Second home mortgages - A guide
Need a mortgage for a second home? Get the right advice here.
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It’s always a good thing when you’re looking for a second mortgage to buy another house.
A lot of people we hear from want to know if they will be eligible for a second home mortgage, whilst others are trying to find the right mortgage after having been declined by the first lender they approached.
If either of those things apply to you, you’ve come to the right place.
Our comprehensive guide includes the following topics:
- Second home mortgages explained
- Can I get a mortgage on a second home?
- Second home residential mortgages in the UK
- Getting a second home mortgage for buy to let purposes
- What else affects eligibility for a 2nd home mortgage?
- How to go about getting a second mortgage to buy another house
- How to get a second mortgage on your existing house
- Second property mortgages FAQ
- Speak to an expert on mortgages for second homes
If you’re short on time and prefer to talk to someone about arranging a mortgage for a second home instead of just reading about it, talk to one of the expert whole-of-market brokers we work with.
Call 0808 189 2301 or make an enquiry and we’ll match you with an advisor with the best experience to help answer your questions and find the right mortgage to suit your circumstances.
What is a second home mortgage?
A ‘second mortgage’ is used when a borrower who owns one property takes out another mortgage to buy a second home. This is not to be confused with second charge mortgages, which are second mortgages secured against a property you already own.
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Can I get a mortgage on a second home?
You can, so long as you meet the right criteria. UK mortgage lenders tend to be stricter when it comes to assessing applications for second homes because there’s a greater chance of the borrower being unable to pay if things don’t work out. Because of this, you’ll typically be offered higher interest rates and be required to put down a larger deposit.
Here’s what will be different…
- Affordability checks are more stringent and income requirements typically higher.
- Deposit requirements are usually higher.
- Bad credit can be more restrictive.
- Interest rates will likely be higher.
- The number of approachable lenders will be fewer.
- The lending decision may hinge on your ability to pay both mortgages at once.
In summary, if you’re applying for another mortgage because you’re buying a second home, you’ll have to go through all of the affordability and eligibility checks the lender carried out when they were assessing you for your first mortgage, except they’re likely to be stricter.
The lender will need to be confident that you’re capable of paying off two mortgages simultaneously and the first thing they’ll want to know is whether the second home you need a mortgage for is a residential property or a buy to let investment.
Getting a second mortgage on a residential property
When applying for a second home mortgage to buy a residential property, you’ll likely find that the lender’s affordability and eligibility checks are stricter than when you were purchasing your first home. This section will give you an idea of how stringent they are.
How much deposit will I need?
Most lenders will cap the loan to value (LTV) ratio on a mortgage for a 2nd residential home. The majority of them will only offer 75%, some will go up to 80%, others 85% and a handful will stretch to 90%, under the right circumstances.
With this in mind, the amount of deposit you’re likely need to need is between 25% and 10%, depending on the level of risk.
Certain mortgage providers will also set a minimum LTV requirement for your existing property which must be met before they’ll offer you a mortgage on a second home. Some want you to have at least 85% LTV, others 90% and a minority have no minimum.
How is affordability assessed?
Affordability on a second property is determined in the same way it was for your original mortgage.
Most mortgage providers in the UK cap their lending based on a multiple of your income. Some will lend you x4 your annual salary, others x5 and a minority will stretch to x6.
The only real difference is that the lender’s main concern will be whether your income is sufficient to cover payments for both mortgages at the same time.
To find out how factors such as bad credit, the property type and your employment capacity can affect your chances of getting a mortgage for a second home, jump ahead to the section titled ‘What else affects eligibility for a second home mortgage?’
Getting a second home mortgage for buy to let purposes
If the reason you’re getting a second mortgage to buy another house is for buy to let investment purposes, the lender will assess your affordability in a different way.
Most mortgage providers in this sector will be more interested in the viability of the investment.
As long as you meet all the eligibility requirements and the forecast rental income expected to be generated by the buy to let property is enough to cover the mortgage payments by 125-130%, most lenders will be satisfied. You’ll also need to meet the lender’s deposit requirements.
Some mortgage providers will only offer you a 2nd property mortgage for a BTL if you’ve owned your existing home for at least six months, Although some specialist lenders might be okay with less than that.
You might also come across lenders with minimum income requirements, especially for borrowers who are first-time landlords. Around £25,000 is standard.
Deposit size for a second home buy to let mortgage
Getting approved for a second home mortgage on a buy to let will also come down to the amount of deposit you’re able to stump up. Some lenders will cap loan to value (LTV) at 75%, others at 80% and a handful at 85%.
So, typically, you should expect to require a minimum deposit of 15%.
What else affects eligibility for a second home?
