What is a second-home mortgage?

A second-home mortgage is a loan that allows you to buy a second property. It’s important not to get this confused with a second charge mortgage, which allows you to take out a loan to access the equity in your existing home.

Typically, the kind of second-home mortgage you get will depend on what you plan to do with the new property. Most lenders have different options that might suit your needs.

Second residential mortgage 

This is what is most commonly meant by a second-home mortgage. Most lenders say the property must be for personal use only, for example as a second residence or a property closer to work to use during the week. Some lenders will let you use a second residential mortgage to provide accommodation for dependents, but others have rules preventing this. Most will allow you to buy a holiday home, but it does vary by provider. Some allow you to let out the property periodically, but most say you need a commercial buy-to-let mortgage to do this.

Buy-to-let mortgage

If you’re planning to get a second home that you rent out, you likely need a buy-to-let mortgage. If the property is a holiday property, you might need a holiday-let mortgage, which can be different to a typical buy-to-let. You usually need a commercial mortgage, even if you plan to use the property as a holiday home for your family most of the time and only let it out every now and then. If you want to buy a property in the UK for renting out, you can compare buy-to-let mortgages here.

Overseas mortgage

If you’re planning to buy a second home abroad, you may need a specialist lender. Most high street banks will not allow you to use a second-home mortgage to buy overseas, although some have international mortgage services you can use.

How to get a mortgage for a second home

The process of getting a mortgage for a second home is not dissimilar to getting a first residential mortgage.

First, work out what kind of mortgage you need, and then you need to find a bank or building society that’s happy to lend you the cash.

As with any mortgage, you’ll want to shop around to get the best deal. For a second-home mortgage, you should consider speaking to a specialist broker who can help you find the right lender for your circumstances and the best rates.

You need to answer questions about the intended use of the property, so the lender can ensure that you’re applying for the right product.

You also have to meet strict affordability criteria, as you did with your primary residence. If you’re still paying off your first mortgage, these repayments will be taken into account by lenders. You won't be approved if you can’t afford to make the repayments on top of your existing mortgage.

A deposit for a second-home mortgage is likely to be higher than for a first home. For instance, most lenders want you to have at least 15% and some ask for even more.

If you want a buy-to-let mortgage, you typically need a deposit of at least 25%. If you want a holiday-let mortgage, you might need as much as 30% as a deposit. 

There are other costs too. You’ll have to pay second home Stamp Duty which is an additional 3% on top of what you’d pay for a first home. Interest rates are typically higher too, which means your borrowing will be more expensive.

Are second-home mortgages the same as normal mortgages?

They’re very similar financial products: they’re loans with interest attached used to buy a property. You still need a deposit and are subject to affordability and credit checks.

The main differences are that lenders ask for a higher deposit, the affordability checks may be more thorough, you typically pay higher interest rates, and you attract extra Stamp Duty charges.

In a nutshell, second-home mortgages tend to be more expensive, and you need more up-front capital to get one.