Are you looking to buy a second home for you and your family? If so, you may well need a second home mortgage to be able to complete the purchase of your new property.
The criteria for taking out a mortgage for a second home purchase differs significantly from a traditional residential mortgage.
It is therefore important that you understand how mortgages for second homes work and how you go about finding one.
What is a second property mortgage?
Very simply, a second property mortgage is a mortgage on a property other than the one that is your main residential home.
You don’t even need to have a mortgage on your main residence – if you are not planning to move into the property that you are mortgaging then it will be considered a second home mortgage.
How you go about getting a second mortgage
When you apply for a mortgage on a second property a lender is likely to underwrite your application in a different way than they would for your main residential mortgage.
For example, any existing mortgage you have on your main residence will be taken as a commitment and a lender will want to see that you can afford both mortgage payments.
Some lenders will even require your income to cover the total borrowing you have on both properties using their standard income multiples.
Your alternative to a second residential loan is to take out a ‘buy to let’ mortgage. This will be appropriate if you’re planning to let the second property permanently or for the majority of the year.
What to look for when you compare second mortgage rates
Shopping around can help you find the best mortgages for second property purchases.
When you compare second mortgage rates, make sure you consider:
- Whether the mortgage is on a residential or a ‘buy to let’ basis. Make sure you get the right deal depending on how you will be using your second property
- How the lender underwrites your application. Do they use income and affordability criteria or the anticipated rental income from the new property?
- The maximum ‘loan to value’. How much deposit will you be required to put down?
- The specific interest rate deal. Is it a fixed or a variable rate? How long does the rate for? And are there early repayment charges for coming out of the deal early?
- The charges and fees you'll need to pay. Take these into consideration and work out which mortgage deal will cost you less overall
Take these factors into consideration when you compare second mortgage rates and you'll be able to narrow your options to find the best mortgages for second homes available in the UK.