If you’re getting a mortgage on a second home, you should expect the lender to consider the following factors when assessing your eligibility:
- Your income type – borrowers in full-time employment carry the least risk to lenders, but getting a mortgage for a second property may still be possible through a specialist provider if you’re self-employed or make a significant sum through things like benefits, bonuses and commission.
- Your credit rating – getting approved for a second mortgage might prove more difficult than when you were taking out your first home, as some second mortgage lenders are stricter when it comes to lending to people with a history of adverse credit. However, specialist providers might take the severity of the credit issue and how long it has been on your file into account and take a more flexible approach to your application.
- Your age – getting a second mortgage for a second home can be tougher if you’re retired as some lenders won’t cater for borrowers over 75, others go up to 85 and a minority will lend to a pensioner of any age as long as they’re confident they can meet the mortgage payments during their retirement.
- The property type – if you’re hoping to get a mortgage for a second home that includes any non-standard construction elements (e.g. thatched roofs, timber frames) a specialist lender might be called for as some providers consider these buildings high risk.
If you’re buying a second property and need a mortgage, call 0808 189 2301 or make a quick enquiry.
We’ll match you with one of the brokers we work with, making sure they are experienced in arranging second home mortgages. They’ll be happy to answer all your questions and explain how the above factors might impact your application and the rates you qualify for.
How to get the best rates for a second mortgage
The easiest way to ensure you end up with the best rates is by having access to every lender on the market. That way, all of the most favourable deals you’re eligible for will be available to you.
The advisors we work with have access to every second home mortgage lender on the market.
Make a quick enquiry or call 0808 189 2301 to kick off your application process by letting one of the experts we work with pair you with the right lender first time round.
What is a second mortgage on your existing home?
People often come to us with this question and it’s important to clear up any confusion around this term. A second mortgage on your existing home is not the same thing as a second home mortgage for buying another property, nor is it the same thing as a remortgage.
So, what is a second mortgage on a home? Well, this is what is known as a homeowner loan or a second charge mortgage. They are loans secured against a property you own on a second charge basis and they effectively function like a second mortgage.
People often take homeowner loans when they need to raise capital but can’t, or do not wish to remortgage. Lenders can be flexible with these products, in terms of loan to value and bad credit, and some providers will lend up to x10 the borrower’s income.
Consult our dedicated article on secured loans for further information.
Frequently asked questions
Here are some frequently asked questions we receive about second home mortgages…
How hard is it to get a second home mortgage?
We often hear the question “how easy is it to get a mortgage on a second house?” and the answer will depend on your profile as a borrower and whether the lender thinks you’re capable of financing a second home mortgage along with your existing one.
The thing to remember is that a second home mortgage will likely be more difficult to get than your first mortgage was, because lenders’ checks are more stringent. Also, a higher deposit is often needed and providers can be less forgiving of things like adverse credit.
However, with specialist advice from a whole-of-market broker, like the ones we work with, you’ll stand the best chance of landing a favourable deal. Call 0808 189 2301 and we’ll match you with a broker with the right experience to help you get the mortgage you want.
What credit score do I need for a second home mortgage?
There’s no one-size-fits-all qualifying credit score for any mortgage product in the UK. Not all lenders ‘score’ credit, they simply ‘check’ for adverse.
Many of our customers want to know whether there are second home mortgages for bad credit borrowers, and the answer is yes. These are available from specialist lenders. Whether you qualify for one will depend on the severity of your credit problems, how long they’ve been on your file and how closely you meet the lender’s other requirements.
Call 0808 189 2301 or make an enquiry and we’ll match you with a broker experienced in helping customers with bad credit.
Can I get an interest-only second home mortgage?
It may be possible to get a second mortgage on an interest only property under the right circumstances. If you’re after a buy-to-let mortgage, the vast majority of BTL mortgages are handed out on an interest-only basis.
A residential interest-only deal may be harder to come by.
Your financial commitments to your original mortgage will further reduce the number of approachable lenders, but it may be possible to get an interest-only second home mortgage for a residential abode if you can prove you have a viable repayment vehicle.
This is basically a means to pay off the loan balance on the second mortgage at the end of the term. You’ll need to evidence this along with your ability to pay off your original mortgage as well as the monthly interest payments on the second home loan.
Can I get a self-build mortgage for a second home?
This might be possible, but specialist advice from a whole-of-market broker will be essential to find a favourable deal under such specific circumstances.
Self-build mortgages – which are offered to borrowers with the means and know how to build their own home (or at least oversee its construction) – are only offered by select lenders. To find a lender who will offer you a favourable deal when you already have a mortgage requires a broker with access to every provider on the market.
Call 0808 189 2301 and we’ll match you with one of the whole-of-market brokers we work with. The service we offer is free and there’s absolutely no obligation.
Can I get a second mortgage for a holiday home?
Yes, it may be possible. There are lenders who specialise in holiday home mortgages for properties in the UK and a smaller number who provide them for homes abroad.
