Remortgaging a property to free up the capital that can be used to purchase another property is a common practice among homeowners who want to expand their portfolio. Some purchase-to-rent lenders offer loans up to 85% of the maximum loan value, and the affordability of the loan is based on the rental income that the property can generate. Buying a second property is an ideal way to use the capital from your current home. You can do this with a new mortgage and use the capital for a mortgage deposit for another property. From a financial standpoint, this is one of the best reasons to remortgage.
It's important to be honest with your mortgage advisor about your plans for a second property. This way, we can tailor our advice to your specific circumstances, and you can be sure that you have taken the best path to becoming a second home owner. Another option is to buy a second property to rent as a vacation rental. These usually require a larger deposit, so make sure to factor this into your affordability calculations. You can also rent out your current home and buy another one to live in.
To do this, you'll need to apply for a rent-to-own mortgage for your current property and a residential mortgage for your new home. If you've built up equity in your home over the years, you may even have enough money to buy a second property outright. This means that you will only have one mortgage on your original home. You may be able to free up the capital in your current home to use as a deposit for another property and apply for a mortgage to cover the rest. This means that you would have two mortgages.
In short, yes, you can re-mortgage your property to buy another. The lender will need to know why you are remortgaging your property and the amount will depend on the current value of your property. It is possible to free up capital to purchase a second property, such as a vacation home, investment property, or rental investment. The net value of the home is the absolute value of your home that you own, which is calculated by subtracting any debt linked to your property from the current value of the property. The issued capital is tax-free, is paid as a lump sum and is yours for you to spend as you wish. Remortgaging to free up capital will mean taking out a new, larger mortgage on your current home, which will increase your monthly payments.
And if you want to apply for a mortgage on the second property as well, you'll need to make sure you can pay both mortgages at the same time. The typical minimum deposit on a purchase-to-rent mortgage is 25%, so depending on the average price of the property, you'll have to free up more than £60,000 from your home through a new mortgage. This is an effective way to free up capital to buy another home, but make sure that you can afford the new remortgage rate. Can you free up capital to buy another property? Yes. This is possible and is a common reason why people refinance their homes.
Basically, the transaction consists of re-mortgaging your existing property that extends your loan to provide you with a lump sum that can be used to buy another property directly or as a deposit. This isn't always the case and you may have several options available in terms of how to finance each part of the transaction. The money that is released from this can be used as a deposit for the third mortgage used to purchase your second property. Freeing up the capital of your home to buy another one means that your repayments will be higher than they have been until now. If you're worried that your capital release request will be rejected, it's best to get a free confidential quote.
Not only that, but if you're considering freeing up capital to buy a second home, it's important to research all of the costs involved; for example, rental income may mean paying more taxes and therefore not worth it. Capital release plans are available for owners of older homes in their primary residence when they are full owners of their home and it is valued above 75,000 pounds. The rules are slightly different when it comes to freeing up capital and buying for rent when it comes to the percentage you can release from your property. Young people don't have access to capital release plans, but they can still use some of their accumulated capital to help buy a second property. A lifetime mortgage is the most popular form of capital release and it's a loan secured against your property. You can use the capital release money to help finance moving into a new home or apply for an existing lifetime mortgage.
We work with brokers who know specialized credit markets and are qualified to offer advice on releasing shares so that you can get full comparisons between both products before making any decisions. It's almost always worth seeking advice from an independent mortgage advisor who can guarantee not only the best remortgage offer that will help free up capital from your current home but also find you the best purchase-to-rent mortgage for your second property. If you'd rather have some of that money in hand instead of locking it up in your home, then remortgaging could be an option for freeing up capital. Capital release is another option but it's important that you talk with someone qualified in capital release products if this is something that interests you.