Updated: April 19, 2022

Second Home Mortgages

Are you looking to get a second mortgage to buy another house? It can be done! Find out what the typical rates are and exactly how to do it in our guide.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: April 19, 2022

If you own your home and are looking to buy an additional property, it’s possible to take out a second mortgage and pay off both loans at the same time. Second home mortgages are similar to primary mortgages, but there are some important differences to be aware of before you make an application.

This guide covers everything you need to know about them, including how to increase your chances of getting your application approved, what deposit you’ll need and how much they could cost you.     

Read on for more information or jump to the section that’s relevant to you via the links below… 

What is a second home mortgage?

If you already have a mortgage and want to buy another property, you can apply for a second home mortgage. As long as the lender is confident you can meet the repayments on both loans – and you fulfil all other eligibility criteria – there’s a good chance you’ll be accepted.

Borrowers take out second home mortgages for various reasons including investing in buy-to-let, buying a holiday home or purchasing a property to live in for part of the week.

If you’re buying a second property to live or stay in, you’ll need a second residential mortgage. If you’re letting it out, you should apply for a buy-to-let mortgage.

Don’t confuse second home mortgages with second charge mortgages. A second charge mortgage – also known as a secured loan – is a type of loan available to homeowners, which is secured against their existing property. People take out these types of loans to raise money for things such as home improvement or to consolidate/repay outstanding debts.

If you take out a second charge mortgage, you’ll have two mortgages to repay on one property. With a second home mortgage, you have two separate loans on two different properties.

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Are rates different to primary mortgages?

Rates tend to be higher on second mortgages because lenders view borrowers as higher risk if they have two mortgages to repay.

However, as with all mortgages, the rate you pay will depend on your individual circumstances and the best way to make sure you secure the most competitive deal is by seeking advice from an independent mortgage broker who specialises in arranging finance for second homes.

How to get a second home mortgage

Applying for a second mortgage isn’t hugely different to applying for a first mortgage, but there are some important variables that set the process apart. Here are three simple steps you can take to boost your chances of getting your application approved…

Step one: Speak to a broker

Just because you’ve been accepted for a mortgage in the past doesn’t guarantee you’ll have a second mortgage application approved. Lenders scrutinise second mortgage applications more heavily, paying particular attention to your income and whether or not you can afford two loans.

That’s why the first step should always be talking to a broker, specifically one who specialises in second home mortgages. They’ll be able to review your financials to make sure you can afford another loan and guide you through the process. Far fewer lenders offer second mortgages so it pays to know which to approach and which to avoid. A broker can advise you and save you the stress and expense of wasted applications.

Step two: Get the right paperwork together

You’ll need to be able to prove to lenders you can afford to pay back two mortgages at the same time. This will mean providing them with detailed bank statements and proof of income. If you plan to rent out the second property, lenders may ask for evidence of projected rental income. Being organised and having the right paperwork together can speed up the process and potentially avoid any unnecessary delays.

Step three: Check your credit reports

Lenders will pay close attention to your credit history if you’re applying for a second mortgage. They’ll want to see how good you’ve been in the past at meeting your mortgage repayments as well as any other loans you’ve taken out. They’ll do this by looking for any red flags on your credit reports. If there are any mistakes on your report, you have the right to challenge them – or at the very least add a note to your report explaining any late or missed payments. You can download your credit reports here.

Don’t panic if your credit reports aren’t spotless. You can still get a second home mortgage with bad credit. You may just be limited with the lenders you can approach. An experienced broker can advise you if you’re worried about your credit history.

Eligibility criteria

While different lenders have different eligibility criteria, there are some general requirements most will require borrowers to meet.

Deposit requirements

Deposits for second mortgages tend to be bigger than for first mortgages because lenders deem second mortgages riskier investments.

The size of deposit you’ll be required to put down will depend on a range of factors including your financial situation, the type of property you’re buying and your employment type. Whether you’re planning to live in your second property or rent it out will also make a difference.

If you’re buying the property to live in or as a holiday home, most lenders will cap lending at 75% or 80% loan-to-value (LTV). That means you’ll have to put down a deposit of at least 20%-25%. A handful of lenders may consider a smaller deposit of 10%, but your choice will be limited.

If your second mortgage is for a buy-to-let property, you should expect to put down around 25%. Some lenders may accept 20% and a few will consider 15%, depending on your individual circumstances.

Certain mortgage providers will take into consideration the amount of equity you have in your current home before offering you a mortgage on a second property. For example, they may require you to have at least 85% or 90% LTV.