If you own a property already and are looking to buy a holiday home elsewhere in the country, it may be possible to do so with another residential mortgage rather than incurring the additional costs of a commercial deal.
Not all lenders accommodate this, and for those that do the criteria changes depending on how often the property will be unoccupied, and if you plan to rent it out to third parties or not.
If you plan to rent it out, then it’s possible, but certain lenders place restrictions on the maximum amount of time you can do this (often 3 months of the year). Not all lenders are happy to consider these applications because the nature of holiday rents means the rental income is often inconsistent, and this may affect your ability to repay the loan.
All advisors we work with are whole-of-market, so they have access to all the lenders who specialise in holiday home mortgages, make an enquiry or call 0808 189 2301.
Is refinancing my mortgage to buy a second home possible?
It might be, as long as you hold sufficient equity in your property and are eligible for a second mortgage.
Some borrowers release equity to cover the deposit on a second home. When this is done for buy to let investment purposes, it is known as a let to buy mortgage – although these deals are specifically aimed at customers who wish to convert their current residence into a BTL, rent it out and move to a new primary home.
There are also lenders who may potentially offer you favourable rates if you’re refinancing a second home mortgage – make an enquiry to speak with one of the specialist second home mortgage brokers we work with about this.
What debt to income ratio (DTI) is needed for a second home mortgage?
Your debt to income ratio will tell the lender how much capital you have after your monthly outgoings have been deducted. It is usually expressed as a percentage but there is no fixed rule on what lenders will and won’t accept for second mortgages.
While one might think your ratio is affordable, another might look at your overall profile and consider you high risk.
Whole-of-market mortgage brokers, like the ones we work with, will be able to find the most favourable and the most affordable second mortgage deals available to you. Call 0808 189 2301 to find out what second home mortgage you could get.
Will I pay Stamp Duty on a second home mortgage?
Yes, and since the government introduced changes to Stamp Duty in 2016, those buying a second home or buy to let property must pay an additional 3% on each band.
The table below shows how much extra you will need to pay for each bracket…
|Bracket||How much extra will you pay|
|Up to £125,000||3%|
|£125,001 – £250,000||5%|
|£250,001 – £925,000||8%|
How long are mortgage terms for second homes?
They are no different than mortgages for first homes.
Around 25 years is standard in the UK, but taking out a longer deal means lower monthly repayments.
However, you’ll pay less interest if you take a shorter term and therefore the overall cost will be lower.
Which term you will be eligible for all depends on how much you can afford to pay each month.
Can I get a second home mortgage anywhere in the UK?
As long as you pass the lender’s eligibility and affordability requirements, it’s possible to get a second home mortgage in most parts of the UK.
However, some lenders place postcode restriction outside of England – so if you’re looking for a mortgage for a second home in Scotland, you might struggle if the property is in the Highlands or off the mainland.
There are also similar postcode restrictions for second home mortgages in Northern Ireland, so seeking specialist advice is essential if you’re after a home in these locations.
Can I get a second home mortgage overseas?
It may also be possible to get a mortgage for a second home abroad – these can be arranged through:
- UK-based lenders with an international reach.
- International lenders.
- Local lenders in the country where you’re hoping to buy.
However, this is a niche sector of the mortgage market, so specialist advice from a whole-of-market broker is recommended. Call 0808 189 2301 to talk to one of the experts we work with.
Is a second home mortgage tax deductible?
Customers who have purchased another property for investment purposes (e.g. buy to lets, holiday home etc) occasionally ask us whether it’s possible to get mortgage interest or tax deduction for their second home.
If you rent a property out, the income you make from it will be taken into account and taxed based on your tax position, i.e. which earnings bracket you fall into.
For most borrowers, interest and tax is not deductible on a second property mortgage. Buy to let landlords enjoyed this privilege until 2017 when new guidelines introduced by the Prudential Regulation Authority changed the rules on this.
The only time deducting mortgage tax or interest on a second home is possible is when the property was bought through a Limited Company. If this is the case, these costs can sometimes be claimed as an expense.
You should seek tailored advice from an accountant if you need more information about the tax implications of taking out a second home mortgage.
Can I apply for a second home mortgage online?
Yes, there are lenders and brokers who would be happy to handle the bulk of your application online. Make an enquiry to get started.
Speak to a second home mortgages expert
The experts we work with will discuss your options for a second home mortgage as well as offer insightful information, facts and helpful tips.
Call 0808 189 2301 or make an enquiry. All the advisors we work with are experienced whole-of-market brokers with access to mortgage lenders across the entire UK.
The service we offer is free and there’s absolutely no obligation either.
Second Home Mortgage Information
Looking for specialist advice? Read through our articles about different second home mortgages, and how best to prepare yourself to find the right mortgage for you.