Using Additional Property Security to Fund a Purchase

Did you know that you may be able to purchase another property without using a large cash deposit, even if you don’t have enough savings available?

If you already own a property with equity in it, you could potentially use that property as additional security to help fund your next purchase.

This approach is particularly useful for property investors, developers and homeowners who have substantial equity tied up in property but would prefer not to sell their existing assets or use their available cash.

At GPS Financial, we arrange bridging finance for borrowers across the UK, including transactions where additional property security can help unlock greater borrowing potential.

But how does it work, and could it allow you to borrow 100% of the purchase price?

What Does Using Additional Property as Security Mean?

When you apply for property finance, the lender usually takes a legal charge over the property you’re purchasing.

The amount you can borrow is typically determined by the property’s value, the lender’s maximum loan-to-value (LTV) ratio and your individual circumstances.

For example, if you’re purchasing a property for £300,000 and a lender offers 75% LTV, the maximum loan secured against that property would ordinarily be £225,000.

You would need to fund the remaining £75,000, together with any purchase costs and fees.

However, if you own another property with sufficient available equity, a lender may be willing to take additional security over that property too.

This provides the lender with more security for the borrowing and could allow them to advance a larger amount towards your purchase.

In some circumstances, this can mean funding the entire purchase price without requiring a traditional cash deposit.

How Does Additional Property Security Work?

Let’s look at a straightforward example.

Imagine you’re purchasing an investment property for £250,000.

You also own another property worth £400,000, with an outstanding mortgage of £100,000.

That means you have £300,000 of equity in your existing property.

A specialist lender may be prepared to consider both properties as security for a bridging loan.

Rather than assessing the new purchase in isolation, the lender considers the combined security available, existing borrowing and the overall risk.

Example: Using Two Properties as Security

	Property value
Property you’re purchasing	£250,000
Existing property	£400,000
Combined property value	£650,000
Existing mortgage	£100,000
Proposed bridging loan	£250,000
Total borrowing secured	£350,000

In this simplified example, total borrowing represents approximately 53.8% of the combined property values.

Although the bridging loan could potentially cover 100% of the £250,000 purchase price, the lender would have security across properties worth considerably more than the amount borrowed.

This is why 100% purchase price funding is not the same as borrowing at 100% LTV across the combined security.

Actual lending decisions depend on valuation, existing lender consent, charge priority, affordability where relevant, fees, interest and the lender’s criteria.

For more information, see our guide to 100% LTV bridging loans.

Can You Buy a Property Without a Cash Deposit?

Potentially, yes.

One of the main advantages of using additional property security is that it may reduce or eliminate the need for a cash deposit towards the purchase price.

This can be particularly useful when you have found an investment opportunity but don’t want to release cash from other investments.

However, there are several important considerations.

Even where a lender agrees to fund the full purchase price, you may still need funds for:

• Stamp Duty Land Tax or other applicable property transaction taxes.

• Solicitors’ fees and disbursements.

• Valuation fees.

• Lender and broker fees.

• Refurbishment costs.

• Interest or other finance costs not covered by the facility.

Some costs may be included within the loan where the lender’s criteria and available equity permit, but this should never be assumed.

The amount released to complete your purchase can also be lower than the gross loan facility if interest and fees are retained or deducted.

At GPS Financial, we’ll help you understand the total funding requirement, not simply the headline purchase price.

What Types of Property Can Be Used as Additional Security?

Depending on the lender, several types of property may be considered as additional security.

Your existing residential property

If you own your home and have sufficient equity, it may be possible to use it as additional security.

However, securing borrowing against your home creates a risk of repossession if you cannot repay. The proposed borrowing must also be assessed under the applicable regulatory requirements.

Buy-to-let properties

Landlords with equity in their rental properties may be able to use one or more of those assets to support another purchase.

This can be particularly useful for investors who want to expand their portfolios without selling existing properties.

Our buy-to-let mortgage services can also help landlords explore longer-term refinancing options once their purchase is complete.

