How does remortgaging work to buy another property?
When you remortgage to buy another property you can either use some of the equity in an existing property to put down a deposit for a new one and take another mortgage on the new property, or if you have enough equity you could raise all the money on your current property and purchase the new one outright as a cash buyer.
Any lender will want to be sure you can afford the new remortgage payments and the running costs of both properties, including any new mortgage, out of your income. If you fail to pay the mortgage, you could lose your home, so ensuring you can meet your obligations is key.
Is it worth remortgaging to purchase a buy to let?
Remortgaging to raise a deposit can be a way to get into the Buy to Let market and may be an option for people who have a lot of equity in their home - meaning their existing mortgage is a small percentage of the value of the property.
By remortgaging, you’ll be releasing equity to buy another property and using the money as a deposit. This may be cheaper than taking out a specific Buy to Let mortgage because interest rates are often higher for Buy to Let loans.
It’s important to remember that your new mortgage is going to be larger than the existing one, which means you'll have to show the lender that you can afford the higher repayments.
Another key factor to remember when it comes to owning Buy to Let properties is that there will always be certain times when the property is empty, meaning you won't have any rent coming in. For this reason, you’ll need a contingency fund to meet your mortgage payments when this happens. There could also be occasions when the tenants stay but stop paying rent. Even in situations like this, you will still have to pay your mortgage every month.
If you’re unsure about releasing equity to buy another property, curious about how remortgaging to buy another property works, or would like to learn more about Buy to Let, read our guide "Is Buy to Let a good investment?" to help you decide.
