Quite simply, a second home mortgage is for someone who already owns a home, and is looking to purchase a second property.
A second home mortgage should not be confused with a second charge mortgage, which is a second mortgage that is secured against a property that you already own.
The type of second home mortgage that you need will depend on what you intend on using the property for. There are a few reasons why you would want a second home, such as:
The reason why you are purchasing this second home is important, as it will dictate the type of mortgage you will be applying for.
When you apply for a second home mortgage, you’ll find that the overall process is largely similar to when you buy your first home. However, the main difference is that the lender’s affordability checks and eligibility criteria may be a lot stricter. This is because you will be viewed as a higher risk, because you are already making monthly mortgage repayments. Here’s what the lender may consider during your application, and what you need to think about too:
As mentioned above, lenders may view you as a higher risk when it comes to borrowing, meaning that they may cap the loan to value (LTV) ratio on a second home mortgage. The majority of lenders will only offer a 75% mortgage, whereas some will vary from 80% to 85%, and a small handful may offer 90%, if the right conditions and circumstances are met.
Bearing that in mind, you are likely to need a deposit of between 25% and 10%, depending on how much of a risk the lender thinks is involved.
Some lenders may also set a minimum LTV on your existing property and mortgage, which you must meet before they are willing to offer a second home mortgage. Again, this may vary from 85% to 90%.
By working with a specialist mortgage broker – such as Mortgage Experience – you will be able to access a number of specialist lenders that you wouldn’t find elsewhere.
Your affordability is determined in the same way it would be for a first property. Different mortgage providers will cap their lending based on a multiple of your income, usually 4.5x, sometimes x5 and – very occasionally – x6.
Of course, when the lender considers your income and outgoings, they will be taking into account your other mortgage payments, along with any associated costs such as insurance. This will determine whether your income is sufficient to cover both mortgage repayments at once.
There are stamp duty costs to consider, please visit the government website for more information.
If you are in full-time employment, then your application will be considered to carry the least risk to lenders. However, that doesn’t mean that if you are self-employed or have other income such as commission, bonuses and benefits then you won’t be able to get a second home mortgage. Working with a specialist mortgage provider will help you navigate this part of the application process.
Your credit score is one of the main factors that lenders will look at when determining your eligibility criteria. Many mainstream lenders are stricter with bad credit score mortgages, however specialist providers are more flexible when it comes to credit score, and will look at factors such as the severity of the issue and how long it has been on your file.
The older you are, the less you may have to pay on your existing mortgage. However, getting a second home mortgage can be more difficult if you’re retired; many lenders won’t lend if you’re aged over 75. Some may go up to 85, but working with a specialist mortgage adviser will help you get access to other lenders.
Any property that has non-standard construction features – such as a timber frame or a thatched roof – may be deemed more of a risk by lenders.
Getting any kind of mortgage can be stressful enough. Working with a specialist mortgage broker can help you get access to unique deals, as well as expert advice.
With a Mortgage Experience adviser on your team, you can sit back and relaxed, safe in the knowledge that we will be doing all the heavy lifting to find you a suitable second home mortgage. This gives you more time to do the other important things in life.Get In Touch
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