Call free on 0800 694 5566 Open 24 hours a day.

or

Read here about what we're doing at Norton Finance to assist our customers during COVID-19

Second homes and second mortgages

If you’re thinking of investing in a second home, it’s important to understand everything that goes with getting a second mortgage, including eligibility and affordability.

Thinking of branching out to buy a second home? Unless you have the funds to buy a property outright, this will involve applying for a second mortgage.

Having two homes means two mortgages with separate regular payments - does this make sense for your circumstances? Our guide aims to help you understand the process. 

Taking out a second mortgage to buy a second home

In this instance, taking out a second mortgage means buying a second home, not remortgaging what you currently have or releasing equity for a second-charge mortgage on a single property.

To take out a second mortgage to buy an additional property, you must be in a comfortable position with your existing commitments. For instance, if you live wage to wage, have credit card payments, standing orders and bills on top of your mortgage, applying for another might not be a great idea.

To consider taking out a second mortgage, you will, of course, need to meet the requirements of a lender. Being able to handle your outgoings comfortably and having disposable income to hand is essential to both fulfil what the lender is looking for and ensure you’re not living beyond your means. 

What is a second home?

For tax reasons, a second home is defined as a property that’s not your primary residence. However, you may intend to occupy this home for part of the year.

There are many reasons some choose to buy a second home. For instance, you might live in the countryside but have a second property in the city for work purposes. Alternatively, a second home often works for people as a holiday or weekend home.

Some choose to put their savings into a second home as an investment – sometimes this is with retirement or inheritance in mind. 

Can I rent out a second home?

The rental of your second home is a viable, and sometimes sensible, option - especially if you wish to get help with covering mortgage payments.

How you choose to rent out your property will depend on the amount of use you wish to get out of it personally, but there are a few options when it comes to renting:

Choosing the right second mortgage

Buying a second property and committing to a second mortgage is a big decision to make financially, so it’s important to understand the ins and outs of the situation.

What kind of deposit will I need for a second home?

While there are often mortgage products starting from 5% deposit for first-time buyers, the deposits required are likely to be higher for a second mortgage. Many lenders will require a minimum deposit of at least 25% for a second home.

Are mortgage rates higher for second homes?

Yes, rates are often higher for second mortgages, so you’ll need to work out whether you can afford an additional payment that will exceed your current one.

What might limit my chances of getting a second mortgage?

There are some key factors to consider and a few things that have the potential to limit your chances of being able to buy a second home, such as:

Will I have a range of second home mortgage products to choose from?

You will likely have to do a lot of shopping around for a second home mortgage as fewer lenders offer this option. Finding something that fits your circumstances might take a lot of hard work, but there are things you can do to improve your chances, including:

Can I have mortgages with more than one lender?

Yes, it’s possible to have a mortgage with a different lender for your second mortgage. However, your current lender has all your details and a firm understanding of your financial situation, including what you can afford to pay so will be worth approaching first.

A second mortgage is a big financial undertaking that can affect your credit score. If you can’t find an affordable deal, it’s worth waiting.

You might pay off a little more on your first mortgage, or even investigate if it’s worth remortgaging your current property to a potentially lower repayment. This might help if you decide to try again further down the line.

Remember that borrowing more on your mortgage could put your home at risk, so these decisions should be carefully thought out.

Hopefully, this guide has given you a better understanding of second mortgages. If you’re looking to get your finances in order and better manage your repayments, then get in touch with Norton today.


Share:

For your FREE, no-obligation quote

Get a Quote Now

Alternatively, call FREE on 0800 694 5566 Open 24 hours a day.


Categories


Featured Articles

2020 Platinum Feefo Trusted Service Award

Call us FREE on 0800 694 5566

24 hours a day, 7 days a week.

Complete our quick online form.

Get a Quote Now