Remortgaging your current home to raise money towards buying another property is a common use of released equity, and adverse credit does not usually rule it out. What changes is how much you can raise, based on your loan to value and affordability, and, separately, whether you can then be approved for a mortgage on the second property itself, since that is usually a different application with its own credit and affordability checks.
This page covers using your current home to raise a deposit or purchase funds for another property. For the general mechanics of raising money against your home, see releasing equity with bad credit.
On this page
This page covers
- Reason for remortgaging
- Raising moneyBorrowing more increases your loan to value, which can change the options available.
Read the main guide: Remortgaging to release equity when you have bad credit
In short
- Raising money against your current home is a separate step from being approved for a mortgage on the second property.
- Buy-to-let purchases are usually assessed partly on the rental income the new property could achieve.
- A second residential property, such as a holiday home, is generally assessed like any other mortgage on income and affordability.
- An additional property usually attracts a stamp duty land tax surcharge, which adds to the cost of buying.
Your home may be repossessed if you do not keep up repayments on your mortgage. Think carefully before securing other debts against your home. Borrowing over a longer term can mean paying back more in total.
Two separate steps: raising the money and buying the property
Releasing equity from your current home and buying another property usually involve two separate lending decisions. First, a lender has to agree to increase your existing mortgage, which depends on your loan to value, affordability and credit history, in the same way as any raise-capital remortgage. Second, if you need a mortgage on the new property as well, that is typically a separate application, assessed on its own terms.
Some people raise enough through the first remortgage to buy the second property outright, particularly for a lower-value purchase. Others use the released equity as a deposit and take out a further mortgage for the rest, which means passing two sets of affordability checks rather than one.
Buy-to-let or a second home: does it matter which?
It does, mainly for the mortgage on the new property itself, though the type of purchase can also come up when explaining the purpose of the equity you are releasing from your current home.
| Buy-to-let | Second home or holiday home | |
|---|---|---|
| How the new mortgage is assessed | Often based partly on the rental income the property could achieve | Usually assessed on your own income, like a residential mortgage |
| Who lives there | Tenants | You, family, or left empty part of the year |
| Adverse credit on the new application | Choice can be narrower than for residential lending | Assessed on your own credit and affordability, like a residential application |
| Extra tax to plan for | Additional property stamp duty surcharge; rental income is usually taxable | Additional property stamp duty surcharge |
A general comparison, not advice on any specific transaction. Get independent tax advice for rental income and additional property costs.
What extra costs should you plan for?
Buying an additional residential property in the UK usually attracts a stamp duty land tax surcharge on top of the standard rates, because you already own your current home. GOV.UK sets out the current rates and thresholds, which change from time to time, so check the up-to-date position rather than relying on a fixed figure. Scotland and Wales have their own equivalent taxes with different rules.
Beyond the tax, budget for a second set of valuation, legal and mortgage fees, and, for a buy-to-let, ongoing costs such as letting agent fees, maintenance and landlord insurance.
Does adverse credit affect the second application too?
Raising money against your current home does not carry over to the new property’s mortgage. If you need lending on the second property, your credit history will be assessed again, and buy-to-let lenders in particular can be more limited for adverse credit than mainstream residential lenders.
- Check both applications are realistic before committing to a purchase, rather than assuming the equity release alone secures the deal.
- Treat a buy-to-let mortgage as its own specialist area. Lending on a property you plan to let is assessed differently, and this site focuses on remortgaging the home you live in.
- Factor in the stamp duty surcharge when working out how much you can afford to spend on the second property.
- Get independent tax advice if rental income or a future sale is involved.
Getting advice
The part we can help with is the remortgage on the home you live in: how much you may be able to raise against it given your credit history, and what that would mean for your monthly payments. If you plan to let the new property, the mortgage on it is a separate buy-to-let application that sits outside what this site covers. See remortgaging with bad credit for the wider range of situations we cover.
What may affect raising money to buy another property
| Factor | Why it matters |
|---|---|
| Amount you want to raise | A larger raise-capital request increases both your borrowing and your loan to value on your current home. |
| Maximum LTV for raise-capital with your credit profile | Some lenders set this lower for adverse credit than for a like-for-like remortgage. |
| Whether the new property is buy-to-let | Rental income can form part of how the new mortgage is assessed. |
| Credit history on the second application | The new property’s mortgage is a separate application with its own credit check. |
| Availability of specialist buy-to-let lenders | Fewer lenders may consider buy-to-let with adverse credit than mainstream residential lending. |
| Stamp duty land tax surcharge | An additional property usually attracts a surcharge on top of standard rates. Check current rates on GOV.UK. |
| Affordability across both mortgages | If you keep your current mortgage, both commitments need to be affordable together. |
These are general points, not lender rules. Each lender sets and changes its own criteria.
Information an adviser may ask for
You don’t need all of this to make an enquiry. It helps to know where to find it, because an adviser is likely to ask about most of it.
- How much you want to raise against your current home and what the new property costs
- Whether the new property is intended as buy-to-let, a second home or for family
- Your current mortgage balance, deal end date and any early repayment charges
- An estimate of your current property’s value
- Your credit reports from Experian, Equifax and TransUnion
- Proof of income and details of your regular monthly commitments
Frequently asked questions
Can I remortgage to buy a second property outright?
It can be possible if the equity you release covers the purchase price and costs. This still depends on your loan to value, affordability and credit history for the raise-capital remortgage on your current home.
Do I need a separate mortgage for the new property?
Often, yes, unless the equity you release is enough to buy it outright. A mortgage on the new property is usually a separate application, assessed on its own credit and affordability terms.
Is buy-to-let harder to get with bad credit than a residential mortgage?
It can be, since fewer specialist buy-to-let lenders may consider adverse credit compared with mainstream residential lending, though this varies by lender and the type of credit issue.
Will I pay extra stamp duty on a second property?
Usually, yes. An additional residential property typically attracts a stamp duty land tax surcharge on top of standard rates. Check the current rates and thresholds on GOV.UK, as they can change.