A property is the biggest purchase you’re likely to make, so one mortgage is usually enough for most of us! However, there are times when you might need 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.
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.
A Buy to Let mortgage is a specific type of mortgage for when you buy property as an investment – somewhere you’re going to rent out to a tenant or tenants, instead of somewhere to live for yourself.
If you plan to rent out a property, most mortgage lenders won’t give you a residential mortgage. You’ll need a specialist Buy to Let mortgage.
There are a few differences between Buy to Let mortgages and other mortgages:
Buy to Let mortgages tend to have higher fees than other mortgages, they also tend to have higher interest rates.
Most Buy to Let mortgages are interest-only.
The minimum deposit for a Buy to Let mortgage is often higher than a residential mortgage - usually at least 25%.
Most Buy to Let mortgage lending isn’t regulated by the Financial Conduct Authority. There are exceptions, though.
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.
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’
A second charge mortgage means you can use any equity you have in your home as security against another loan. You’ll then have two mortgages running on your home.
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 one 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.
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.
Applying for a mortgage or understanding your options shouldn't be confusing, yet there are just so many myths doing the rounds and it's not easy to know where to turn to get the right advice.
Our calculators give you an idea of what you might be able to borrow, what's affordable and a rough estimate of the kind of property prices you can start to look at.
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