If you are looking to invest in another property that isn’t your current home, you are going to need to take out another mortgage. There are many different reasons why someone may want a second mortgage. Some people may even want more! It entirely depends on what the applicant wants.
Before you will be able to take out another mortgage, you will first have to pass the same affordability checks, credit checks etc., that you passed to qualify for your current mortgage. In order to understand why people may want to take out another mortgage, we have compiled a list to show how it can be made possible in both residential and buy to let scenarios.
Before you can take out another mortgage on a residential property, you will have to demonstrate that you can afford it. Lenders will need to see that you can not only afford one but two mortgages. Most people want a second residential home for a home away from home. They may use it for work, get-aways/holidays or for their family to stay in from time to time.
We have seen that some people may take out a second mortgage to purchase a home for a family member. This option isn’t as popular as people prefer to use gifted deposits over paying another mortgage off.
The problem that you may encounter when taking out a residential mortgage is that you can only live in one property at once.
You also cannot buy another property with a residential mortgage, with plans to let it out in the future. Buy to lets are taxed differently, therefore, this would be illegal.
Residential mortgages have high loan to value ratios. This loan is being secured against the property (or an asset). With this in mind, you usually cannot get another mortgage on the same property.
The only real exceptions would be if you took out a second charge mortgage or a further advance. A second charge mortgage allows you to borrow slightly more from your property with the same lender, and a further advance is the same but through a different lender.
Because you’re borrowing extra on top of your existing mortgage, you will have to pass various affordability checks before receiving the go-ahead. Depending on which product you take out and the rates that come with it, these could end up costing you quite a bit. Speak to a Mortgage Broker in Sunderland like us before taking out something like this.
Buy to lets mortgages are a little easier to work with if there is more than one. There are no real limits to how many buy to let properties you can have, which is why it makes it easier.
Qualifying for them can be difficult, however. You must consider that the more buy to let properties that you have, the more monthly repayments you are accountable for. Theoretically, they should pay for themselves, however, if your tenant moves out and you struggle to find a new one, you are accountable for the repayments. Lenders will check that you can afford this before they let you take out your new buy to let mortgage.
One issue that you may encounter could be the location of the property. Some lenders may be less willing to lend on a street where you already own a property. We have also seen that they may not be willing to lend on a property that is in the same area as one of their own buy to let properties. The reasoning for this is that if one of the properties goes down in value, they’re likely to be more affected by it.
Strictly, no. Living inside of a buy to let property is a breach of your contract between you and your lender. You may be fined for this and face legal action. If you want to turn your property into a buy to let, you will need to remortgage the property and take out a new deal suited to your needs. Before you do this, you should look into buy to let mortgage advice in Sunderland.
If you still have any more questions regarding residential and buy to let properties, feel free to get in touch with our team. We recommend speaking with a Mortgage Broker in Sunderland to get the best answer to your specialist questions.
Having one mortgage to sort out can be stressful enough, never mind another one! Our team at Sunderlandmoneyman are more than happy to help and we can’t wait for you to get in touch. Book your free mortgage appointment online or give us a call.
Date Last Edited: 19/02/2024