Can you borrow against your house to buy another house?

If you wish to a buy another house, either to rent out, as a second home, for your children to live in, or for any other reason, borrowing against your current home can be a good way to raise the necessary money. There are potentially 3 ways to do this:

1. Taking out a further advance from your current lender.
2. Remortgaging the property and repaying any existing mortgage and taking out a new mortgage for an increased sum.
3. Taking out a ‘second charge’ or ‘second mortgage’ from a different lender to your main mortgage.

Borrowing in this way can offer a number of advantages. You should seek advice from an Independent Financial Advisor to see which of these options best suits your circumstances.

Benefits of using borrowing against your main home to buy another property

There are two main benefits to taking out further borrowing on your existing home, compared to borrowing against the new property:

1. It can allow you to borrow more - for example if the equity you have in your property is a lot more than the value of the property you wish to buy or if this is an alternative to your children on a low income applying for a mortgage.
2. It can allow you to access a better interest rate - especially when compared to many buy-to-let mortgages, which tend to have relatively high interest rates.

There may also be other benefits depending on the circumstances, such as allowing you to buy a property to renovate that is currently considered unmortgageable e.g. because it does not have a functioning kitchen and bathroom.

How further borrowing on your home works

All of these options work similarly to a standard mortgage - you borrow money secured against your home and the amount you can borrow is determined by the value of the property and how much you can afford to repay.

Your lender will normally need to carry out a valuation and affordability checks before determining how much you can borrow. It is often possible to take your combined borrowing up to 90% of a property’s value, or even more in some cases.

When taking out further borrowing, you will usually need to have a solicitor act for you to review the mortgage offer and ensure your interests are protected.

Who can take out further borrowing?

In theory, anyone who already owns their own home can apply for further borrowing. However, to be able to raise enough to buy a second house, you will normally need to have a significant amount of equity built up in your current property.

To be eligible, most lenders will want you to have owned your current home for at least 6 months and be up-to-date with all of your mortgage payments. Specific requirements vary between lenders, however, so it is important to familiarise yourself with the different options when considering whether you will be able to get a second charge mortgage.

Get reliable conveyancing for buying a house

Bird & Co Solicitors is a long-established law firm offering conveyancing services for properties across England and Wales from our 3 offices in the East Midlands.

With decades of experience in all types of residential property, we make buying a house or flat as fast, smooth and cost-effective as possible while keeping your interests protected. We can also help you with all of the legal aspects of taking out a second charge mortgage on your current home. We are accredited by the Law Society’s Conveyancing Quality Scheme reflecting the high quality of our residential property services.

To find out more about our conveyancing services for residential property, call us today on 01476 591711 or use our contact page to find details of your nearest office.