Lets look at a typical example, you purchased your home 10 years ago since then you have kept up with your repayments and the property has risen in value, let’s say you bought it for £100,000 on a 20 year term and you have been paying around 3% interest.
You would now owe approximately £57,000, during this time your property has also risen in value and is now worth £120,000, this would now leave you with £63,000 equity in your property. In these circumstances it is now possible to re-mortgage your home for more than the £57,000 currently owed thus releasing equity that had built up in the property.
A client who wished to invest in a Buy to Let property or a holiday home could re-mortgage for say £77,000 and use the extra £20,000 as deposit towards the next purchase.
The best thing to do is speak to a mortgage broker who can guide you through the process. Our brokers will assess your situation and find the best option for your personal circumstances.
You really need to do your sums and be 100% sure that you will be comfortable with the repayments on both your new increased residential mortgage and the repayments on the second property, even if it is a buy to let it would be foolish to assume that you would achieve continuous occupation be paying tenants. You must allow for void periods and be comfortable with the repayments no matter what circumstances arise.