Applying for a Second Mortgage

Here, we examine the process of applying for a second mortgage and the requirements you may need to meet for a successful application. We also identify the maximum amount you can borrow, which lenders offer them, and where you can seek guidance during the process.

Can you get a second mortgage?

Yes, you can get a second mortgage for another house if you meet lender criteria. They’ll assess if you can afford both mortgages by looking at your income, debt-to-income ratio, and credit history. Significant equity in your first home and a strong financial history enhance your eligibility.

A second mortgage is separate from your first, so you would have two different monthly repayments. This means you don’t have to have both mortgages with the same lender (even if the second loan is for your current home).

Second mortgages can be perceived as a higher risk to many lenders. As a result, they will often charge you a higher interest rate, particularly with buy-to-let mortgages – a common second mortgage type. It’s important, therefore, to account for these extra associated costs. An experienced broker would be able to help outline what these could be.

Scenarios where you can get a second mortgage

Why you want a second mortgage will affect the type of product you can get and how much you can afford.

Common scenarios are:

Second properties

You may want another property because:

• You already have one with an ex-partner but don’t want to exit your original mortgage
• You are buying a holiday/second home

You’ll need a residential mortgage for these purchases, with mortgage providers often requiring you to:

• Be between their age parameters (typically 21-70 years old)
• Have at least 10% equity, if not more (some lenders may require a minimum of 25-35% for second mortgages)
• Have a suitable source of income

Lenders will determine how much you can borrow by looking at your income and your outgoings. If you want to purchase another property as a holiday home, lenders will usually run an affordability assessment to see whether you can afford the second lot of repayments.

If you have a property with an ex-partner, your outgoings could likely be quite high if you are still paying for some of your original mortgage. Be prepared; that could lessen how much you can now borrow.

Buy-to-let (BTL)

If you are buying another property to rent out, you’ll require a BTL mortgage.

To be eligible, you need to meet specific criteria:

• Sufficient rental income to cover the mortgage repayment
• Lenders can only offer mortgages to those over 21 and often have an upper limit of 70, though some may go higher

You’ll also often need to pass affordability tests. BTL mortgages usually mean looking at rental income to see whether it more than covers the mortgage repayments. Mortgage providers won’t usually look at your income, though some may consider it if you want to increase your loan amount.

Second charge mortgage

If you simply want to access some of the equity in your property, you can take out a second-charge mortgage. Both original and second-charge mortgages are secured against the property and don’t have to be with the same lender. If you do not meet your repayments, your lenders can then sell the property to repay the debt. When this occurs, the original mortgage is repaid first.

The more equity you have, the more you can borrow. A second-charge lender will determine your affordability based on your income level, credit rating, and age.

How to get a second mortgage

Your first step should be to find a specialist mortgage broker with experience in this area. This will boost your chances of getting approved at the best terms available.

Using our broker-matching service, you can speak directly with the right broker by simply making an enquiry online.

They’ll be able to help with:

• Readying all the necessary paperwork. Suppose you’re applying for a second mortgage. In that case, you’ll need to provide evidence – in the form of payslips or certified accounts (if you’re self-employed) and bank statements – that you can comfortably afford two monthly mortgage repayments.  
• Downloading and optimising your credit reports. You can start your free trial by clicking the link and reviewing your credit records immediately. Removing any inaccurate or outdated information will avoid unnecessary rejections by a lender. 
• Finding the right lender and securing the best deal for you. An experienced broker can quickly identify lenders who will consider applications for second mortgages more favourably.

How much can you borrow if you already have a mortgage?

Maximum amounts depend on the type of mortgage you need and your lender’s specific criteria.

However, to give an idea:

Residential mortgage amount:

Loan amounts for this type of mortgage depend on the equity in your first property, any separate deposit and income. Lenders usually cap mortgage amounts at 70-80% loan-to-value. Many providers will lend at 4-4.5 times your salary, but some may go to 5 times, if not higher, in rare instances.

Buy-to-let mortgage amount:

There’s no strict limit on the maximum amount you can borrow, but mortgage providers will want to ensure that your rental income is at least 125% of your monthly interest payments. It could be more depending on the provider, but it can vary hugely. For providers who require 125%, an example would be: if your mortgage interest payments are £1,000 per month, your rental income would need to be at least £1,250 a month.

Second charge mortgage amount:

These loans depend on the equity built up in your home. If you have a house worth £300,000 and you have £200,000 left on your original mortgage, you have £100,000 equity from which a lender will allow you to borrow against.

The exact additional amount you can borrow will depend on the lender and their criteria. It’s unlikely you could borrow 100% of that amount, but there may be a few specialist lenders who could potentially do this.

Which lenders consider second mortgage applications?

Here are a few potential lenders for each common scenario requiring a second mortgage – however, these are subject to change.

• Second properties: Leek United Building Society, Progressive Building Society, Beverley Building Society
• Buy-to-let: Penrith Building Society, Leeds Building Society, Keystone
• Second charge mortgage: These mortgages typically require specialist lenders for which you’d need a broker. Some lenders like NatWest and Santander will only lend to existing mortgage customers. However, the fintech sector is broadening the market, with some lenders such as Paper Money or Revolut becoming potential second-charge mortgage lenders.

When is it not a good idea to get a second mortgage?

The only time you’d need a completely new and separate mortgage is when purchasing a second property. 

In all other circumstances—particularly if you want to extend the borrowing on your existing home—other alternatives should be considered first, such as a remortgage (if your existing deal has ended) or a second-charge mortgage. 

Also, if the amount you need to borrow is quite small (below £25,000), you can consider arranging a personal loan that can be paid off sooner. This avoids the risk of paying back more interest over a longer period. 

Speak to a broker experienced in second mortgages

Getting the right product for your second mortgage ensures that the mortgage is affordable and for the amount you need. Yet, finding that product is a tough call on your own, given the many options available. It’s also crucial only to apply for a mortgage for which you are eligible. If you don’t, your application will almost certainly be rejected, which can impact your credit rating.

A broker can help ensure that that does not happen. They’ll improve your chances of only ever applying successfully for a second mortgage and ensure that the mortgage is appropriate for you.

Our broker matching service can connect you with a specialist second mortgage expert. Call 0330 818 7026 or enquire so we can connect you.