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Getting a Second Charge Mortgage on Buy-to-Let Property

Find out everything you need to know about how to secure a second charge mortgage

No impact on credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: August 26, 2021

A secured loan or second charge mortgage can be a perfect financial solution if you’re a landlord wanting to invest in another property, consolidate debt or when you need to release some cash for property renovations or improvements.

A buy-to-let (BTL) secured loan can also be a really quick way to raise a cash deposit for your next buy-to-let property.

Read from top to bottom for a comprehensive guide to secured loans for buy-to-let property, or click a link to jump straight to the information you’re after:

The advisors we work with are experts when it comes to securing second charge mortgages on buy-to-let properties.

Call 0808 189 2301 or make an enquiry for a free, no-obligation chat and we’ll match you with an expert who can answer your questions and help you find a lender with the right deal for your circumstances.

How does a second charge mortgage work?

A second charge mortgage is a loan secured against the equity in your property, essentially giving you two mortgages.

Many people refer to this type of loan as a second mortgage, secured loan and, sometimes, a homeowners loan. This kind of financial arrangement comes with some distinct advantages for those looking to release equity from a buy-to-let property or a portfolio of BTL properties.

Why choose a buy-to-let secured loan?

A BTL secured loan has some distinct advantages if you want to release some equity from a buy-to-let property you have.

These include:-

  • Maintaining a great existing mortgage rate – If for some reason, your credit rating isn’t as good as it was, this could mean that a secured loan would be a better alternative to having to remortgage at a potentially higher interest rate on your entire mortgage.
  • Avoiding early repayment charges – Remortgaging could incur an early repayment charge. Using a buy-to-let secured loan would mean no early repayment charge as your mortgage is left intact. In which case, approaching a ‘buy to let’ second charge lender could make more financial sense. To find out if an early redemption charge might apply to you, check your mortgage terms or speak to your lender.
  • Might be easier to qualify for – Second charge loans on buy-to-let property can sometimes be easier to obtain for those with adverse credit ratings. If you’ve been declined a main mortgage due to poor credit, income or affordability issues, a second charge mortgage might be the answer.
  • Have you considered a personal loan? – Personal loans may be a good alternative if you are looking to borrow a small amount of cash over a short period. Depending on your credit rating, rates can be quite attractive.

You could borrow more with a secured loan on a buy-to-let property than you could using an unsecured personal loan, which is capped at £25,000. Unsecured loans are also more accessible than a first charge mortgage, which often come with tighter affordability restrictions, so using a personal loan may not suit everyone’s requirements.

Talk to an expert about your options and let them help you find the right financial solution at the best available price, based on your circumstances. Make an enquiry and we’ll match you with one of the expert buy to let brokers we work with.

All the experts we work with have whole-of-market reach with access to mortgage lenders across the entire UK. They have to knowledge and resources to ensure you get the best available rates on a product which works for you.

What can you use a BTL second charge mortgage for?

Many buy-to-let investors use a 2nd charge mortgage to get a buy-to-let mortgage secured on existing property to start or extend a property portfolio.

However, they are also a quick and easy way to take advantage of an investment opportunity you didn’t plan for.

If you simply need some extra cash for home improvements or even a wedding or a holiday, and have the necessary equity available and meet lenders’ criteria, there’s no reason you won’t be able to get a secured loan, to release cash for anything you need.

Who can apply for a second charge buy-to-let mortgage?

Almost any property-owning individual can apply for a second charge buy-to-let mortgage, so long as they have the equity (and income) required.

It’s even possible to have 3rd and 4th charge mortgages if your situation warrants it.

Can I get a secured loan on a buy-to-let property?

It is possible to take out a secured loan on a buy-to-let property. However, while it’s possible to borrow up to 100% of any equity in your home when using rental property as security, most lenders will limit the amount you are able to borrow.

Every lender has different criteria, but if you qualify by satisfying their criteria for affordability, you should be able to find a lender willing to offer you a secured loan against your buy-to-let.

