Can I Have More Than One Mortgage?
The short answer is yes, in fact you can have as many mortgages as you can afford providing you meet certain criteria laid down by the lenders.
The Mortgage On Your Main Residence
It is only possible to have ONE mortgage that is classed as your main residence. A main residence can have a second mortgage secured against it, providing your lender agrees to this and they have ‘first charge’ ensuring they are paid first in the event of a default. The lender will want to know why you require a second charge mortgage an d they would expect it to be of a short term.
Main residence mortgage deals tend to be the cheapest because it is less likely that a borrower will default and risk losing their home. To benefit from lower costs, it is not uncommon for people to say they are going to live in a property to get ‘residential rates’, when in fact they are going to let the property out; we strongly advise against this as it is mortgage fraud. When buying a property for investment purposes there are ‘buy to let’ mortgages to choose from.
Buy to Let Mortgages
It is possible to have several buy to let mortgages as lending is dictated primarily by the level of rental income the property can achieve. You may encounter difficulties if you require mortgages on several properties in the same area because lenders see this as risky should that particular area suffer a downside in ‘rentability’ (if there’s such a word).
You will be required to have a certain level of income in case the property is empty for several months since you will still have to pay the mortgage. Typically £15,000pa, this is not usually a significant hurdle for people investing in this market. If you earn less than £15kpa then seriously consider how you would cope if the property was empty for several months (this caught many people out at the height of the buy to let boom when the recession struck and rents went unpaid).
Essentially, the rental income must cover the mortgage payments calculated on an interest only basis usually by 125% at a given rate. The rate will vary between lenders but might be the rate at which the mortgage is charged or a fixed rate (say 6%). You will also have to put down about 25% deposit. If you’re buying properties with good rental income then you could have as many buy to lets as you have 25% deposits.
These tend to be mortgages taken on by companies that buy the premises from which they trade or by investors that purchase properties from which other companies trade.
This is specialised market that is difficult to enter unless you have significant capital of your own to invest. Most commercial mortgages will require a deposit of 40%. Furthermore, you may need to demonstrate your credentials as a commercial landlord and have good levels of income to support the mortgage should you be unable to rent the property – sometimes, finding a tenant for a commercial property can take years.
If you are company buying commercial premises for your own use then you will need a strong set of accounts to demonstrate that the company can afford to continue making the mortgage payments.
Interest rates tend to be about 2-4% above the Bank of England or Bank’s base rate. Fees will be higher (expect 1% – 2%) and you will require more reports are more onerous as you will require more detailed surveys, energy performance certificates, electrical certificates and environmental reports.
Mortgages for Second Homes / Holiday Homes
There are very few lenders that operate in this market but 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 (that includes letting the property when no gain is made because the income does not exceed the cost of the mortgage). The mortgage rate will be a little higher than a residential mortgage. Loan to Value is likely to be capped at about 75%. The mortgage must be deemed affordable by the lender after taking into account any mortgage on your main residence.