Pete Mugleston | Mortgage AdvisorPete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.
Updated: 4th October 2019 *
If you’re looking to buy a second property or home, or are struggling to get the financing to buy, you’ve come to the right place.
The mortgage experts we work with know the market inside out and arrange second mortgages for customers every day.
All the brokers we work with are whole-of-market brokers and have access to mortgage lenders across the whole UK, which 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 depending on lender criteria, but there are certain things that they all have in common. This is just one of the areas we cover in this article, read on to learn about:
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’s the affordability criteria for a second home mortgage?
Generally, second home mortgage requirements are tougher than lender requirements for first, or primary mortgages.
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.
Your current mortgage will be taken into consideration when a lender assesses 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.
If you want to know how much mortgage you can borrow for a second home it’s worth bearing in mind that Income and affordability are assessed in the same manner as your first mortgage.
There’s a range of income multiples on offer, although most lenders will cap their lending at 4x your earnings. A minority of lenders will go as far as 6x but this is rare and relies on you having very particular circumstances.
Second home mortgage rules and restrictions are often strict. If you’re only just able to cover your current mortgage, it’s unlikely that any lender will progress your application.
What other requirements do mortgage lenders have for second homes?
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 (LTV) will be taken into account.
Most lenders will look at both the loan to value on your current residence and the one you’re 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 altogether, 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. Call 0808 189 2301 or make an enquiry and we’ll match you with an advisor who can answer all your questions and help you find the mortgage you want.
The lender may want to know why you’re buying a second property
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.
The distance between your existing and second home will be looked at on a lender-by-lender basis. Many lenders don’t look so favourably on overseas second houses as they view currency fluctuations and complex foreign property markets as being more risky.
The case for a second property becomes more favourable when the lender can see how it will benefit the applicant.
For example, if your main residence is a family home 2-3 hours from your regular place of work they’ll appreciate the need to buy a flat close to your employer to live in during the working week.
Some won’t consider financing a UK property that is too far away from your first property, unless you can prove that your work is close enough to your prospective second house.
Some lenders may require you to change your mortgage to a buy-to-let mortgage, although some are happy to let the mortgage continue as long as you inform them. Failure to notify a change in use could be a breach of contract result in the debt being called in. So make sure you get the okay from your mortgage broker if you’re trying to change the way you use the property.
Renting 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. If you can make a case for renting out your second home, some lenders may look at your application more favourably. After all, you could offset the potential rental income against your mortgage payments which could reduce the perceived risk for a mortgage lender.
Second home stamp duty
By law, anyone buying a second property in the UK is subject to stamp duty, even 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 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 mortgage expert
If you want financing for a second property and would like to speak to an expert for the right advice, call 0808 189 2301 or make a quick online enquiry for a free, no-obligation chat.
We’ll match you with an expert in second home mortgages who will be happy to answer all your questions and help find you the best mortgage deal based on 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...