The great news is that even with the tighter restrictions on lending that were introduced in April 2014 you can still have more than 1 mortgage providing you meet the lending criteria. In fact, you can have as many mortgages as you can afford. Let’s take a look at some examples of the criteria for additional mortgages.
Mortgage for a second home
It is possible to get a mortgage on a second property or a holiday home, provided it is for your benefit and will not be let out for commercial gain.
Affordability rules still apply, meaning all outgoings (including the mortgage payments, council tax and utilities on your main residence) will be taken into account when calculating how much you can borrow and you might find that you also need a larger deposit. Usually second home mortgages are limited to a maximum of 75% of the property value.
Buy to Let / Holiday Let Mortgages
Buy-to-Let and Holiday Let Mortgages are calculated in a very different way to a traditional mortgage.
Potential borrowers have to show that the rental yield for the property in question will exceed 125% – 145% of the interest payment of the mortgage (dependant on the lender’s interpretation of the Prudential Regulation Authority’s (PRA) rules.
In addition to this, you’ll need to pay a deposit of at least 20-25% and prove that you have an income which in the event that the property remains vacant for a number of months, is enough to pay the mortgage.
The lending criteria for Buy to Let and Holiday Let Mortgages means you can potentially have an unlimited number of mortgages, provided each property purchase is made with a sizeable deposit and exceeds the income tests and interest coverage rules at the time.
Alternative methods of raising capital
If you don’t meet the criteria for an additional mortgage by yourself, all hope is not lost. There are still a number of options available to raise the capital you need:
- Refinance your first property to release equity
- Buy with a partner. Providing the partner manages their finances well, this could increase your borrowing potential
- A Guarantor Mortgage. If you have a poor credit rating or a smaller deposit – a guarantor with sufficient equity in their property could provide you with leverage to obtain the capital you need
- Take a second charge – lenders that arrange a loan secured on the property after the first charge lender can sometimes take a more lax view on income multiples and income streams, allowing you to borrow more
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
Doing it right can save you £££’s
With multiple methods of borrowing and a wide array of products on the market, making the right choice could save you thousands of pounds over the life of the mortgage so it’s worth getting it right at the beginning.
At Credius, we offer a free initial consultation to ensure you get the most appropriate product for your borrowing needs. Call us today on 020 7562 5858 to learn how we can help.