Recent mortgage Q&A
Finding a mortgage for a second home
Before you start looking for your second home there are a few things you will need to be aware of if you are planning on taking out a mortgage to finance the purchase. The main one is that you are only permitted to have one main residence and this also means that you are only entitled to one residential mortgage. Residential mortgages are far easier to access as there are so many to choose form, however mortgages for a second home is a niche market so you will have to do some research in order to find out what your options are and which ones will provide you with the best deals.
What are you going to use your second home for?
Your answer to this question is going to determine which type of second home mortgage you are going to need. If you second home is purely for your use, or if you are going to let it but not make any profit, in other words, the income is either equal to or less than the monthly mortgage payments, you will need a second home mortgage, which is not very common, but they are growing in number. If you are planning on renting out your second home to someone else, including family, you will need a buy to let mortgage and you will then be required to let your property through an assured tenancy that lasts for a minimum of six months. However there are some lenders who have slightly more relaxed requirements for letting if you want a little more flexibility.
What sort of deposit will I need?
Whether you are planning to buy a second home as a holiday home, or you are planning to buy to let, you will need a deposit of at least 25% of the value of the property that you are planning to buy. You will find, however, that some mortgages require you to have an even larger deposit, which can be up to 40%. Therefore these types of mortgages are targeted at the more affluent due to the higher deposit requirement and also because the repayment interest rates are generally higher as well.
Can I get an interest only mortgage for my second home?
Many lenders have now withdrawn interest only mortgages from the second home market due to the issues that borrowers were facing as house prices fell, along with interest rates, meaning that ensuring that the final payment to pay off the entire loan was often falling short.
Can I get a mortgage for a second home overseas?
It is possible to get a UK mortgage if you wish to buy a second property overseas for you to use as a holiday home. The location often doesn’t matter; instead your intended use of the property will dictate which mortgages are available to you. The main criteria will be whether the income from a holiday let will meet or exceed the mortgage payments. You can get specific holiday let mortgages, but these are pretty rare.
Do your research and get advice
Before you start searching for your dream second home or holiday house you will need to do some research to find out how best to manage your purchase. Due to the higher interest rates on any second home mortgage you would be better off increasing your mortgage on your main residence in order to put down a larger deposit on your second home in order to pay less interest on the loan. You will also find that you are able to get better rates as well.
While you could do all of the research yourself, you would actually be better off getting advice from a mortgage broker. For second homes, buy to let properties and holiday lets you should look for a specialist mortgage broker who has experience in that area because they will already be aware of the products available, the limitations and restrictions that come with each one and also all of the relevant costs. Paying a little for the advice of a mortgage broker early in the process could potentially save you thousands in the long term by ensuring that you are working with the most up to date information.
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