Are you comfortably settled in your home and have been paying the mortgage now for quite some time – enough to start seeing the light at the end of the tunnel anyway? You might now be considering what your next move could be. Does the prospect of owning a second property appeal to you? Daydreams of holiday homes, or perhaps a nice buy-to-let investment? Well, now could be the perfect time to explore your options and see if this dream could actually become a reality.
How does remortgaging work to buy another property?
Although you might not have the money saved up to put down a deposit on a second home right now, there are other ways you can still achieve this. Remortgaging is a common path many people take in order to buy a second property. First, it’s good to understand how this works.
With every monthly repayment you make on your current mortgage, you are gradually shaving off more and more of your mortgage. During this process, you’re building up the equity in your home. As the equity increases, you can remortgage and release some of the equity to put it towards other things, such as home improvements or, in this case, buying another property.
This is often a common choice for many looking to branch into the buy-to-let market. The equity you have built up can be put down as a deposit on a second property.
Using your equity to buy another property can be an effective way to use money that would otherwise sit tied up in your property. A mortgage adviser will look at your personal and financial situation before making recommendations on how you can achieve your ultimate goal.
Releasing equity in your property means that your repayments would be significantly larger than they have been previously. Your mortgage adviser will go through affordability checks with you when you remortgage. You’ll have to show that you can afford to pay these higher repayments on your current wage. Failure to meet these payments could result in the loss of both properties, so it’s important you’re honest and clear with your mortgage adviser.
If you are a contractor, freelancer or self-employed. you might be concerned about going through the remortgage process. Your mortgage adviser will again be able to offer their expert advice when it comes to your remortgage decision. They will take into consideration your whole situation and clearly go through all your options so you can make an informed decision that’s right for you. In the meantime, you might want to visit our page on Mortgages for Contractors and Freelancers.
To find out more about remortgaging to buy a second property, please get in touch and we’d be happy to answer any questions you may have. In the meantime, why not see how much you might be able to borrow using our initial search?