Make an enquiry and we’ll match you with one of the expert mortgage brokers we work with. All the experts are whole-of-market brokers who will help you find the right mortgage as the best available price.

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How much can I borrow on a second charge mortgage?

A second charge mortgage is assessed in a very similar manner to a normal first charge mortgage, lenders will assess:

  • Your income
  • Expenditure
  • Available equity
  • Credit history

You’ll still need to prove your income and ability to make the monthly repayments, but the amount a lender will lend will be secured against the equity in your home.

The equity in your home is the percentage of the property owned outright by you. For example, if your house is valued at £200,000 and you have a mortgage of £150,000, then you have £50,000 equity.

Equity can increase as the property’s value increases, and as your mortgage gets paid down.

Most lenders will let you borrow as little as £10,000. The higher the equity in your property, the more your lender will be inclined to lend.

Maximum affordability

The traditional thought behind buy-to-let mortgages is that they are totally self-funding.

This is because the mortgage is based on the rental income of the property, which is then used to calculate the max loan by each lender in their own way. Some lenders’ calculations are more generous than others.

However, the reality is that rental payments can vary depending on location and may suddenly stop for any number of reasons, including failure to find or replace tenants, the damage that might make the property uninhabitable for a time or market fluctuations in rent.

The maximum you can borrow for a buy-to-let mortgage is still directly linked to the amount of rental income you anticipate receiving.

If there’s a shortfall, some lenders do permit you to use your earned income in the affordability calculations.

However, lenders must carry out stringent affordability assessments, specific to buy-to-let mortgages, in order to safeguard both themselves and the applicant.

What is the maximum loan to value?

Most lenders cap lending to a loan to value (LTV) of around 75% for raising capital on buy-to-let property. However, some lenders consider up to 80% and a handful will go up to 85% in the right circumstances.

There are also some non-equity lenders offering higher rate deals to homeowners and landlords over and above 100% LTV. If this was affordable for you, it may be an option if you really need the cash.

There are also some lenders who may consider a further advance on buy-to-let mortgages, as long as it does not exceed a certain loan-to-value rate.

If you are interested in looking at higher LTV borrowing on a buy-to-let property, perhaps over and above 100%, make an enquiry and we’ll refer you to one of the experts we work with for the right advice.

Buy-to-let secured loan rates

The rates on buy-to-let 2nd charge mortgages are comparatively low, as are the buy-to-let charges, so they can make for a pretty cost-effective financial alternative to other types of unsecured loans.

The rate you will actually be able to get will depend on your situation. Borrowers with a clean credit history borrowing an amount considered ‘easily affordable’ at a low loan-to-value (LTV) will have a choice of competitive rates due to the low risk nature of the application.

For borrowers with heavy, or recent, adverse credit issues looking to borrow a higher LTV will, more than likely, be offered higher rates to compensate for the risk the lender will be taking.

Even if you do have a weak credit record, there are specialist lenders who will consider your application. Make an enquiry for a free, no obligation chat and we’ll match you with an expert with experience in arranging second charge mortgage for customers in similar circumstances.

All the experts we work with are whole-of-market brokers with access to lenders across the entire UK market. They have the tools, knowledge and experience to know which lender is likely to offer you the best deal, based on your circumstances.

How to get a second charge mortgage on a BTL

As with a regular mortgage, you apply for a secured charge mortgage from a lender, either directly or through a broker. The lender will value your property as a suitable security and assess your application in terms of affordability, credit history etc.

Using a new lender for the additional borrowing

Remember, you don’t have to take a second charge mortgage on your buy-to-let from your original mortgage provider. In fact, by having access to the whole market, one of the expert advisors we work with could well be able to get you a better deal with a different lender, whilst still leaving your current mortgage intact.

Speak to an expert for advice

Before you consider taking out a second charge mortgage on your buy-to-let, it’s important to get the best possible advice. Call 0808 189 2301 or make an online enquiry for a free, no obligation chat.

We’ll match you with one of the experts we work with who will be happy to answer all your questions. They will use their whole-of-market reach to connect you with the right lender offering the best rate deals on the product which best suits your needs and circumstances.

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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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