Other lenders will only care about the lump sum deposit you can put down, while some will consider both the equity and deposit.

Affordability

Lenders will carry out a series of checks to make sure you can afford your mortgage. Most providers will let you borrow 4.5 times your annual salary but some will offer as much as 6 times. Their main concern will be whether or not you can afford to repay two mortgages at the same time.

If you’re planning to let the property out, lenders may ask for proof that your expected rental income will be enough to cover the mortgage payments by 125-130%. Some lenders may also have a minimum income requirement, for example, £25,000. However, this often only applies to first-time landlords.

Some lenders may also require you to have owned your current property for at least six months before offering you a second mortgage for a buy to let.

Finally, your age may affect your ability to get a second mortgage. Several lenders won’t consider lending to older borrowers because of concerns their income has decreased, which could affect affordability. Many have an upper age limit of 75 or 85 years of age.

What stamp duty will you have to pay?

For second residential properties in England and Wales worth more than £40,000, you’ll have to pay an extra 3% surcharge on top of the basic stamp duty rate.

The surcharge applies to any additional property whether it’s a second home or a buy to let.

The table below shows how much stamp duty you should expect to pay:

Purchase price Standard stamp duty rate Extra you’ll pay for a second home
Up to £125,000 0% 3%
£125,001 – £250,000 2% 5%
£250,001 – £925,000 5% 8%
£925,001 – £1.5m 10% 13%
Over £1.5m 12% 15%

If you’re purchasing a second property in Scotland, you’ll have to pay the Additional Dwelling Supplement (ADS), which is a one-off tax of 4% on the purchase price of properties over £40,000. It is charged on top of Land and Buildings Transaction Tax (LBTT).

In Wales, second property buyers need to pay a 4% Land Transaction Tax (LTT) surcharge on top of standard residential rates for properties worth more than £40,000.

Types of second home mortgages

As part of their eligibility assessment, your lender will ask you what you plan to use your additional property for. These are the most common reasons people take out second home mortgages:

  • To buy a property to use at weekends or during the week as a base near work

As long as the lender is satisfied you can afford two mortgages concurrently, and you meet their other eligibility criteria, it should be pretty straightforward to get this type of second home mortgage.

  • To buy a holiday home for you and your family to use and rent out occasionally

If you only plan to let out the property for a few weeks a year, a normal residential second mortgage should be fine. If you’re renting it out more regularly, you’ll need to apply for a holiday let mortgage. Remember: if you want to let out the property on a site such as Airbnb, you’ll typically need permission from your lender first.

  • To help a family member get on the property ladder

Again, as long as you can prove to the lender you’re able to pay back two mortgages, and you’re able to meet their deposit requirements and have a decent credit history, you shouldn’t have too much trouble getting a mortgage for these purposes.

  • For a buy-to-let investment

If you have no intention of living in your second property and plan to rent it out from the outset, you should apply for a buy-to-let mortgage rather than a second residential loan. Although it’s possible, it’s trickier – and more costly – to convert a residential mortgage into a buy-to-let mortgage later down the line.

Connect with a second home mortgage specialist today

Taking out a second mortgage is a big financial commitment and isn’t a move that should be taken lightly. That’s why your first step should always be speaking to a broker with expertise in this area.

We work with brokers who have a track record of helping people secure a second mortgage and who can match you with the perfect lender for your circumstances. They’ll also be able to negotiate deals on your behalf and get access to exclusive rates.

Give us a call on 0808 189 0463 or make an enquiry and get matched with a broker today for free. We hand-pick all the advisors in our network and rigorously vet them so you know you’re getting the best possible advice.

FAQs

Can I get an interest-only second home mortgage?

Yes, it’s possible, but it will depend on your individual circumstances. Your lender will need to be satisfied that you’ll be able to save enough money to pay back the loan at the end of the term while at the same time making the repayments on your primary mortgage.

It’s typically easier to get a buy-to-let interest-only loan as rental income can be used to pay back the initial mortgage amount.

How long are second home mortgage terms?

They’re the same as the terms on primary mortgages. The average mortgage term in the UK is 25 years but some lenders will offer 30, 35, even 40-year terms. A longer term will mean lower monthly repayments, but also a bigger interest bill overall.

Can I get a second home mortgage overseas?

Yes, you can. However this is a specialist area of the mortgage market so it’s worth talking to a broker with expert knowledge of overseas mortgages.

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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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