Is it Possible To Have Two Mortgages?

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Owning a home is a significant financial achievement for many. However, life can sometimes lead you down a path where it becomes a milestone but not necessarily the end of your property ambitions.

For example, whether you’re considering an investment property, a weekend home, or an additional living space for your growing family, you might consider taking on two mortgages at the same time.

But is that even allowed in the UK? And what are the special eligibility criteria you need to meet before qualifying?

In this guide, we’ll walk you through everything you need to know about the possibility of having two mortgages, including the different scenarios where this is viable and important aspects to keep in mind before requesting a second mortgage. So without further ado, let’s dive right in!

Is It Possible To Have Two Mortgages In The UK? 

The simple answer to this question is yes. Contrary to popular belief, there are no legal restrictions on having multiple mortgages in the UK.

However, lenders are not obligated to approve a second mortgage, and they typically have strict criteria for approving subsequent loans, especially with the heavy financial strain associated with having more than one mortgage at once.

Of course, the primary aspect lenders need to consider here is whether you can afford a second mortgage. You’ll need to demonstrate sufficient income to comfortably handle repayments on all your mortgages.

You should also know that a second mortgage is not your limit when it comes to mortgages, as you’re theoretically able to have multiple mortgages at the same time. The issue here is that with each additional mortgage, lenders become increasingly wary of your debt and how much you owe, compared to what you earn. 

As a result, approvals become more and more challenging (but not impossible) with each subsequent mortgage. In fact, while technically feasible, it’s extremely unlikely to find someone who has more than four mortgages at the same time.

Mortgage Comes In Different Types

Before diving into further details about multiple mortgages, you should note that mortgages come in different categories, with residential and buy-to-let mortgages being the most common types. 

Understanding these forms of mortgage is crucial to proceed with the guide, as the rules for each one can vary when it comes to multiple mortgages. Here’s a brief breakdown of each one of them:

Residential Mortgage

As the name suggests, residential mortgages are designed for individuals or families looking to purchase a property to live in themselves.

When applying for a residential mortgage, the lender will assess your affordability based on your income and outgoings to ensure you can comfortably meet the mortgage repayments.

These mortgages are typical repayment mortgages. In other words, you pay the loan amount and interest (whether fixed or variable) over a specific period, which is usually between 25 to 30 years.

Buy-to-Let Mortgage

Buy-to-let mortgages are specifically designed for those looking to invest in a property to rent out to tenants and generate income.

When assessing affordability for a buy-to-let mortgage, High Street banks and lenders will typically focus on the expected rental income from the property, rather than your personal income.

Of course, there will still be a minimum income requirement, but the main emphasis is usually to ensure the rent covers the mortgage repayments.

Buy-to-let mortgages are often structured as interest-only mortgages. This means you only pay the interest on the loan each month, and the full loan amount is then repaid at the end of the mortgage term. This usually includes selling the property itself, but not necessarily.

Different Scenarios For Having Two Mortgages

Another important note to keep in mind here is that taking on a second mortgage can actually have various meanings. Each scenario can have its unique purpose and requirements. 

In the following section, we’ll take a look at the different scenarios associated with having two mortgages at once and how they work:

One Residential and One Buy-to-Let Mortgage

Having two mortgages typically involves two separate properties. In that case, the most common situation here is having a residential mortgage on your home (where you live) as well as a buy-to-let mortgage on an investment property that you rent out.

As previously explained, these two types of mortgages are different in terms of eligibility criteria, so you’ll need to apply to each one of them separately.

However, the approval rate of combining these two mortgages is relatively high, as long as you’re able to afford them and have the right guidance by your side.

Two Residential Mortgages

In all cases, your ability to afford the mortgage is critical for approval. However, for a second residential mortgage, you’ll also need to demonstrate a viable reason to convince lenders why you need it. 

The following are some of the most common reasons for having multiple residential mortgages:

  • Buying a vacation or a weekend home that you can easily afford
  • Constantly moving between two cities for work and need a place to stay in both
  • Buying a property for a relative to live in, such as a parent.

 

It’s important to note that you can’t use a residential mortgage to buy a rental property, as these have different tax rules and eligibility criteria. In fact, in some government assistance schemes like the Help to Buy Scheme, the property you purchase must be your main residence. 

To put it simply, you might be able to afford the mortgage financially but still not qualify for one legally.

Two Buy-to-Let Mortgages

Similar to residential and mixed mortgages, you can also take multiple buy-to-let mortgages at once. That being said, qualifying for them becomes increasingly difficult as they pile up.

This is because every time you apply for a new buy-to-let mortgage, lenders will consider your previous mortgages as financial obligations and debts that reduce your credit score. This will also reflect on the larger deposit you may be required to pay as a part of the mortgage application process.

That being said, unlike residential mortgages, there are little to no legal regulations when it co comes to multiple buy-to-let mortgages. In other words, your financial stability should be your only burden.

