What is a second home mortgage?

Mortgage lenders will only consider one property to be your main residence. If you buy another one, this will be considered a second home, whether you intend to live in the property yourself or let it out to somebody else.

Not all lenders offer mortgages for second properties, and those that do often impose tighter rules.

Is getting a second mortgage different?

A mortgage on a second property will vary from the one on your existing home in the following ways:

  • The deposit required may be higher - usually at least 25% of the property's value

  • The interest rate will usually be higher than on loans for main residential homes

  • Your payments on your existing home will count as a financial commitment when the affordability of your new mortgage is calculated

  • Not all providers will offer you a loan and not all deals will be available on a second property

What kind of property are you buying?

A mortgage for a second home can be used to buy properties for a range of purposes, including:

  • A second UK property you will live in

  • A buy to let investment

  • A holiday home

  • A commercial property

UK properties

If you want to live in the new property, you will need a second residential loan, which would be subject to the tighter lending restrictions outlined above.

If you intend to rent out the property, you will instead need a buy to let mortgage. Although you will need a deposit of 25% or more, you will not have to rely solely on your own income being enough to cover the mortgage, as you would also receive rental payments which can be taken into account by your mortgage lender. You can find out more about buy to let mortgages here.

If you are considering a real estate investment which is rented out to a business, read this guide to investing in commercial property.

Holiday homes

Many mortgages for holiday homes are based on letting out the property, meaning what you can borrow would be based on how much rental income the property could bring in.

If you want the property solely for your own use, lenders will want to be sure you can afford the payments. Remember also that overseas property is a bigger risk due to currency fluctuations and the unfamiliar property markets and laws abroad.

Find the right second home mortgage

As well making sure you will meet the affordability checks, you will also need to look at:

  • How much you need for a deposit

  • Whether you want a fixed or variable interest rate

  • What fees and charges come with the mortgage, including those you pay to set it up in the first place and any early repayment charges

When you have found several options that suit your circumstances, check the interest rates. With fewer deals available, second mortgage rates are usually higher, so make sure you consider all of your options using our comparison.

You can then work out what each mortgage will cost overall and pick the cheapest.

Raising a deposit using your current home

If you do not have enough money saved for the deposit on your new home, you may be able to use any equity in your existing home towards it.

You could raise the funds using either a remortgage on your existing property or a second charge secured loan.

What if you want the new home to be your main residence?

Even if you intend to use the new property as your primary residence, lenders will still apply the same checks to make sure you can afford both homes.

However, you would need to inform HM Revenue & Customs that the new home is your primary residence. This will make sure you do not need to pay Capital Gains Tax (CGT) if you sell the property later.