If you want to buy a property in addition to the one you live in, you may need to take out a second home mortgage. 

A second home mortgage is a type of loan used to buy a property in addition to a family home or residence. We explain how second home mortgages work and what you need to be aware of before you apply for one.

How does a second home mortgage work?

A second home mortgage is different from a remortgage or second charge mortgage and is used to buy an additional property. 

Mortgages on second properties are not that different from mortgages used for main residences.

  • The type of second home mortgage you’ll need will depend on what sort of property you are buying and what you will use it for.

  • Not all lenders offer second home mortgages 

  • The application process involves more financial scrutiny than for a main mortgage

  • Lenders will want to make sure you can afford a second mortgage

What are second home mortgages used for?

  • Buying a property you want to use as a second home

  • Helping a relative onto the property ladder

  • Buying a holiday home 

  • A buy to let (BTL) investment

  • A property for business use

Can I get a second mortgage?

You can only get a second mortgage if you already own a home. This is because second mortgages are secured loans, so they need to use the borrower’s home as security. 

Taking out a second mortgage

You need to be able to meet the repayments on top of your first mortgage and lenders treat second mortgages differently when it comes to borrowing.

  • They normally want a higher deposit

  • The mortgage will have a higher interest rate

  • There are more restrictions on who can borrow a second mortgage

If you wish to take out a second home mortgage, your lender will need to know which home is your primary residence

You’ll also need to give a good reason as to why you want to take out a mortgage on a second residential property 

If you plan to rent out the property at a later date you need to let the lender know as this will affect the type of mortgage you are able to borrow.

Can I take a second mortgage out on my house?

You can take out a second mortgage on your house, but this would be a second charge mortgage which is a different type of mortgage.

When can I get a second mortgage?

You can take out a second mortgage whenever you like, as long as the lender is satisfied you can afford to pay two mortgages.

Can I get a second mortgage to buy another house?

A second home mortgage is a loan secured on property, in this case a property that is not your main residence.

  • When you apply for a second home mortgage a lender will take into account your existing mortgage repayments

  • If you are buying property as an investment, buy to let or a holiday home to rent out, the lender will look at how much rent you could charge for it

  • They take all this into consideration when they work out how much you can afford

Do you need a deposit for a second mortgage?

Yes, getting a second home mortgage requires a larger deposit than that you would if you are taking out a first mortgage.

If you can afford a larger deposit, you will find it easier to take out a mortgage, you will have access to better (cheaper) rates and you may be able to opt for an interest-only mortgage.

  • Normally you will need a minimum deposit of 15% for a second home mortgage although some lenders may ask for more

How to find a second home mortgage

You need to choose the type of interest rate you want and the term of the mortgage. Most mortgages run for 25 years, but you may want to take out a mortgage for a shorter term than that.

A variable rate mortgage means your interest rate could change if the Bank of England increases or reduces interest rates.

A fixed rate mortgage gives you a set repayment, and your interest rate is fixed for the term of your fixed rate deal. There are 2 year fixed rate, 3 year fixed rate, 5 year fixed rate or even a 10 year fixed rate mortgages available.

However, the choice of fixed rate deals available will depend on the lender you borrow your second home mortgage from.

  • You can also work out how much you can borrow using our calculator.

  • If you need help finding a mortgage, you may need to go to a mortgage broker for ideas of which companies may accept you and which deals suit your finances.

Can I get my first mortgage extended to cover a second home?

No, some lenders only offer mortgages for your main residential property. Check your lender offers second home mortgages before you apply.

What if I already own my own home outright?

If you own your home outright and you don’t intend to live at the property then your application will be treated as a second home mortgage.

If you are renting out the property you intend to buy, you may want to consider a buy to let mortgage

Can we get a joint second mortgage?

Yes, you can get a joint mortgage for a second home. Most lenders will only offer joint mortgages for second properties to 2 people, 

  • Some lenders will allow up to 4 people on a second mortgage but this will normally be for an investment property, such as a holiday let

  • You may need to speak to a specialist broker if you want to have several people on the mortgage 

Can I get a mortgage on my third property?

There is no limit to the number of residential mortgages you can borrow but not all lenders offer second or third home mortgages.

  • If you plan on renting out the property you may need a buy to let mortgage 

  • Some lenders offer mortgages that cover a buy to let portfolio of several BTL properties

Can I take out a second home mortgage using Help to Buy?

No, you can only use Help to Buy on a property that will be your only home for you to live in yourself.

Can I get a mortgage that covers two properties?

No you can’t get a mortgage that covers two properties. You have to have separate mortgages for each property you own. 

Second home mortgages for holiday homes 

If you are buying a holiday home and do not plan to rent it out, then you can take out a residential mortgage on the second property. 

  • Remember you will also have to factor in additional Stamp Duty when you buy a second home

  • If you want to let out your property as an Airbnb you need permission from your lender

Second home mortgages for buy-to-let properties

If you plan to use your second property as a buy-to-let investment, then you need to apply for a buy to let mortgage.

You will need a higher deposit – normally around 25% - but you can opt for an interest-only mortgage which will make your monthly repayments cheaper

A second home mortgage for a second home

Only take out a second home mortgage if you are not likely to let the property out.

However, what if you buy a second home to move into and you later struggle to sell your previous property?

  • In this case you may want to let out the previous property. If you decide to do this you will need to convert your main mortgage to a let to buy mortgage

  • Let to buy mortgages are for homeowners who become “accidental landlords” 

  • These are landlords who let out their homes out of necessity and not as a business

Other ways to finance a second home

A bridging loan

You can secure a bridging loan, also known as a bridge loan, against property or land that you cannot buy using a residential mortgage. 

  • Bridging loans are short-term loans with relatively high interest rates and can be used to develop a property which can then be sold on quickly afterwards

Development loan

If you intend to buy a second property and renovate it before selling it a development loan may be an option. 

  • Development loans run from 12-18 months

  • They have high interest rates 

  • You’ll also need to provide at least 30% of the costs up front

Is there an age limit on a second home mortgage? 

There’s no official age limit for obtaining a second mortgage, but mortgage lenders will have their own age limits. 

  • The older you are the shorter the mortgage term will be, a 65-year-old might be able to get a 10-year second home mortgage but not a 25 year one.

  • Taking out a mortgage to finance an investment property in later life can be a way of securing an income from a property that you later plan to sell.

What are the risks of taking out a second home mortgage?

Taking out another mortgage if you have enough equity in your first home can be a good idea

But lenders will still want to make sure you can afford the higher repayment payments.

It’s important to note that if you miss any mortgage repayments then that property could be repossessed.

Do I have to pay Stamp Duty on my second home?

If you buy a second home in England or Wales, an investment or a holiday home, you will have to both standard Stamp Duty plus an extra additional 3%. 

This is known as the Stamp Duty Surcharge.

  • You can apply for a Stamp Duty refund if your second home ends up becoming your primary residence and you sell or give away your first property within 3 years of buying your second home.

9th October 2020