Can You Have Multiple Mortgages?

Can I get more than one mortgage?

Are you considering buying another property? Maybe it’s a second home, a holiday home, a commercial property or a buy-to-let property. Or perhaps you are looking to take out a second mortgage on your property for home improvements. Whatever your reasons, it is possible to have multiple mortgages and there are no legal limits to stop you. Lenders, on the other hand, may have limits and whether your applications will be successful is another thing entirely. Each lender has their own set of mortgage rules defining what they will accept and there are no guarantees. To improve your chances of being accepted for your next mortgage application, it’s worth working with a mortgage advisor. Our trusted team can help you secure the right mortgage for your needs, so get in touch to apply today.

How many residential mortgages can I have?

There are no specific rules when it comes to how many residential mortgages you can have. If you want to buy a holiday home, or a second home to live in, you can. You’ll need to prove to the lender that you can afford to make the monthly mortgage repayments. If you are considering buying a second home, you’ll need to inform the lender which property is your main residence and they’ll want to see proof of this. When taking out another residential mortgage on a second home you will normally have to select one as your ‘main residence’ and will need to evidence this. Residential mortgages cannot be used to purchase a property that you intend to let out so if this is your intention you will need to apply for a buy to let mortgage.

Common Scenarios for multiple residential mortgages include

• A second home you use during the week whilst working (you return to your main residence on a weekend)
• One or more holiday homes either in the UK or abroad
• You are divorced or separated, can’t be removed from the mortgage and need a mortgage for your new home.

What are the rules for buy to let mortgages?

The rules surrounding Buy To Let (BTL) mortgages work slightly differently. With residential mortgages, lenders review your income and financial commitments to determine whether you can afford to repay the mortgage. With BTL mortgages the lenders assess the rental income to determine that this is sufficient to repay the mortgage payments. It’s therefore possible to have multiple BTL mortgages, the rent from which can then be used to prove an income.

If building a BTL portfolio, borrowers will have multiple mortgages. If you have more than 4, the lender will consider you a ‘portfolio landlord’. The criteria for portfolio landlords is more stringent and the lender will normally carry out more checks into your portfolio to check (amongst other things) your total rental coverage. I.e. Do all your rents cover your mortgage payment and by what percentage? This is to ensure that if rates increase, the mortgage payments can still be met.

What are the rules for holiday homes?

Want to buy one or more holiday homes to let out? You’ll need a specialist type of mortgage known as a holiday let mortgage. Holiday let mortgages normally allow you to reside in them for a short period (normally less than 90 days) but it’s expected that for the majority of the time they’ll be let out to tourists. 

A lender usually calculates how much you can borrow for a holiday let mortgage based on the rental income you are expecting to receive. As rental property values can vary based on season, this is often factored into lender affordability calculations and the rental income for high, middle and low seasons would be confirmed by the letting agent. Whatever figure the lender uses, the projected rental income needs to comfortably cover the mortgage payments with a preset safety margin – usually 125% – 145% of the mortgage payment. You’ll also need to meet the lender’s income criteria and a deposit of 20%. 

Owners of furnished holiday let properties can also benefit from some special tax benefits which aren’t available to standard BTL landlords. Mortgage interest on holiday let mortgages is fully tax deductible as is the cost of furnishing the property. A landlord’s rental income also counts as ‘relevant earnings’ when it comes to pension contributions and they are able to claim certain capital gains tax reliefs on sales. Some lenders do have limits on how many holiday let mortgages you can actually have though, so this is also worth bearing in mind. This isn’t tax advice, so consult an accountant. 

Can you have multiple mortgages on the same property?

Yes, it’s possible to secure multiple mortgages against the same property. Also known as second (or third) charge mortgages, these allow homebuyers with equity in their homes to borrow more. A second mortgage is completely separate from your original mortgage so you can retain your current mortgage deal. Customers often choose second mortgages because their lender won’t allow them to borrow more or isn’t offering competitive rates. They can borrow what they need and pay less because they won’t incur early repayment charges to remortgage elsewhere.  Despite this, it’s important to note that interest rates for second charge mortgages tend to be higher because of the risk to the lender, but rates can still often be lower compared to unsecured personal loans.

Can anyone have a second charge mortgage?

To qualify for a second charge mortgage, you’ll normally need to get permission from your current lender. You’ll also need to undergo a full affordability assessment to ensure that you can afford the payments for both mortgages. The amount of equity you have built up will also be a factor in how much you can borrow. Many second-charge companies will only allow you to borrow a combined total of 75% of your home’s value although this figure can vary up to 95% depending on the lender.

Things to consider before applying for a second mortgage

There are a few factors to consider before applying for a second mortgage these include:

Affordability 

What is your monthly budget for mortgage payments? Can you afford an additional payment and if rates rise, can you afford an increase to your monthly payments?

Your credit rating

Your credit rating is determined by your past history of the conduct of your financial commitments. Do you have a good track record of making payments? Do you have any adverse credit registered against you? How much debt do you have? And how much is your debt vs your income? All of these factors can potentially influence a lender’s decision to provide a second mortgage and affect what interest rates you might be eligible for.

A lenders perspective 

The lender will want to know why you are taking a second charge out in the first place. They will also look at your history, including whether you have taken out any second charges before and your history of repayment. Repayment is important to your lenders, in the event of a repossession the second charge lender is repaid last (after your original lender is repaid) so the risk for them is higher.

We strongly recommend that you speak to our team of mortgage advisors. They can discuss whether a second mortgage is right for you or if there is another more suitable option.

Get expert advice on taking out multiple mortgages from a trusted advisor

If you are considering taking out multiple mortgages or securing a second charge against a current property, then it’s worth speaking to our friendly team. Our experienced mortgage advisors can talk you through the options that are available to you to find the mortgage that’s right for your situation. Our advisors have unlimited access to a wide range of mortgage products available on the market and are completely independent so can recommend options that are perfect for your situation. If you need more specialist lending like a second charge lender or holiday let lender, our team has extensive connections to specialist lenders who can help you achieve your goals. Get in touch to start your mortgage application today.