Our Guide to Second Home Residential Mortgages

In the past two decades, the number of UK households with a second homeA property that is purchased as a second home or holiday hom... has grown considerably. Earlier studies showed ownership increasing from around 1.6 million in 2000 to roughly 5.2 million in 2014. More recent figures suggest that the total rose further to around 5.8 million by 2020, illustrating a steady upward trend.

Despite this growth, the vast majority of second property owners still keep the property for themselves rather than renting it out. Estimates suggest that only about 3% to 4% use these additional homes as holiday lets or short-term rentals, while the remainder choose them for personal breaks or occasional stays.

This rise in second home ownership has coincided with periods of a weaker pound and notably good summer weather, encouraging more people to spend their holidays in the UK. A survey in 2021 indicated that over 60% of UK residents were interested in taking home-based holidays, reflecting a wider movement towards staycations.

If you are considering this route, you may already be looking at second home mortgages—sometimes called 2nd home residential mortgages. As second home ownership continues to increase, lenders are offering a variety of deals aimed at those interested in purchasing a property for occasional use or future rental prospects.

What is a second home mortgage and how it is different?

A second home mortgage is a loan used to buy a property that isn’t your main residence. Typically, it’s for a holiday retreat, a weekend getaway, or a house you plan to use occasionally rather than living there full-time. Because it’s not your primary address, lenders tend to view it as a higher risk than a standard residential mortgage. This can lead to different (often stricter) lending requirements, such as a larger deposit or slightly higher interest rates.

1. Purpose:

•A main residential mortgage covers the property you live in year-round.

•A second home mortgage is for a property you use part-time, possibly for holidays or weekends.

2.Lender Requirements:

•You might need a bigger deposit for a second home.

•The credit checks and affordability assessments can be more thorough, reflecting the added financial commitment of a second property.

3.Interest Rates:

•Interest rates may be higher for second home mortgages due to the risk of having two properties to maintain.

•Lenders consider whether your finances can support both.

By understanding these distinctions, you can decide whether a second home mortgage is the right fit for your lifestyle and budget, and compare deals that suit your circumstances.

Is a second home mortgage the same as a remortgage or buy to let mortgage?

A second home mortgage is just that – a mortgage that enables you to buy a second home, for use by you and your family for holidays or the occasional escape or retreat from everyday workaday life.

A mortgage for a second home, therefore, is not to be confused with either a:

remortgage – which is something you might seek to replace the existing mortgage on your current main home when the current deal comes to an end or if you are looking to improve the terms and conditions of your present mortgage; or

buy to let mortgage – which is the specialist type of mortgage required by landlords of buy to let property for whom rental income is the driving force of their business and the buy to let mortgage has quite different affordability and lending criteria.

The  Council of Mortgage Lenders (CML), explains some of the principal differences between residential mortgages and buy to let mortgages, including the assessment of the latter’s affordability according to the rental income expected to be earned by the let property and a repayment strategy on the part of most landlords that anticipates eventual re-sale – so that most buy to let mortgages are interest-only mortgages.

2nd home residential mortgages are for those who genuinely want the enjoyment of a second home – a home away from home, if you will. Perhaps you live and work in the city, for example, and are looking for a second home to which you and your family can retreat at weekends and for holidays.

Second home mortgages – next steps

While most lenders offer mortgages on second homes, each has their own eligibility and affordability criteria.

This can take a lot of time and hassle to understand and to compare any mortgage deals you may be offered. With our help you can find out in minutes which lenders you are eligible to borrow from, regardless of whether the property in question is a second home retreat for you and your family, a pied-à-terre for your work away from home, or accommodation for a dependent relative.

Extra questions people often ask

Can first-time buyers get a second home mortgage?

It’s rare, but some first-time buyers do look at second home purchases if they have special circumstances, such as inherited wealth or the intention to share costs with a partner. Generally, you need to climb the property ladder with a main home first.

What if I want to purchase property in Northern Ireland?

Northern Ireland follows different stamp duty rules compared to Scotland or Wales, but the additional surcharge for second properties still applies. Check local regulations and speak to a specialist broker familiar with the region.

What about buying property at auction?

If you plan a property purchase via auction, a second home mortgage can still apply, but you need to meet loan requirements screen checks quickly. Auction purchases often require a 10% deposit upfront, with the remaining finance arranged within 28 days.

Is it possible to use a second home as a base for a business?

If you plan to use the property partially for commercial activities, you may need a commercial mortgage. Lenders have acceptable loan purposes, so clarify your plans early.

What else should I budget for?

Consider Conveyancing costs, building insuranceInsurance that covers damage to the structure of a property...., possible renovations, and extra costs like a discount clawback period if your mortgage deal has an introductory rate. Also factor in any administrative considerations for changing the property’s status later on.

Seeking comprehensive help

Many providers, such as Lloyds Bank or local building societies, offer mortgages for people wanting second homes. Each has different application criteria and rules about acceptable equityThe difference between the value of the property and the amo... sources or joint borrower scenarios. It’s best to gather reliable borrowerreferences (if applying jointly) and be prepared with relevant paperwork:

•Proof of identity (passport or driving licence)

•Proof of address (utility bills, council tax statements)

•Proof of income (payslips, bank statements, or tax returns)

•Credit reports from credit reference agencies

A professional service or exclusive mortgage expert can walk you through everything. In some cases, you might hear about lifetime mortgage or equity release options, but these tend to be more relevant for older homeowners or those seeking a different type of equity release.

Final thoughts

Second home mortgages can be a sound investment or a way to enjoy a holiday place on weekends and during breaks. However, they involve additional costs, stricter requirements, and careful attention to tax considerations. Whether you’re looking for a quiet retreat, hoping to buy commercial or investment buy-to-let properties, or simply planning for your future, the key is:

1.Understand all the costs of stamp duty and surcharges.

2.Research mortgage providers lending in this area.

3.Use a mortgage affordability calculator or get personalised advice to see if you meet the standard requirements.

4.Check your credit score and financial checks thoroughly to ensure the best possible chance of mortgage approval.

By preparing in advance and consulting a specialist broker or a financial advisor, you can approach the property purchase process with complete confidence and find a mortgage type that fits your needs.