If you already have a residential mortgage, it is still possible to obtain a second residential mortgage depending on the use of that second property. For this to be a possibility, the reason for the application should be one of the following:
- A marital breakup
- Separation
- Pied à Terre (meaning a property bought for occasional use)
- A holiday home purchased for personal use
- A holiday home purchased for personal use and limited rental
As such, some people may find themselves forced into considering this scenario if they fall into one of the first two categories given above. Others may wish to enjoy the freedom of having a holiday home they can visit whenever they wish, without needing to book accommodation. A few may view a second home as a solution to a long workday commute, allowing them to live in town during the week and to return home at the weekends.
What is the lender looking for?
The most important thing the mortgage lender is looking for is whether you can afford the second property. You must be able to prove your income is sufficient to cover two mortgage payments and your remaining monthly outgoings. If you cannot prove this, it is unlikely you would be accepted for a second mortgage. However, if you can provide documentation that proves your affordability status, a lender will be willing to loan you the money for a mortgage on a second property for your own use.
How does the lender calculate affordability?
The Mortgage Market Review requires all lenders to consider whether applicants can afford the home loan they are applying for. This includes a stress test to determine whether the homeowner would still be able to meet the repayments if interest rates were increased.
This applies in the scenario of a second home loan just as it would with a loan on a main home. However, if you apply for a second residential loan, your current outgoings would of course include the amount paid for the first loan on your current property.
That said, different lenders may use different methods for assessing affordability. Similarly, some may be prepared to lend more than others. If you use a mortgage broker, they will be able to advise you on which lenders would present a better option for you. They will know the specific criteria and quirks of each lender. They will also be able to highlight any lesser-known lenders who may prove to be a better choice when making your application.
If you choose a decent, reputable mortgage broker, there should be no charge associated with this type of service.
Is there anything you should avoid?
The main criterion is to be honest. Do not say you are going to use the second property as an occasional holiday home if you intend to rent it out as a holiday property throughout the year. Similarly, do not try and get a second residential mortgage on a property you intend to put on the letting market.
Lenders are aware of the different types of mortgage fraud some applicants will attempt to get past them. You can only apply for such a loan if you fall into one of the categories mentioned above. It may seem easy to try and pull a fast one, but you will come unstuck. Lenders share information with each other to help prevent such instances.
If you did manage to successfully get a second residential loan on another property and you used it as a permanent holiday rental or standard rental property, expect to be found out. That may put your property – and your reputation – at risk. Obtaining a mortgage by fraudulent means is a criminal offence and may be treated as such.
What do you need to do next?
If you would like to discuss your existing mortgage or talk to a broker about the possibility of obtaining a second residential loan, contact us today. Our experienced brokers are happy to assist and advise you. It takes just a few moments to complete our online enquiry form to find out more.
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