Second Home Mortgage Rates

There are a range of reasons to think about buying a second home from having a holiday home to helping a family member get on the property ladder. No matter the reason you want to invest in a second home it is important to make sure you can fully afford it.

Mortgages on second properties are not always very different from mortgages for main residences but what is available to you will depend on certain factors. The type of mortgage you will need will depend on what kind of property you want to buy and what you intend to use it for. For example, it can be a bit different if you want to buy a second property as a buy-to-let investment.

Mortgages for second homes or Holiday homes

Second home mortgages for buy-to-let 

If you are intending to buy a second property as a buy-to-let investment you should apply for a buy-to-let mortgage instead of a residential one. The second home mortgage rates are usually higher, and you will have to put down a minimum of 25% as a deposit, but they can be interest-only rather than repayment and are specifically designed for that purpose.

It starts to get trickier if you buy a second property that you plan to use as residence and hence take out a residential mortgage but then end up letting it out instead. For this you will need to get permission from your lender and possibly pay an administration fee. Each lender will approach this situation differently and not all of them will give you permission to change. If you think there is even a chance you could let the property out in the future, you should check whether the lender will let you and what the terms and conditions would be.

Alternatively, if you buy a second property with the intention of moving in but struggle to sell your previous home, you may want to consider converting your current residential mortgage to a consumer buy-to-let mortgage (sometimes referred to as a let-to-buy mortgage). You should keep in mind that mortgages like these and buy-to-let mortgages are not the same as standard residential ones. Often they need higher initial deposits and charge higher interest rates. So, you will need to think about this when working out if it is a financially viable option for you.

Is there a limit on the number of residential mortgages you can have?

Technically in the UK you can have as many residential mortgages as you want, but lenders are particularly cautious with people using them to buy properties and then rent them out. As a result, lenders often only allow a maximum of two residential mortgages, one for your main residence and one for a holiday home or for a family member to live in. If you want to get a second mortgage you will need to declare which of the properties will be your main residence.

Also, you will be required to give a good reason as to why you want to take out a mortgage on a second property, such as divorce, holiday home for the family etc. Lenders need to be sure that they are lending money for the purpose it is intended and that you are not taking out a residential mortgage on a second home to earn rental income from that property.