How to buy a second property using equity

Many people often wonder ‘how much can I remortgage my house for?’ and it’s sometimes because they want to invest in a second property. In fact, every year thousands of people in the UK decide to buy a second home either as an investment or a place they can use as a holiday home. The following questions will help you decide whether buying a second home using equity from your existing home is the right move for you.

How much equity do you have?

One of the first steps towards buying a second home using equity in your property is to find out how much money you have invested in your existing home. This can be calculated approximately by subtracting the outstanding mortgage amount from the estimated value of the property. Once you know the amount of equity in your property, you can begin to consider the type and size of another property you might like to buy.  It is important to speak with a mortgage adviser to clarify how much of this equity is available to you.

What type of mortgage do you need?

If you are planning to become a landlord and rent your property out to tenants, you will need to apply for a buy-to-let mortgage. Banks and building societies will consider a number of factors for a buy-to-let mortgage, including the rental market in the area you buy, to ensure there is as little risk involved as possible. In addition, they will assess your own personal income and circumstances including your current mortgage and any other regular financial commitments.

If you are planning to live in both your existing home and your second property at different times, you can apply for a second residential mortgage. You may wish to release equity from your existing property to fund the deposit on your new property, which may mean applying for a mortgage on both properties.

There are numerous mortgage options on the market for you to choose from, but it’s important that you select the best rate, term and repayments for your own individual circumstances. At Private Wealth Mortgages we aim to get a full understanding of our client’s financial situation as well as the goals or aspirations they have for the future. This helps us to present the most appropriate selection of mortgages to help you make the best decision.

Are you an ‘older’ borrower or retired?
It’s important to consider there may be limitations on how much you can borrow in order to purchase a second property depending on your age. For example, some lenders may have a restriction on providing mortgages to people aged 70 or above. But this will depend on your individual circumstances and your ability to repay the mortgage.

How much will stamp duty cost?

Every property purchase is subject to stamp duty, otherwise known as tax. If you already have a property, you will typically pay 3% in addition to the existing stamp duty rate, but this may fluctuate depending on government rules and regulations. Stamp duty varies depending on the value of the property you are buying, so we recommend you ask for professional advice on the stamp duty charge before committing to any large property investment.

If you’re looking for a mortgage adviser who takes the time to get to know you and where you are in life, you’ve come to the right place.

Choosing the right mortgage for you can be really challenging. At Private Wealth Mortgages, our expert advisers guide you through the entire process and will find the best deal for your circumstances.

Call our expert mortgage advisers today

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