If you are contemplating buying a second home –maybe a holiday home or a home that will only be lived in during the week (but not buy to let) – then it’s wholly important to understand a lender’s requirements.
This will vary from lender to lender, but as with all mortgages, the amount you will be able to borrow will primarily be calculated on your personal income and affordability, albeit with slightly tougher requirements than you will have experienced with your first mortgage. This is largely due to the element of high risk as, understandably, lenders will want to know that you will actually be able to meet both your monthly mortgage repayments
There does tend to be a range of income variables available, but these are usually capped at four times your earnings. That said, if you can only just afford the repayments of your first mortgage, then its very unlikely you will be considered for another.
Lenders will take into consideration the Loan to Value (LTV) of your current home, and the one you are hoping to buy.
With regards to a deposit, in the majority of cases (due to the added risk of a second mortgage), some lenders will demand 25% or more, on the basis you have at least 15-20% equity in your main residence. Get lucky and sometimes it is possible to find a lender willing to pass over your main residence and offer a lower deposit. As whole of market, independent advisers, we are really well placed to help find the perfect solution based on your financial situation – we’ve even managed to help clients where others have failed, so there is always a fighting chance that we can help.
Two final points to touch on…
Be prepared to answer questions as to why you are buying a second property – it can be the difference between you being made a mortgage offer or having it declined. Lenders may also require proof that after the purchase, one of the properties will still remain your main home.
The location of second home is also a consideration – some lenders aren’t keen on overseas homes. They bring an increased risk due to currency fluctuations and property markets. But if a Lender feels the second home will benefit you in some way – for example, if the second home is closer to your place of work.
Whatever your situation, if you are considering buying a second property speak to a member of our experienced team today.
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