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Getting a mortgage on a second home

From buying a holiday home to helping a relative onto the property ladder, there are many reasons you might want a second mortgage. No matter the reason it’s important to ensure a second home is affordable. Mortgage rules for second homes will vary depending on your lender so using our mortgage comparison service can be very helpful when choosing a deal. However, all second home mortgages have certain things in common. This guide will take you through what a second home mortgage is and the affordability criteria for most lenders.

In This Guide:

What is a second home mortgage?

You will need a second home mortgage if you already own one property and wish to take out another mortgage to buy a second home. Some reasons you may be looking for a second home are to have a residence during the working week or to eventually let out. The reason for taking out a second mortgage is important as it will determine the type of mortgage you will need.

What type of mortgage is right for my second home?

If you intend to live in your second home, or if it’s to help a relative onto the property ladder, you will want a second residential mortgage. If you take out a second residential mortgage and later decide to let out the property you will need permission from your lender and may have to pay an administration fee. It’s important to compare mortgages if you are likely to want to let your property in the future as some lenders will not allow it.

If you are buying your second home as a rental property, you will need to take out a buy-to-let mortgage. These usually have higher rates and you will often be required to put down at least a 25% deposit. However, they are also often interest only mortgages which can help make repayment more affordable.

If you are looking to buy a holiday home that you wish to let for part of the year, you will need a holiday home mortgage. If you would like to let on Airbnb, you will need explicit permission from your lender.

The many possibilities for your second home make comparing mortgages a really important step. You can try our free comparison tool to compare second home mortgages, filter through the options so you can find the best deal on the market. 

Buying a second home as an investment

You may also be looking to buy a second home to do up and sell on quickly for a profit. If this is the case, you have two options:

Bridging Loans

A bridging loan can be secured against property or land that is unsuitable for a secured mortgage. It might be suitable if the property does not have a necessary facility, e.g. a bathroom. You could take out a bridging loan to cover the cost of installing a bathroom. You can then mortgage the property and the works will have also boosted the value meaning you can sell for a profit. A bridging loan covers the cost of a specific project or a huge home renovation, however as they are short-term loans and often have high interest rates.

Development Loans

A development loan may be appropriate if you intend to buy a second property to totally renovate before selling for a profit. You will be required to present your plan to a lender who will then release money at different stages of the renovation process. Usually, a development loan is for a period of 12 to 18 months and will have high interest rates. It’s also worth noting you will be required to provide at least 30% of the renovation costs yourself.

What are the affordability criteria?

Affordability criteria for a second home mortgage are usually harder to meet than for a primary mortgage. This is because if you’re already paying the mortgage on your first home, lenders will view you as a higher risk. Fewer lenders offer second mortgages as a service, so you may find it harder to get competitive rates.

Your current mortgage will always be considered when lenders assess your new application. Income and affordability will be assessed in the same way, but because you already have one loan to repay, the lender will need to ensure you can afford both repayments.

A second home mortgage will often require a higher deposit. You are likely to need at least 25% to get the best mortgage deals.

Your lender may also be interested in why you are buying a second home and will be more likely to accept your application if they can see a clear benefit. One example that most lenders look favourably on is if your main residence is a family home and your second home is intended for living in during the working week.

Buying a second home overseas is often harder because lenders view currency fluctuations and foreign property markets as a higher risk.

The easiest way to get the best rates for your second mortgage is to access as many lenders as possible. If you compare mortgages, you’ll be able to get the best rates available. Try using our online mortgage comparison tool, choose the filters you want and find a second mortgage that suits your needs.