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A Guide to Second Home Mortgages

No impact on credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: August 13, 2021

It’s absolutely possible for many people to take out a second mortgage to buy another property, but before you press ahead with this, it’s a good idea to take a pause and do some background reading as well as seek advice from a mortgage broker who specialises in this area.

In our guide to second home mortgages, you’ll learn how they work, whether you qualify for one, how to get the right advice about them and more. Plus, in our FAQ section, we answer the questions we hear most often from customers who are buying a second property.

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.

Can I get a mortgage on a second home?

This will depend on a number of factors. You may have passed the eligibility criteria for your existing mortgage without a problem, but UK lenders tend to be much stricter when assessing applications for second homes.

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.

Deposit requirements

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 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.

Affordability criteria

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?’

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 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%

You can find out whether it’s possible to add stamp duty to your mortgage loan in our standalone guide about this topic.

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.

Assessing affordability

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%.

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Other factors that affect eligibility

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.

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?

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. It’s 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.

Get matched with a second home mortgage expert today

Speaking to the right mortgage broker can potentially help you save time and money when it comes to getting a mortgage on a second home, and this is something we can help you with.

We offer a free broker-matching service that will quickly assess your needs and circumstances to pair you up with an advisor who specialises in second home mortgages. This will be somebody we’ve vetted and handpicked for you because of their track record helping customers just like you.

Call 0808 189 2301 or make an enquiry and we’ll set up a free, no-obligation chat between you and your ideal second home mortgage broker today.

FAQs

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.

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.

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.

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

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.

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.

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 buy another property and use the equity released to use as a 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.

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.

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.

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.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the 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 information 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.

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