Can I Have Two Mortgages on the Same Property?

In addition to having two mortgages on different properties, you can also have two mortgages on the same one. This typically goes by different names, such as second-charge mortgage, but it’s not the same as refinancing or a current mortgage.

The simplest way to describe this type of mortgage is that it’s an additional loan that you secure against the equity you’ve built up in your property, which is the difference between its current value and what you still owe on the first mortgage.

For example, if your home is now worth £300,000 and your existing mortgage is £210,000. This means you have £90,000 of equity. With a second-charge mortgage, you could borrow up to this amount, secured by your home.

The key difference between a second-charge mortgage and remortgaging is that you don’t replace your current mortgage. Instead, you take out an entirely new loan alongside your existing one. This also means you’ll end up making monthly repayments on both loans.

What Are The Qualification Criteria For A Second Mortgage?

Securing a second mortgage hinges on meeting specific criteria that different lenders will assess you against. These eligibility aspects can vary significantly between lenders, so they should be treated case-by-case.

However, to give you a brief idea of what to expect, here’s a quick look at the common aspects many of them will assess:

  • First Home Equity Value: Before approving a new mortgage, lenders will want to ensure your home’s value, combined with your financial situation, surpasses the requested second mortgage amount.
  • Credit Score: Having a high credit score is also necessary for approval and interest rate value. Keep in mind that each organisation assesses your credit score a bit differently, so you need to check the formula your current provider follows
  • Debt-to-Income Ratio: The lower this ratio goes, the more likely you’ll be able to get a second mortgage at a better rate.

 

Lenders may also consider additional factors like your employment status, net income, history with the lender, and more while assessing your eligibility for the mortgage. 

Frequently Asked Questions

Can I live in my buy-to-let property?

In most buy-to-let mortgage arrangements, your mortgage provider will specifically place terms that prevent owners from living in the property.

As a result, living there would be a breach of the agreement, which can lead to several legal issues that vary depending on the offence severity and the terms specified, ranging from fines and major penalties (such as asking you to pay the loan in full) to potential jail time for fraud.

Is it better to get a second mortgage or remortgage an existing property?

Choosing between either of those options varies depending on your situation, as they both have their advantages. For instance, getting a second-charge mortgage is ideal if you want to access cash using your home’s equity but can’t land a better deal on your mortgage.

On the other hand, refinancing your mortgage allows you to replace your existing mortgage with a completely new one, which typically helps you get a lower interest rate or change the loan term.

It’s usually a good choice if you have a massive improvement in your credit score since applying for your current home’s mortgage.

Can I rent out a property that I obtained through a residential mortgage?

Renting out a property under a residential mortgage is illegal because it’s taxed differently. Additionally, using the property as residence is also a requirement for the mortgage, so it’s considered a breach of contract.

You should also note that your regular home insurance won’t cover rental activities, and most insurance providers won’t extend your insurance to cover them without a buy-to-let mortgage.

However, you can inform your provider about your intentions to switch your mortgage into a buy-to-let one, which requires specific arrangements but is doable and quite common.

Of course, once you pay what you owe on your property in full, you’re allowed to rent it out freely, even if it is a residential mortgage.

What are the typical interest rates on the second mortgage?

A second mortgage is treated as an entirely separate mortgage, so its interest rates are similar to standard rates.

However, it’s heavily impacted by the presence of current mortgages, which increases the debt-to-income ratio, increasing the potential interest rate to the upper end (up to 20%)

Conclusions

Securing a second mortgage requires a deep understanding of your financial situation and careful planning to find out whether it’s the right step for you. 

If you’re considering a second mortgage, consider seeking the assistance of a professional mortgage broker like When The Bank Says No

We have the expertise and contact to identify the best loan options for your needs and negotiate favourable terms with lenders.

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Emma Jones
Emma Jones
Emma began her career in Lloyds Banking Group, first in the unsecured & secured loans department at Halifax and later as a mortgage advisor at Lloyds. During 9 years in these roles and a further 2 years at Yorkshire Building Society, Emma was able to observe the impact of the recession, and how the banks let their customers down by denying loans and mortgages. Wanting to be a driving force for change, she stepped into a market advice role where she has been able to help clients when others couldn’t. Identifying a gap in the mortgage space, Emma went on to establish When the Bank Says No. As a keen property investor, she has been the focus of features in publications including The Sunday Times and This is Money. Emma’s greatest joy is overcoming the low expectations of their customers, many of whom have all but given up on getting a mortgage due. One thing Emma has learned through her own personal struggles is every client must be treated like a human and understood better by advisors and lenders in the industry. “We all have to navigate life events which can ultimately impact your financial status. It shouldn’t mean dreams of homeownership or business growth should have the breaks applied”. Emma and her team’s passion for helping people overcome the challenges they may face when applying for a mortgage have fuelled the success of When the Bank Says No.

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