20,000 mortgage products and over 15 specialist schemes - in seconds. Get started here.

You might like: How to find a good mortgage broker

3. Apply for a remortgage

Once your mortgage broker has found the right deal for you, they will submit your remortgage application on your behalf. This is when the lender will assess your eligibility for the new loan, as well as whether you can afford the repayments based on your affordability. Your credit score, income, outgoings and the value of your existing property will come into this. 

Read more: What is mortgage affordability?

4. Unlock money from your current home

Once you’ve been approved for the remortgage, you can use the mortgage offer to proceed on your new purchase. Keep in mind that you may be required to put down a deposit of 20% or more to purchase another property, so the funds released from your current home need to be equivalent to this.

5. Apply for your second mortgage

As long as the lender has evidence of the deposit source (your remortgage), you can apply for a new mortgage to purchase a second property. Again, the lender will need to assess your affordability before approving the mortgage application. They will want to be confident that you can comfortably afford two mortgages, including if interest rates rise. If you are purchasing a buy to let property, your affordability will be based on the expected rental income. But if this isn’t sufficient by itself, you could consider a top slicing mortgage instead, which takes your personal income into account.

Your mortgage broker will be able to help you throughout this process, including finding the right deal for you and ensuring the application runs smoothly.

Is it a good idea to remortgage to buy property?

Whether remortgaging to buy property is a good idea depends on your financial goals and individual circumstances. Here are some things to consider before making the decision:

  • Financial stability: Are you in a stable financial situation and can comfortably manage two mortgages?
  • Interest rates: What are current interest rates doing? If they are rising, this could mean it’s not a good time to purchase a second property if you are likely to fall short of a lender’s affordability checks. However, this could mean property prices fall, which will make affording a second property easier.
  • Investment goals: Are you wanting to purchase another property as a second home, or to start your own buy to let business? Do you want to create a source of passive income, or profit from house price growth in a decade or two? It’s worth thinking about why you want to buy another property, and if it makes sense to remortgage your current home to make this happen. 

Do you pay stamp duty on remortgages?

No, you typically do not pay stamp duty on remortgages. Stamp duty is a tax that is usually associated with property purchases, not refinancing existing mortgages. However, if you are remortgaging your current home to purchase another property, you will pay stamp duty on the purchase of the second property. The rate of stamp duty for additional properties is higher than the rate you would pay for purchasing your first home.

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See what stamp duty you’ll pay

Use our stamp duty calculator to see how much you’ll pay when you purchase another property.

Stamp Duty Calculator

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Should I remortgage to buy another property?

Whether you should remortgage to buy another property depends on your financial goals and risk tolerance. It can be a viable option for those looking to expand their property portfolio or become a landlord. However, you need to have enough equity in your property to be accepted by a lender for a second mortgage, as well as be able to afford two mortgages. The current market climate might also make it a difficult time to purchase another property. 

Getting expert advice is the key here. At Tembo, we can help you work out if remortgaging your home to purchase a second property is the right thing to do, as well as help you find the right deal for you.

See what you could be offered today

To see whether remortgaging your home to purchase another property is a viable option, all you have to do is create a free Tembo plan. We’ll assess your eligibility for thousands of mortgage products from across the market in seconds to generate a personalised recommendation. Then, you can book in a free call with our award-winning team.

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