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Second home mortgages - A guide

Need a mortgage for a second home? Get the right advice here.

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  • Second home mortgages – a guide

We hear from tonnes of customers who are looking for a mortgage to buy a second property. Many of them simply want to know whether this is possible, while others have been declined for a second home mortgage at least once in the past.

If either of those things applies to you, you’ve certainly come to the right place. Our comprehensive guide to 2nd home mortgages 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

What is a second home mortgage?

We often hear questions like “what is the definition of a second home mortgage?” and “how do second home mortgages work?” so we’ll start with the basics.

The term ‘second mortgage’ is used when a borrower who owns one property takes out another mortgage to buy a second home. The phrase is not to be confused with 2nd charge mortgages, which are second mortgages secured against a property you already own.

Can I get a mortgage on a second home?

Borrowers frequently ask us “can I get a second mortgage to buy another house?” and the answer to this question will depend on a number of factors. You may have passed the eligibility criteria for you existing mortgage no problem, but UK lenders tend to be much stricter when assessing applications for second homes. Here’s what will be different…

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  • 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 will 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 for a second residential property?

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 will likely 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 will 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 for a mortgage on a second property assessed?

This is determined in much the same way as it was for your original mortgage, in the sense that most UK providers will 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 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.

Second mortgage buy to let affordability

Most mortgage providers in this sector will be more interested in the viability of the investment. If the forecast rental income the buy to let property will generate is enough to cover the mortgage payments by 125-130%, most lenders will be satisfied, as long as you meet their other eligibility requirements and can put down enough deposit, of course.

Some mortgage providers will only offer you a 2nd property mortgage for a BTL if you have owned your existing home for at least six months, but 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.

How much deposit do I need to get a second home mortgage on a BTL?

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 85%. So, a minimum deposit of 15% is typically needed.

What else affects second home mortgage eligibility?

If you’re getting a mortgage on a second home, expect the lender to consider the following factors when assessing your eligibility…

  • Your income type:
    Those 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. Read more about self-employed mortgages here.
  • 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 adverse. 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. Read more here.
  • Your age:
    Getting a second mortgage for a second home can be tougher if you are 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. Read more about non-standard construction mortgages here.

If you’re buying a second property and need a mortgage, make an enquiry today. The brokers we work with can tell you more about how the above factors will impact on your application and the rates you qualify for. They have access to every lender on the market and can introduce you to the right one, based on your needs and circumstances.

How to go about getting a second mortgage for buying a house

Customers often ask us things like “how do I go about taking out a second mortgage to buy another house?” and the answer is quite simple.

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 in reach.

The advisors we work with have access to every second home mortgage lender on the market, so you should start by making an enquiry here. This is the best way to kick off your application process as you can rest assured that you will be paired with the right lender.

What is a second mortgage on your home?

We often hear 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 cannot 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.

Second home mortgages FAQ

Looking for a mortgage for a second property? This section will provide you with additional information based on the most frequently asked questions we hear about 2nd 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, 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, you will stand the best chance of landing a favourable deal.

What credit score do I need for a second home mortgage?

There is no one-size-fits-all qualifying credit score for any mortgage product in the UK, and keep in mind that 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 and whether you qualify for one may 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.

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 it’s a buy to let you’re after, the vast majority of BTL mortgages are handed out on this basis, but 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 that 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, and you will 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.

Specialist advice is essential for niche deals like this, so make an enquiry or check out our article on interest only residential mortgages here.

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, so to find one who will offer you a favourable deal when you already have a mortgage to finance will require a broker with access to every provider on the market.

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 go unoccupied, and if you plan to rent it out to third parties or not.

If you do 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 the nature of holiday rents is the often inconsistent rental income, and the effect this may have on your ability to repay the loan.

All the advisors working with us have access to the whole market, including lenders that specialise in holiday home mortgages, so make an enquiry and we’ll put you in touch with the experts.

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 more 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.

The thing to remember is that, with whole-of-market access, you will be able to find the most favourable and the most affordable second mortgage deals that are available to you

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 of 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 you will pay

Up to £125,000

3%

£125,001 – £250,000

5%

£250,001 – £925,000

8%

£925,001 – £1.5m

13%

Over £1.5m

15%

 

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 will 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 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 and 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.

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 with us here to get started.

Speak to a second home mortgages expert

If you’re still wondering “can I get a second mortgage to buy another property?” or would like to know more, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.

The experts we work with will discuss your options for a second home mortgage as well as offer insightful information, facts and helpful tips.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances.  – We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

Mortgages for second homes

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