Pete Mugleston | Mortgage AdvisorPete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.
Updated: 8th July 2019* | Published: 18th March 2019
We get lots of enquiries from people who are looking to buy a second property, or who may have struggled to get the financing for one.
The good news is that the mortgage experts we work with know the market inside out - they arrange second mortgages for people like you every day. That means they’re in the best place to guide you, and can help you to understand all the requirements for a second home mortgage.
Mortgage rules for second homes tend to vary per lender, but there are certain things that they all have in common. We’ll outline this below.
Second homes (which can include holiday homes, or homes that are only lived in during the week) are treated as second residences - not as buy to let properties. They’re calculated using your personal income for affordability.
What is the criteria for a second home mortgage?
Generally, second home mortgage requirements are tougher.
Because you’re already paying the mortgage on your first house, lenders will view you as a higher risk and make the conditions around your borrowing stricter. This is true even if you plan to make your new house your primary residence.
Second home mortgage affordability requirements
Your current mortgage will be considered when assessing the affordability of your new property. Your lender will need to make sure that you’ll be able to pay your second mortgage as well as your first.
How much of a mortgage can I get for a second home?
If you want to know how much you can much on a second home it’s worth bearing in mind that Income and affordability are assessed in the same manner as your first mortgage - with a range of income multiples on offer. Most lenders will cap their lending at 4x your earnings, though a handful will go all the way up to 6x.
Second home mortgage rules and restrictions are often strict. If you’re just about able to cover your current mortgage, it’s unlikely that the lender will progress your application.
What other second home mortgage requirements do lenders have?
In addition to their general affordability criteria, most second home mortgage lenders have the following requirements for borrowers....
Your LTV may need to be lower
Like your first mortgage, affordability criteria such as the loan to value will be taken into account.
Most lenders will look at both the loan to value on your current residence and the one you are looking to purchase. Some will expect a larger deposit for your second house purchase (25% or more) and others will want you to have at least 15-20% equity in your main residence.
That said, a few will ignore your current main residence, and only require a 15% deposit for the second property. A handful will be more lenient, accepting a 10% or even 5% deposit.
Your credit history could be a big factor
As you may expect, your credit history is also a factor. With second homes, there are fewer lenders offering mortgages at higher LTVs - as a result, bad credit can be more restrictive if you don’t have a large deposit or significant equity in your primary residence.
Of course, this doesn’t have to be a deal-breaker - the advisors we work with help people with bad credit all the time. Or make an enquiry.
The lender may want to know why you’re buying a second property, and will look at the the locations of both properties
Your provider will often want to know why you’re buying a second home - you may need to make a case for it. For example: your lender may require proof that, after the purchase of the second property, one of the properties will still serve as your main home.
Second home mortgage distance requirements
Second home mortgage distance requirements vary on a lender-per-lender basis, but many lenders don’t look so favourably on overseas second houses. They view currency fluctuations and complex foreign property markets as more risky.
The case for a second property becomes more favourable where the lender can see it will benefit the applicant.
So if your main residence is a family home 2-3 hours from your regular place of work they will appreciate the need to buy a flat close to your employer to stay in during the week.
Some won’t consider financing a UK property that is too far away from the first - unless you can prove that your work is near enough to your prospective second house.
Some lenders may require you to change your mortgage to a buy to let - although some are happy to let the mortgage continue as long as you inform them - failure to notify could be breach of contract and could result in the debt being called in.
Whether you choose to rent out your second home could affect your eligibility
Many people choose to let out their holiday homes for part of the year (not the same as buy to let, which is renting it out for all of the year).
However, some lenders won’t allow you to rent out your second property at all. Others may look at your application more favourably if you can make a case for renting out your second home. After all, you could offset the potential rental income against your mortgage payments.
You’ll have to pay Stamp Duty when you buy
By law, anyone buying a second property in the UK is subject to stamp duty, even if if the purchase price is under the £125,000 threshold.
This tax is due regardless of what you plan to do with your second property. This is applied at a higher rate for those purchasing a second property.
Get some expert advice about your second property purchase
Our customers consistently rate us 5 stars on Feefo because we offer access to expert brokers who:
Can offer you access to the whole of market
Know the best second home lenders for your unique circumstances
Can offer bespoke advice to second home buyers
Are fully OMA accredited
Have passed the LIBF training course
Speak to a second home mortgages expert
If you have questions about financing for a second property and want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0800 304 7880, or make an enquiry here.
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.
*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.
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 here...