Mortgage-free properties

A property owned outright can be particularly attractive as additional security because there is no existing mortgage reducing the available equity.

However, the amount a lender is prepared to advance will still depend on the property’s value, type, condition and the overall transaction.

Commercial and semi-commercial properties

Some specialist lenders will consider commercial or mixed-use property as additional security.

The property’s use, tenancy arrangements, valuation and marketability can all influence the lending decision.

Not every lender accepts every property type, which is why selecting the right lender is important.

Can You Use a Property That Already Has a Mortgage?

Yes, potentially.

You don’t necessarily need to own your existing property outright to use it as additional security.

What matters is how much usable equity remains and whether the lender can obtain an acceptable legal charge.

For example, if your property is worth £500,000 and your outstanding mortgage is £200,000, you have £300,000 in equity.

However, that doesn’t mean a lender will automatically allow you to borrow the full £300,000.

They will assess the existing mortgage, their permitted LTV, the property’s valuation and whether the current lender’s consent or a different charge arrangement is required.

Some lenders may accept a second charge bridging loan, allowing the existing mortgage to remain in place.

Others may require a first charge or the existing borrowing to be refinanced.

The most suitable arrangement depends on the individual transaction.

Why Do Property Investors Use Additional Security?

Property investors often have considerable wealth tied up in their portfolios but relatively limited cash available for new purchases.

Using additional security may allow them to access new opportunities without selling existing assets.

Purchasing investment properties

An investor might use equity in an existing rental property to help fund the purchase of another buy-to-let.

Once the new property is ready for occupation and meets the lender’s criteria, the bridging loan could potentially be repaid through longer-term mortgage finance.

Purchasing properties at auction

Auction purchases often have tight completion deadlines.

Bridging finance can provide a short-term funding solution where a conventional mortgage cannot be arranged within the required timescale.

Using additional security may help reduce the amount of cash needed to complete.

Funding refurbishment projects

If you’re purchasing a property that requires substantial renovation, a conventional mortgage may not be available immediately.

A refurbishment bridging loan may allow you to acquire the property, complete the necessary works and refinance once it becomes suitable for longer-term lending.

Additional property security can sometimes help fund a larger proportion of the acquisition costs.

Buying before selling an existing property

Homeowners may also consider additional security when they want to purchase their next home before their current property has sold.

This is sometimes known as chain-break bridging.

Rather than losing a purchase because your buyer hasn’t completed, a bridging loan may allow you to proceed while your existing property remains on the market.

Our article, Buying a House Before Selling Yours: How Chain Break Bridging Works, explores this type of transaction in more detail.

Can Additional Security Help With an Unmortgageable Property?

Yes, potentially.

Some properties cannot initially qualify for a conventional mortgage because of their condition, construction or other issues affecting their suitability as security.

Examples include properties without functioning kitchens or bathrooms, properties requiring major structural repairs and certain non-standard construction properties.

A specialist bridging lender may consider the purchase, particularly where there is a clear plan to address the issues and repay the loan.

Additional security could help strengthen the overall application.

Our article Can You Get a Bridging Loan on an Unmortgageable Property? explains how specialist lenders assess these circumstances.

What Are the Risks of Using Additional Property Security?

Although using another property as security can create opportunities, it also increases the assets exposed to the borrowing.

If you fail to repay the loan, the lender may be able to enforce its security against more than one property.

This is particularly important where your family home is being offered as additional security.

Other considerations include:

• Increased exposure: Multiple properties may be at risk if the loan defaults.

• Interest and fees: Bridging finance is short-term borrowing and can be more expensive than a conventional mortgage.

• Valuation risk: A lower-than-expected valuation may reduce the amount available.

• Refinancing risk: Your planned mortgage or sale may not complete when expected.

• Existing lender restrictions: A mortgage lender may not consent to additional borrowing secured against its property.

• Legal complexity: Multiple charges and security properties can make a transaction more involved.

