Buying a house is tough enough. Let alone remortgaging it to buy a second home. So we’ve put together a simple guide on how to remortgage to buy a second house.
It can seem like a dream come true to remortgage your home and buy a second one. But there are a few financial requirements that you need to be aware of before you can remortgage.
What is a remortgage and do you need to actually ‘refinance’?
When a homeowner wants to move to another property, they have two options. Either they will sell their current house and buy a new one. Or, they will keep their current house and take out a “remortgage” on it that will allow them to make monthly payments with money saved up for any eventuality.
A remortgage is when the homeowner takes out another loan on their property which is secured by the existing mortgage. The homeowner can use this money for any purpose but it has to be paid back over time like any other form of debt.
A remortgage is a mortgage loan on an existing property. The borrower can often remortgage to raise funds for several reasons, such as home improvements, moving house or consolidating debts.
No, you do not need to refinance to remortgage. A remortgage is the same as an extension on your current mortgage and it does not affect your credit score.
Can you remortgage to pay down a large deposit and lower the monthly payments?
In the U.K, the costs of houses purchased in the last few years are huge, and buying a new home is often not an option for many people because they don’t have enough money saved up. The answer for them is to remortgage their home and get a lower monthly payment or a larger deposit.
If you’ve been saving up for years and have finally been able to afford a second home, but can’t afford the monthly payments – don’t worry! There are some ways that will allow you to buy your dream home without spending as much. You can remortgage an existing property or borrow from friends or family through equity release.
The possibility of remortgaging to pay down a large deposit can provide an opportunity for people who are struggling to make monthly mortgage payments.
To remortgage, the borrower applies with the lender, specifying new terms that they would like their new mortgage to have. The lender then reviews the application for approval and will provide a new set of documents with the terms of this agreement.
It is important to note that while some lenders may offer reduced monthly payments or reduced interest rates for remortgaging, all lenders will increase the length of the loan until it reaches its maturity date.
Tips for buying a second house in the UK
A. Bad credit
The U.K is generally a stable place to purchase a home. So, how do you buy a house when you have bad credit? Here are some tips for buying a second home in the U.K:
1) Find an affordable location: A lot of homes are in more affordable locations in the U.K., like the Midlands or Devon, which are both cheaper than London and the South East. If you can’t afford to buy in these areas, then try renting there until prices drop or they become more affordable over time.
2) Get advice from experts: It’s worth talking to experts who know about sourcing property for people with bad credit – They’ll be able to advise on what might work best for your situation and help find properties that might be a good fit for your needs.
B. Single parent
Buying a home is a big commitment and it can be hard to balance with career and family life. However, it’s not impossible to buy your second home as a single parent in the U.K.
Buying a home can be challenging but more so when you are buying it on your own. Find out the tips on how to buy a second house as a single parent in the UK
1) Get Educated: There is no better way to ensure success than by having adequate knowledge of the subject at hand. Research your options about mortgages, rental prices, insurance premiums, and other considerations before making any decisions.
2) Set a Budget: Knowing how much you can afford will make it easier for you to find an affordable property that suits your needs and not go over budget with unnecessary features that may not suit your family’s lifestyle or suitability of the home with future plans for growth.
C. Low-income individual
If your monthly income will be low, here are a few encouraging tips:
1) The first tip for a low-income individual is that you should calculate the monthly interest payments and mortgage repayments to ensure you choose a home that is affordable for you. There are certain locations with lower-priced housing.
2) The second tip for low-income individuals is that they should not buy a house with an expensive mortgage if their income is not high enough to cover the repayments.
3) The third tip for low-income individuals is that they should check the type of discounts or help-to-buy options available on mortgages before committing to one lender.
Best websites for the lowest refinance rates instead of going to high street banks
The problem with high street banks is that they tend to charge high-interest rates and fees for their services.
This is why it is so important to look for other alternatives when you need a low-rate mortgage.
Firstly, you can go online to calculate your payment in a few simple steps.
Plus there are websites that can help you get a low rate that could be a more affordable choice for you.
How to estimate remortgage affordability, remember to figure out your payments
Did you know that the average first-time buyer spends over three years saving up for a deposit?
After getting a mortgage approval, it is important to calculate what your new monthly payments will be. To sum it up, the following are good steps to follow:
- Estimate your current monthly mortgage payment.
- Determine your current monthly income.
- Calculate the amount you can afford to pay every month by dividing your monthly income by twelve and then subtracting your current mortgage payment from that result plus other debt payments you have each month, including credit cards, car loans, student loans, etc.
- Compare the result to available remortgages and see which one suits your budget best.
- A good rule of thumb is that you should spend no more than 33% of your gross income on housing payments or other debt payments (including credit card payments).
- This means that if the gross income is £4,500 or less, any other debt payments they make every month like car loans, student loans, etc. will be subtracted from whatever they have leftover each month after their basic living expenses are taken care of.
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