Can You Have More Than One Mortgage?

Can you have more than one mortgage?

Technically, you can take out as many mortgages as you like! As long as it’s the right mortgage for your needs - and you can afford the repayments on multiple mortgages - there’s nothing stopping you from having more than one mortgage. 

You might need another mortgage for a number of reasons, such as:

• You’re renting out a property you own

• You’ve bought a second home or holiday home

• You’ve taken out a second charge mortgage on your main home

With each mortgage you get, the harder you’ll have to work to prove to a lender that you can afford the multiple payments.

Can you only have one residential mortgage?

It’s a common misconception, but you can actually have more than one residential mortgage. However, lenders will need to see lots of evidence that you use these properties as homes, rather than investments.

Lenders have pretty strict criteria when it comes to multiple residential mortgages. This is because the interest rates and terms for residential mortgages tend to be a lot better than mortgages for Buy-to-Lets. So you’ll have to come up with lots of evidence to show that you have more than one home, rather than a home and some investments.

How are buy-to-let mortgages different from residential mortgages?

A buy-to-let mortgage is a type of home loan for a property you’re going to rent out to a tenant or tenants, instead of somewhere to live for yourself. Mortgage lenders don’t allow residential mortgages to be used for this purpose.

Buy-to-let mortgages are usually offered on an interest-only basis and tend to require a higher deposit as they’re perceived as being slightly higher risk than residential mortgages. This is because the rental income is used to pay for the mortgage repayments and there may be periods where the rental property is vacant.

What about holiday homes?

If you’re lucky enough to be buying a holiday home, you’ll usually be able to get a second residential mortgage on it. That’s if it’s only you who’ll be staying there. The rules change slightly if you plan to rent out your holiday home. You’ll need what’s called a Holiday Let mortgage, which falls within buy-to-let lending.

You’ll need a Holiday Let mortgage if you’re thinking about long-term and short-term rentals, and things such as AirBnb-style lets. If you’re letting family and friends have a free holiday here and there then you’ll usually be fine with a residential mortgage. 

You’ll need to be upfront from the start, and put together a well-crafted application. Read more about how holiday let mortgages work.

Can you have more than one mortgage on the same property?

It’s possible to have more than one mortgage on the same property. The most common time this happens is with something called a ‘second charge mortgage’, which you can apply for using the equity you have in your home as security against the additional loan. You’ll then have two mortgages attached to the same property.  

You can take out a second charge mortgage on any property you own, so if you have a Buy to Let then you could use your rented property against your loan. 

But just like any mortgage, if you don’t keep up with the payments then you run the risk of losing your home. Your initial mortgage always takes precedence over a second charge in these scenarios.

You might find it tricky to get two full mortgages on one home - say if you and another person wanted separate mortgages on the same home. A lender will always want the initial mortgage rather than the second charge, for the reasons above. 

What should you consider when taking out another mortgage?

When you’re applying for another mortgage, lenders will be looking closely at your application. Ask yourself:

• Can you afford the new mortgage on top of your other mortgages? Lenders will want to know you’ll make repayments without struggling. You’ll need to pass affordability checks on your income. And if you have a buy-to-let property, they’ll check if the rent you charge will cover the mortgage.

• How’s your credit rating? Nearly all lenders will carry out a credit check to see how you’ve managed your borrowing in the past. Generally, the cleaner your credit history, the more likely you are to be accepted. Having a higher credit score will also open up the better deals. If you have bad credit, it’s definitely possible to get another mortgage, you’ll just need to apply to a lender that specialises in bad credit. 

• How risky might you seem? Mortgage lenders make their decisions based on risk. How risky you appear to lenders will impact what you pay, or whether you get accepted at all. All lenders will have different ways of weighing up risk, but a lot of lenders will have strict limits on how many mortgages you can take out with them.