A credible repayment strategy is essential before taking out any bridging facility.

If you’re concerned about a loan approaching maturity, our article What Happens When a Bridging Loan Reaches Its Repayment Date? explains the potential consequences and refinancing options.

How Much Does Bridging Finance Cost When Using Additional Security?

The cost depends on the amount borrowed, loan term, security offered, property type, borrower circumstances and lender.

Typical costs to consider include:

• Monthly interest.

• Lender arrangement fees.

• Valuation fees for the security properties.

• Legal fees.

• Broker fees, where applicable.

• Exit or early repayment charges, if applicable.

At GPS Financial, our bridging broker fee is no more than £995, and in some circumstances we may waive it.

We’ll explain the applicable charges so you understand the overall cost of the proposed finance.

For a more detailed example, see our article How Much Does a £200,000 Bridging Loan Actually Cost?

What Happens When You Want to Release the Additional Security?

An important part of arranging finance against multiple properties is understanding how and when each property can be released from the lender’s security.

For example, you might purchase a property using a bridging loan secured against both the new purchase and an existing rental property.

Once the purchased property has been refurbished, you may plan to refinance it onto a long-term mortgage.

The proceeds could then repay the bridging lender, allowing the lender’s charges over both properties to be released.

However, releasing security is subject to the terms of the loan agreement and the lender receiving the required repayment.

Some lenders may permit a partial release of security during the term, subject to conditions and a sufficient reduction in the outstanding loan.

It’s important to establish the intended exit strategy and security release arrangements before committing to the finance.

How GPS Financial Can Help You Use Additional Property Security

At GPS Financial, we work with property investors, developers and homeowners who need specialist funding solutions that aren’t always available through traditional mortgage lenders.

With whole-of-market access to specialist property finance lenders, we can assess your available equity and explore how additional security might help fund your next purchase.

We can help with:

• Bridging loans using multiple properties as security.

• Potential 100% purchase price funding.

• First and second charge bridging arrangements.

• Buy-to-let and portfolio purchases.

• Property refurbishment and development funding.

• Short-term finance for time-sensitive purchases.

• Refinancing and exit strategies.

We also understand that property finance can become complicated when multiple properties, lenders and solicitors are involved.

Our aim is to make the process as straightforward as possible, explaining your options clearly, keeping you informed and maintaining regular communication with everyone involved to help your transaction progress smoothly.

We’ll be realistic about what can be achieved and ensure you understand the costs and risks before proceeding.

Frequently Asked Questions

Can I use my house as security to buy another house?

Potentially, yes. If you have sufficient available equity, a lender may consider taking security over your existing home to help fund another property purchase. Your circumstances and the applicable lending regulations will determine what is possible.

Can I get a 100% bridging loan using another property?

Some specialist lenders will consider funding the full purchase price where additional property security provides sufficient overall equity. Approval depends on the lender’s criteria, valuations and repayment strategy.

Do I need to own the additional property outright?

No. Some lenders accept properties with existing mortgages, provided there is sufficient equity and an acceptable legal charge arrangement can be established.

Can I use more than two properties as security?

Potentially, yes. Some specialist lenders consider multiple security properties, particularly for experienced investors and portfolio landlords.

Can I use additional security to fund an auction purchase?

Yes, subject to lender approval and the completion timescale. Additional security may help increase the available borrowing for an auction purchase.

What happens to my other property when the bridging loan is repaid?

Once the loan and all amounts due have been repaid, the lender’s legal charges can normally be discharged through the appropriate legal process.

Could Your Existing Property Help Fund Your Next Purchase?

You may have more borrowing options than you realise if you already own property with available equity.

Whether you’re purchasing another investment property, buying at auction, funding a refurbishment or trying to complete a purchase without a large cash deposit, additional property security could provide a solution.

At GPS Financial, we’ll look at the properties you own, the equity available and what you’re trying to achieve before exploring suitable lending options.

Call us on 029 2267 7707 or contact GPS Financial to discuss your next property purchase.