Updated: March 16, 2022

Second Home Mortgage Deposits

Not sure how much deposit you'll need for a second home? Find out exactly how much you need and all the other requirements in our in-depth guide!

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: March 16, 2022

If you’re considering getting a mortgage to buy a second home, whilst there’s no set rules amongst lenders, it’s likely you’ll need to have a larger deposit than you did for your main residence.

This guide will give you a better understanding of how much deposit you may need, how this amount could affect your interest rate and where to look for help securing the best deals available.

How much deposit do you need for a second home?

On average you will be required to put down about 25-30% deposit, although there are a number of criteria that affect this general loan-to-value calculation (see below).

From a lender’s perspective, the larger the debt in relation to the property’s value, the bigger the risk, therefore, it’s often the case that borrowers will be asked to pay a larger loan-to-value ratio on a second home mortgage.

However, this loan calculation is from lenders who specify a standard loan-to-value criteria for second mortgage applications, but many don’t specify and have open-ended criteria, instead making decisions on a case-by-case basis.

Is it possible to put less than a 25% deposit down?

Yes, it is. There are no hard and fast rules, and there are lenders out there who will be willing to take a wider view on eligibility when applying for a second mortgage.

This is where working with an experienced broker would be beneficial, as they will understand which direction to go in when it comes to more flexible lenders and broader criteria that might suit your individual circumstances.

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Do deposit amounts impact available rates?

Yes, it’s definitely a factor. Securing the highest loan-to-value available will come at a price and that’s typically the interest rates that will accompany these types of deals.

As with all kinds of different mortgages, the more money you put down as a deposit (therefore borrowing less), you will be in a stronger position to not only secure a mortgage but also benefit from the better rates.

For example, if you contribute a 40% deposit (or more) to the buying of your second home, you should get access to the best deals, therefore the debt itself will be cheaper to pay back each month and you will pay less interest over the mortgage term.

What affects the deposit amount required?

There are a number of factors that will affect what percentage is required and it’s not as simple as choosing your own preferred deposit ratio when buying a second home:

  • Credit history: The cleaner your credit report, the lower the risk, according to mortgage lenders. If they view your financial behaviour in the past as a concern, you might be expected to offset that risk by putting down a larger deposit. How you have coped and conducted your payments in your current mortgage term will also be considered.
  • Affordability: All lenders will want to be certain you can comfortably afford the additional mortgage repayments throughout the term. The lower your current debt-to-income ratio is, the better chance you have of securing the borrowing you need.
  • Equity in your current home: If you have significant equity already in your first home because you’ve paid off a good portion of the mortgage, it is sometimes possible to combine the loan-to-value borrowing ratio with your first home, which could bring down the deposit required in your potential second home.
  • Type of mortgage: For example, a buy-to-let mortgage might require a higher deposit than a residential one.
  • Type of property: Any benefits you might have gained from a strong eligibility might still be undone if your property type is considered risky.

How a broker can make the difference

With an understanding of the marketplace and access to the entire lender spectrum, working with a broker when applying for a second home mortgage could make an enormous difference when it comes to what deposit you’ll have to pay and the interest rate on your mortgage.

Having someone knowledgeable and trustworthy working on your behalf when going through the complex process will provide peace of mind and could save you money in the long-term.

The brokers we work with will know which lenders are likely to require a higher deposit than others, where your criteria fits, and where to go with the deposit you have available.

If you get in touch we will arrange for a specialist to contact you directly.

What is the impact on stamp duty?

As well as potentially paying a bigger deposit, stamp duty is also another large outlay that is hiked for second homes, so you should consider this sum carefully too.

Stamp duty on second properties is set at 3% higher than first homes as a result of the UK Government’s efforts to support first time buyers get onto the property ladder.

If your second home is under £40,000 or is a mobile home, caravan or house boat, you are exempt from paying stamp duty.

The amount you pay is relative to the rate you will have paid on your first home, with 3% extra applied. The table below explains:

Tax band Primary property Second property
<£40,000 0 0
£40,000 – £125,000 0 3%
£125,000 – £250,000 2% 5%
£250,000 – £925,000 5% 8%
£925,000 – £1.5m 10% 13%
£1.5m > 12% 15%

Example:

The allowance you will pay will go up in price stages. So, if your second home is £300,000, you won’t pay 8% on the whole amount. On the first £125,000 you will pay 3% stamp duty. Between £125,000 and £250,000 you will pay 5%, and the remaining £50,000 will be charged at 8%.

Get matched with a broker who can guide you through

There are many things to consider when applying for a second home mortgage. Working with a specialist can point you in the right direction and make things clearer.

We work with second home mortgage experts who give independent and bespoke advice and guidance. Call us today on 0808 189 0463 or make an enquiry for a free initial consultation to find out how the process might benefit you.

FAQs

Can I get a mortgage on a second home with a 10% deposit?

Realistically, it will be difficult to get one with such a low sum, however, as already outlined in this guide, there are possibilities depending on your circumstances. If you have paid off your first mortgage, for example, could put you in a good position for such a low deposit being accepted.

Can you have two primary residences?

No, you can only have one primary residence, however you may be able to choose which one to nominate as your primary address. This must be approved by HMRC though, and it would be wise to take proper advice on this if you intend to save on stamp duty this way.

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We can help! We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in mortgage deposits. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

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!

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 that 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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