Is It Possible To Have Multiple Mortgages?
In the UK, there are no legal restrictions on the number of mortgages a person can have. However, the criteria for multiple mortgages can be challenging to meet, especially after obtaining the first few mortgages. The majority of people have a residential mortgage on their main property and then any additional mortgages are typically on a buy-to-let basis.
While it’s possible to have multiple residential mortgages, the lender will require proof that the borrower intends to live in both properties. On top of this, each lender has different criteria, so it’s important to consult with a mortgage advisor before applying for multiple mortgages because they’ll help you understand your options and guide you through the process.
What Types of Second Mortgages Are There?
1. Second Charge Mortgages
A second-charge mortgage allows homeowners to borrow money by using their home equity as collateral. It’s also known as a secured loan and can be used for various purposes, such as a home improvements loan, debt consolidation or other expenses. Second-charge mortgages are often used by people who cannot remortgage their homes or who prefer to keep their current mortgage.
2. Further Advances
Further advances are an additional loan from the same lender. They allow homeowners to borrow more money against the equity in their property. A great benefit of this type of loan is that the interest rate on further advances is typically the same as the primary mortgage.
3. Bridging Loans
Bridging loans are a type of short-term loan that’s used to bridge the gap between the purchase of a new property and the sale of an existing property. They are often used when homeowners want to buy a new home but have not yet sold their current home. Bridging loans are typically more expensive than other types of loans and they usually have a higher interest rate.
4. Equity Release
Equity release mortgages allow homeowners to release equity from their property without having to make any repayments during their lifetime. Instead, the loan is repaid when the property is sold, usually after the borrower passes away or moves into a care home. However, it’s worth pointing out that equity release mortgages are only available to homeowners who are aged 55 or over.
Buy-to-let mortgages are used to purchase a property that’ll be rented out to tenants. They are often used by people who want to invest in property and generate rental income but they usually require a larger deposit than residential mortgages and the interest rates are typically higher.
Can You Have Two Residential Mortgages?
There are certain scenarios where you may want to take out two residential mortgages. For example, you may live in one property during the week for work purposes and in another during the weekend. However, to have two residential mortgages, you’ll need to provide plenty of evidence to the lender to prove that this is the case.
The main reason why there are restrictions with multiple residential mortgages is due to legal reasons (i.e. illegal sub-letting). This is because, with residential mortgages, you don’t require a larger deposit than you would do for a buy to let mortgage.
What To Consider Before Taking Out A Second Mortgage?
- Affordability: Can you realistically afford the repayments on a second mortgage? You should look at your income and outgoings to determine whether you can afford the additional loan.
- Eligibility: Lenders have different criteria for second mortgages, so it’s important to check whether you meet their requirements. You may need a good credit score and a high level of equity in your property.
- Repayment: You should consider how you’ll repay the second mortgage. Will you repay it alongside your primary mortgage or as a separate loan? You should also consider the length of the loan and the interest rate.
- Purpose: You should have a clear purpose for the second mortgage, whether it’s for home improvements, debt consolidation or another reason. You should also consider the potential risks, such as the possibility of falling property prices.
- Professional Advice: It’s important to seek professional advice before taking out a second mortgage. A mortgage broker (such as ourselves) can help you determine whether a second mortgage is the right option for you and can help you find the best deal.
To conclude, it’s possible to have two mortgages but it largely depends on your financial situation and the lender’s criteria.
However, before taking out a second mortgage, you’ll need to consider your affordability, eligibility, repayment options, purpose and seek professional advice. It’s also important to remember that your home is at risk if you default on the loan, so you should only take out a second mortgage if you are confident that you can afford the repayments and that it’s the right option for you.
If you require further information regarding taking out a second mortgage, feel free to get in touch with our team and we will try to help out where possible.