How It Works
Remortgaging to buy another property involves raising extra capital against your current home and using those funds as a deposit (or full purchase price) for a second property. You take out a new, larger mortgage on your existing home, and the additional borrowing is released to you as cash.
The second property will usually need its own mortgage as well, unless you're raising enough from your main home to buy it outright. This means you'll have two mortgages to service, and lenders will assess your ability to afford both before approving the extra borrowing on your home.
Buy-to-Let Considerations
If you're buying the second property as a buy-to-let investment, the rental income can help cover its mortgage costs. However, lenders will still need to see that you can afford your main home's increased mortgage without relying on rental income, as void periods and maintenance costs are always a possibility.
You'll also need to factor in the additional costs of being a landlord, including stamp duty (which is higher for second properties in the UK), letting agent fees, maintenance, insurance and income tax on rental profits. Buy-to-let mortgage rates are typically higher than residential rates.
Using Equity as a Deposit
Most people use the capital raised from remortgaging as a deposit on the second property rather than funding the entire purchase. The larger the deposit you can put down, the better the mortgage rate you'll secure on the new property. A 25% deposit is often the sweet spot for competitive buy-to-let rates.
Keep in mind that the more you borrow against your main home, the higher your LTV becomes, which could affect the rate on your primary mortgage too. It's a balancing act between raising enough for a good deposit on the new property and keeping your main mortgage affordable.
Stamp Duty on Second Properties
Since April 2016, there has been a stamp duty surcharge on purchases of additional residential properties in England and Northern Ireland. This adds an extra 5% (increased from 3% in October 2024) on top of the standard stamp duty rates. Scotland and Wales have similar surcharges under their own land transaction taxes.
This is a significant additional cost that should be factored into your budget when deciding whether to buy another property. On a £200,000 purchase, the surcharge alone could add £10,000 to your costs. Make sure you account for this when working out how much capital to raise.
Important: Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice. The actual rate available will depend on your circumstances. Think carefully before securing other debts against your home.