Can You Have More than One Mortgage?

man thinking about mortgages

If you have a mortgage already you may be wondering if you can take additional mortgages. It is common for borrowers to want to buy second homes or rental properties. The good news is you can have more than one mortgage, you can even have multiple mortgages on the same property.

This guide explores everything you need to know if you want to get more the one mortgage. Let’s explore this further.

How Many Residential Mortgages Can You Have?

There is currently no limitation to the amount of residential mortgages you can have. Lenders do have strict criteria pertaining to residential mortgages though and it can be difficult obtaining a second mortgage let alone multiple additional mortgages. To qualify for a residential mortgage on a new property, you will need a deposit and the ability to repay the mortgage (commonly known as affordability).

For every additional residential mortgage that you take on a new property you will need a deposit and the affordability criteria becomes tighter with each successful application. This is because when you are approved for a mortgage, lenders will take your current mortgage into account for subsequent mortgage applications when assessing affordability.

For example, if you have a mortgage payment of £1000 per month on your primary residence, this will be deducted as expenses when a lender calculates your affordability on a second residential property.

In short, you will need to show you can afford your existing mortgage and the new mortgage comfortably when applying for a second mortgage.

Lastly, you will need to pass the credit score requirements for any subsequent mortgage applications. Having an existing mortgage will factor into your credit score – sometimes it can have a positive impact and sometimes negative.

How Many Buy to Let Mortgages Can You Have?

As with residential mortgages, there is no limit on the amount of Buy to Let mortgages you can have. In fact, it is fairly common for landlords to have multiple mortgages in a property portfolio.

For each Buy to Let mortgage you apply for on a property you will need to put down a deposit and show that the anticipated rental income is suitable to cover the mortgage interest payments. A typical deposit for a Buy to Let mortgage is 25% of the purchase price but you can put down more to reduce the amount of capital you are borrowing (and therefore reduce the monthly interest payments).

Buy to Let mortgages aren’t without risk, you should be prepared to oversee your property portfolio or hire a management company to act on your behalf. With legislation becoming increasingly tight on landlords, profit margins may be squeezed over time.

A mortgage lender will still expect your payment each month on the mortgage regardless of external market conditions. Shocking statistics from UK Finance show that Buy to Let borrowers are finding it increasingly difficult to pay their mortgage payments:

  • 5760 Buy to Let mortgages are in arrears of 2.5% or more,
  • 1780 of those Buy to Let mortgages are in arrears of 10% or more,
  • The amount of Buy to Let repossessions has risen by 11%.

With the cost-of-living crisis in full swing, many renters are struggling to afford their rent. This means landlords must cover the mortgage costs without necessarily having significant rental income.

To combat this, many lenders are now increasing their Buy to Let stress testing on new Buy to Let mortgages. This means if you are applying for a Buy to Let mortgage today, it will be more difficult than if you had applied a year ago.

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Can You Have Two Mortgages on One Property?

Yes, you can have multiple mortgages and charges against a single property. Lenders will be cautious when allowing you to take an additional mortgage on a property that is already mortgaged.

Typically, you will need to approach a specialist lender who organises second charge mortgages. These lenders have higher interest rates as they have a higher risk compared to traditional mortgage lenders.

For example, if you fail to pay both mortgages on a property, the first charge (original mortgage) will take priority during the repossession and auction process. Any funds left over will be allocated to second charges and finally the borrower.

Because auction values are normally lower than traditional property sales, a second charge lender may not be able to recover the full amount on the mortgage.

You will find that applying for a second charge mortgage is difficult but not impossible. It can be made much easier if you have a substantial amount of equity in the property.

What You Should Consider When Taking Out Another Mortgage

Any additional mortgage carries additional risks for borrowers. Financial circumstances will change over time and a mortgage is a long-term commitment, make sure any additional borrowing is comfortably affordable for the foreseeable future.

Once you have ascertained that you can comfortably afford a second mortgage, you will need to ensure you have a suitable deposit and your credit score is at a level that enables you to secure an additional mortgage.

For Buy to Let borrowers, it is also a good idea to have a separate pot of money to use as an emergency fund if something unforeseeable happens with your tenants or government legislation.

An example of changing government legislation is the new requirement for all rental properties to have an energy efficiency rating of C or above by 2025. Landlords are currently having to foot the cost to ensure the property meets this energy efficiency requirement.

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How to Get Approved for Multiple Mortgages

Obtaining a second mortgage can be a life-changing event for borrowers and can considerably improve people’s quality of life. However, alongside this benefit there is a risk that borrowers can easily overextend themselves. Lenders are becoming increasingly aware of the risks of multiple mortgages and getting approved can be tricky.

You should speak to a whole of market mortgage broker in the first instance to receive advice specific for your circumstances and discover the range of options available to you. As specialist mortgage advisors, we’re here to help. We offer FREE, no obligation mortgage advice including recommendations for second mortgages. Complete our form to arrange a free consultation to discuss your second mortgage options.

Gerard BoonB.A. (Hons), CeMAP, CeRER

Gerard is a co-founder and partner of Boon Brokers. Having studied many areas of financial services at the University of Leeds, and following completion of his CeMAP and CeRER qualifications, Gerard has acquired a vast knowledge of the mortgage, insurance and equity release industry.