Rules & Eligibility Requirements for Second Home Mortgage

Thinking of buying a second home? It isn’t as straightforward as buying your primary residence, but there are still plenty of finance options available – it’s just important to know the rules first. Here’s everything you need to know about buying a second property and how to get the mortgage you need.

How to get a second home mortgage

Your first step should be to make an enquiry with us so we can match you with a broker who specialises in second home mortgages. This can significantly improve your chances of securing the best possible deal.

The broker we match you with will guide you through the following steps:

• Assessing whether you should release equity from your home for the deposit
• Finding the right lenders and rates for a second home mortgage
• Helping you secure the best deal and complete your application

What are the rules and requirements for buying a second home?

People choose to buy another property for a variety of reasons, but you need to be aware of the rules before you take the plunge. There are specific regulations around what qualifies as a second home, tax implications and the type of insurance you need.

A mortgage broker who specialises in second home guidelines will be best-placed to help, but here’s a quick overview of what you can expect…

What’s classed as a second home?

A second home is essentially any other property you own that you don’t live in all the time. It could be a holiday home, for example, perhaps a property you only live in during the week, one you’ve bought for someone else or that you part-own with a family member.

Note that this only applies to residential properties. You may of course want to buy a second home purely to let it out, but this will be classed as a buy-to-let or investment property, and the legal and financial requirements will be different accordingly.

If this is the route you want to go down, you can find out more in our guide to buy-to-let mortgages.

Stamp duty implications

You’ll need to pay an additional 3% stamp duty surcharge on any additional property you own. It’s based on a tiered system, so the higher the value of the property, the more stamp duty you’ll pay. Though you won’t pay a flat rate – it’s a progressive system so you’ll only pay a percentage on each portion of the property’s value.

Note that no stamp duty is payable on second properties worth less than £40,000.

You can use our calculator below to work out how this could look for you, based on the property you’re looking to buy:

Council tax

Council tax implications may differ as well, but not always. You’ll still need to pay council tax on a second property, but some councils are able to offer a discount, the amount of which can vary. This will depend on your particular council, so you’ll need to contact them to see if a discount will be offered.

Other tax implications

Second homes will be subject to capital gains tax (CGT) when they’re sold, but you’ll only pay tax on any growth in value. You’ll also have a CGT allowance to use, which can reduce the amount of tax you’ll need to pay. This can be a tricky area, so it’s vital to speak to an expert broker and ideally a financial adviser who can offer more support.

Rules around insurance

You likely won’t be eligible for standard home insurance, largely because you may be leaving your property unoccupied for long periods – most insurers will only allow the property to be unoccupied for a maximum of 30 days – and so will need a specialist policy to suit your needs.

Eligibility criteria

Standard eligibility requirements will be broadly similar for second home mortgages as for primary residences, but there can be differences when it comes to things like deposits. You may also be expected to specify your reasoning for wanting a second residential mortgage, so be prepared to answer some additional questions.

Deposit requirements

You’ll normally be expected to put down a bigger deposit for a second home mortgage, with maximum loan-to-values (LTVs) typically in the range of 75-80%. There are a few lenders that will go higher than this, while others set a lower maximum if you want an interest-only deal.

Many will take into account the level of equity you have in your primary residence, and some will set a combined LTV for both properties. It will often be decided on a case-by-case basis, which makes having an expert broker on your side who knows each lender’s requirements for second mortgages invaluable.

Mortgage affordability

Bear in mind that your affordability profile will come into even sharper focus when buying a second home, namely because you’ll need to prove that you can afford to cover payments for two mortgages, rather than just one.

Lenders will take your existing mortgage payments and all other related costs into account before deciding whether or not they can lend to you, and their affordability checks will often be stricter. Make sure to check your credit score too, as if it’s worsened since you bought your first home it could be more difficult to be approved for a second residential mortgage.

Try our mortgage affordability calculator below to get a rough idea of how much you could borrow…

You’ll be more likely to be approved if you’ve got plenty of disposable income, or if you’re close to paying off your mortgage on your first property. If you’re struggling to make the repayments on your primary mortgage, you’ll likely find it very difficult to be approved for a second.

Are mortgage rates different for second properties?

Take a look at our rates table below to get an idea of what deals are currently available for second home mortgages. Please note that these rates are subject to change.

Please note that the above rates were accurate at the time of writing, but are always subject to change at the lender’s discretion. Speaking to a mortgage broker is the best way to find the most up-to-date deals.

Remortgaging to buy a second home

If your primary residence is mortgage-free or you have a lot of equity in it, you may be considering remortgaging it to buy a second home. This is a common way to raise capital for a new deposit and, provided you’re still able to prove affordability, shouldn’t pose too many issues.

Though again, bear in mind that these affordability checks will be tougher than if you only had a single mortgage, and if you’re going from being mortgage-free to having two home loans, it may take a bit of adjustment to work the repayments into your budget. Make sure you can, and that  you can prove it to lenders.

Can you get a second mortgage with bad credit?

Yes, it’s possible. There isn’t a huge difference between getting a mortgage for a primary residence with bad credit and getting a second mortgage under the same circumstances.

In addition to affordability, a mortgage lender’s main concern in such cases will be the type of bad credit recorded on your report, the amounts involved and when this event occurred. Some lenders will also take account of why it may have happened as there may be tangible reasons for it. 

If you do have bad credit this could reduce the pool of lenders willing to consider your application which can have an indirect affect on the interest rates available and the deposit requirements will likely be higher to offset the perceived risk.

Getting a second residential mortgage for a family member

This is very much possible and is a common reason people take out a second mortgage. Borrowers looking to take out a second mortgage for this purpose actually have more options as they are special types of mortgage agreement that could help you out.

If you want to help a family member get on the property ladder, you can get a second standard residential mortgage for this purpose and this would essentially work in the same way it would if you were buying a second property for yourself.

Another possibility could be getting a joint borrower, sole proprietor mortgage, provided you are happy with an arrangement that offers you less rights in terms of ownership.

Get matched with a second home mortgage specialist

Having the right broker on your side can make all the difference when you’re buying a second home, and we can put you in touch with the expert to help. Just tell us a few details and we’ll scour our extensive network of brokers to pair you up with the one who perfectly matches your requirements, all for free and with no obligation.

Get in touch today – just call us on 0808 189 2301 or make an enquiry and we’ll get started.