For most people, it is possible to have more than one mortgage, although it’s important that you have the right financial support and advice if you’re planning on taking out multiple mortgages.
Can You Have More than 1 Mortgage?
There is nothing to stop you from applying for more than one mortgage, as long as you can prove that you can afford the repayments on multiple mortgages.
There are several reasons why people might want to take out more than one mortgage:
- Investing in a buy-to-let property
- Purchasing a holiday home
- Buying a second property for your family to live in
Applying for a second mortgage can be challenging and you will need to demonstrate that you have the income to afford the repayments. Keep in mind that every lender sets its own eligibility requirements. If your application is rejected by one lender, it doesn’t necessarily mean that you will be rejected by another.
What do You Need for More than 1 Mortgage?
These are the factors that lenders will usually look at when deciding whether to approve you for a second mortgage.
Affordability
First and foremost, a lender will check that you can afford to make the repayments on a second mortgage on top of your existing mortgage. This typically means that you must have sufficient income to cover the monthly repayments on a buy-to-let mortgage even if the property is empty e.g. you can’t rely on rent from a tenant to pay the mortgage.
Creditworthy
Lenders will check your credit score to determine whether you are a good applicant for a second mortgage. Some lenders have very strict criteria whereas others have a much lower threshold or don’t have a credit scoring system at all. You can get a free credit score report by visiting a website like Experian.
Low risk
Many lenders will only approve mortgages if applicants are considered low risk. Some lenders will reduce their exposure to risk by restricting the number of mortgages they will approve for a single borrower.
They may also restrict the amount of lending they do in a particular area. For instance, if a lender already has a mortgage on several properties in a block of apartments, they may refuse to grant any more mortgages in that building.
Intent
It is illegal to buy a property on a standard residential mortgage when you intend to rent it out straight away. Standard mortgages usually require a 10% deposit while most buy-to-let mortgages require 25% or higher.
You are committing mortgage fraud if you rent out your property without special permission from your lender, even if you are in the process of transitioning to a buy-to-let mortgage.
How Many Buy-to-Let Mortgages Can you Have?
The number of buy-to-let mortgages you can have will depend on your lender and your personal circumstances. Some lenders only allow people to take out one or two buy-to-let mortgages while others have no set limit.
In most cases, you have a high chance of being approved for multiple buy-to-let mortgages as long as you can prove that you have sufficient income to cover the repayments.
What is the Maximum Number of Residences I can have?
The general rule is that you can only have one property classed as your main residence, so you will need to justify why you are applying for a second residential mortgage. Residential mortgages are the cheapest that lenders offer, so they will only give them to people who have the intent to live in the property.
There are a few exceptions to this rule. For example, if you live in a different city and want to buy a property to live in during the weekdays. Most lenders would only allow you to have a maximum of two residential mortgages in these circumstances.
How Many Mortgages Can you Have on 1 Property?
This question usually arises when two people who are unmarried want to buy a property but take out separate mortgages. It is not common to have more than one mortgage on a single property, as both lenders would want to be the holder of the first charge on the property e.g. have control over the assets. This is not possible if there is more than one mortgage on the property as and only one of the lenders would have this power.
Multiple Commercial Mortgages
Businesses can take out multiple commercial mortgages to purchase the buildings they work in and commercial landlords can also apply for commercial mortgages to rent properties to other businesses.
The eligibility criteria for commercial mortgages are usually strict, especially if the applicant has one or more mortgages already. You must prove that you can afford the new commercial mortgage and show that you have the necessary expertise in your industry to demonstrate that the loan is viable.
Taking out a second mortgage can be complex and it’s essential that you have the correct independent financial advice and support. Get in touch with our mortgage experts for independent financial advice on mortgages or other aspects of financial planning.
