If you’re looking to buy a second home with another mortgage, you’ll either need to save a cash deposit or remortgage your existing property to release equity that can go towards your second home.
Getting a mortgage for your second home isn’t that different from getting a mortgage for your first home. Lenders still need you to meet their eligibility criteria and affordability requirements, they just also consider the costs of running your existing home as well as the costs of running your second home. This means you need to prove to them that you have enough disposable income to cover 2 mortgages and the costs of maintaining 2 homes at the same time.
It’s important to note that the minimum amount required for second home mortgage deposits tends to be a little higher than for first property purchases. LTVs (loan-to-values) for second home mortgages are capped at 85%.
The Topics Covered in this Article Are Listed Below:
When Would I Need a Second Home Mortgage?
There are various scenarios where you would need to consider getting a second home mortgage. For example:
- If you’re looking to buy a UK based holiday home for you, your friends and family that you don’t plan to let out for the majority of the year – holiday lets and buying a property abroad are different processes
- If you need a residence closer to your workplace to avoid the grind of a daily commute while keeping the family home
- If you don’t have a fixed location throughout the entire year and sometimes live away from your main residence for significant periods of time
A second home mortgage would not be suitable if:
- You’d like to buy a home for your relatives to live in, such as your parents, children or immediate family – you would need a consumer/regulated buy-to-let mortgage
- You’d like to buy an investment property that will be exclusively rented out to tenants to live in – you would need a buy-to-let mortgage
- You’d like to buy an investment property that will be exclusively rented out as a holiday home – you would need a holiday let mortgage
How Much Deposit Do I Need for a Second Home Mortgage?
The absolute maximum LTV (loan-to-value) for a second home mortgage is 85% with the majority of lenders offering up to 75% - 80%. The maximum LTV available to you will depend on whether you meet the lender’s criteria and your affordability. The lender will look at things such as your income, credit record and your current and potential future household outgoings. The more you have in deposit, the more mortgage products available to you and the better the rates you can access.
You may be able to contribute more deposit towards the second property mortgage – therefore borrowing at a lower LTV - or even buy the second property outright by remortgaging your first home if you’ve built up enough equity in it. It’s worth bearing in mind remortgages come with better rates than second home mortgages.
The size of the deposit you need to find may also depend on the type of property you’re looking to buy– for example, you’re unlikely to get a mortgage with 85% LTV on a cottage with a thatched roof as this is deemed riskier for lenders.
Can I Get a Second Home Mortgage with a 90% LTV?
Second home mortgages with a 10% deposit aren’t available. Many lenders cap the LTV at 75% - 80%, while a few go up to 85%.
It’s important to note that higher LTVs for second home mortgages often also attract higher interest rates.
Can I Get a Second Home Mortgage Without a Deposit?
No mortgage lender will offer a second home mortgage without a deposit. You may be able to release equity by remortgaging your existing property and then use money as a deposit on your second home instead.
Can I Get a Second Home Mortgage with a Poor Credit Rating?
In general, a poor credit rating can adversely affect your access to finance, especially when applying for a second home mortgage. As well as fewer offers, you might also face higher interest rates in addition to a lower cap on LTV. The good news is that in some circumstances it may still possible to get a second home mortgage, despite the following situations:
- County court judgments
- Poor credit ratings
- Adverse events and defaults
- Late payments
- Mortgage arrears
- Individual voluntary arrangements
- Home repossessions
Although a poor credit rating is likely to limit your options, it’s still possible to get a second home mortgage. Lenders will assess your current income, the equity you have in your existing property as well as the proposed LTV on your second home. They will also factor in the circumstances surrounding the bad credit events to ensure they are unlikely to happen again and that you’ll be able to maintain 2 mortgage payments.
Can I Get a Second Home Mortgage for Any Type of Property?
When it comes to second home mortgages, some types of property can pose more of a challenge than others to lenders. While you can get a second home mortgage on almost any type of building, you may be offered a lower LTV cap – 80% or lower – if the lender considers the property to be in a higher risk category. There are 2main types of higher-risk structures.
New build properties are considered by lenders to be a higher risk category for second home mortgages. If you’d like to buy a new build property for your second home, you may therefore encounter various limitations from lenders.
For example, new build houses may be deemed acceptable, but not new build flats. Mortgage lenders sometimes only accept certain construction firms and specific property developers. Or your case may be assessed individually.
Mortgage lenders also consider non-standard construction properties to fall into a higher risk category for second home mortgages. Examples of non-standard construction include:
- Unusual construction such as a thatched roof, prefabricated buildings, or kit houses
- High-rise apartments or small flats
- Ex-council homes
- Properties above commercial premises
- Properties with dangerous construction materials such as asbestos
If your chosen second home is non-standard in any of these ways, you may find the LTV is capped below 80%.
Second Homes and Stamp Duty
A final issue to consider when planning to buy a second home is Stamp Duty. Stamp Duty is a tax you pay to the Government whenever you buy a leasehold or a freehold property or when you buy land. In England and Northern Ireland, this tax is called Stamp Duty Land Tax (SDLT).
For second homes, you’ll have to pay an extra 3% on top of the standard rates. There's no Stamp Duty exemption on second home purchases, just as with buy-to-let properties.
SDLT for second home properties in England and Northern Ireland is as follows:
- 3% for properties up to £250,000
- 8% for properties between £250,001 and £925,000
- 13% for properties between £925,001 and £1.5million
- 15% for properties over £1.5million
You can use our online Stamp Duty calculator to calculate how much Stamp Duty you’ll have to pay.
Stamp Duty on second home properties usually must be paid, however there are specific cases where you can avoid it. For instance, if you’re buying a property worth less than £40,000, you won’t need to pay Stamp Duty on your second home. Also, you’re exempt if you're buying a motorhome, a mobile home, a caravan, or a houseboat for your second home.
Other Tax Considerations
As well as Stamp Duty, you’ll also have to pay Council Tax on your second property. That said, many councils offer a discount on furnished second homes of up to 50%. Check with the council in the area where your proposed second home is situated.
Finally, if you wish to sell your second home in the future, you should be aware that this sale will be subject to Capital Gains Tax as it's classed as an asset.
Types of Houses
There are a few common types of houses in the UK. This guide explains how they’re different, as well as how they can affect your mortgage and insurance needs.
Read the most frequently asked questions about getting a mortgage on a second home, which have already been answered by our mortgage experts.
Second Property Mortgages
Are you looking to buy a second home and need advice on a second property mortgage? Perhaps you’re planning to buy a holiday home? Read our guide to find out more.
Compare the latest remortgage rates and deals with our comparison tool and discover how this type of mortgage works, the process and if it’s suitable for you.
Second Home Stamp Duty
What is second home Stamp Duty? Learn how second property tax works & use our calculator to work out how much Stamp Duty you'll pay on a second home in the UK.
Buy-to-Let Stamp Duty Calculator
Find out how much Stamp Duty you’ll pay on your new buy-to-let property with our free and easy Stamp Duty calculator for second homes.