Mortgages help you purchase properties you have no hope of being able to buy outright. For many, you only ever need one mortgage in your lifetime. Sure, you may remortgage it with a different lender or change mortgage products, but for the most part, you’ll only need one residential mortgage.
This even applies if you are a landlord or business owner since residential mortgages differ from buy-to-let or commercial mortgages.
Now, while most won’t ever need more than one mortgage, there are a few instances where you will want more than one. So, if you’ve started asking yourself, “can I have two residential mortgages?” then you’ve come to the right place.
This guide covers those instances, the limits, and everything you need to know about managing multiple mortgages at once.
What is a residential mortgage?
What is a residential mortgage? It is, in simplest terms, any mortgage that helps you purchase a residential property. This means you don’t earn an income from the property itself. You can work from home, run workshops out of it, etc, but you must live in it or be using it as a second (or next) home.
Can you have two residential mortgages in the UK?
Can you get 2 residential mortgages? The short answer is yes, you can have multiple mortgages at once in the UK. Whether this is the right move for you, however, depends on several factors like your financial situation, your assets, and what you need your mortgage for.
Instances where you can have two mortgages at once
If you’ve already asked yourself, “can I have 2 residential mortgages at once?” then you’re probably already in a situation that would call for it. That being said, it’s important to understand when people would need to take out a second mortgage and your other options.
1. You own two properties
One of the most common reasons to take out a second mortgage is to buy a second property. This happens if you want to buy a holiday home, for example, for exclusive use of you and your family.
If you want to take out a second mortgage to help your kids buy a place of their own, however, hold off. You can instead sign on as a guarantor of their property, which puts them as sole owners. In exchange, they will still benefit from your support.
2. You want to buy a new home that’s more expensive than your last one
Another reason why you may want to take out a second mortgage – at least temporarily – is if you are moving to a new property that costs more than your old one. In this case, you would move your existing mortgage to your new home and then take out a second mortgage to cover the remaining cost.
If you just signed a new fixed-term contract, for example, and have many years left on your loan period, then taking out a second mortgage can be more cost-efficient. Then, when that first mortgage’s fixed-term period ends, you can remortgage both your previous mortgages into a single one.
Alternatively, your lender may allow you to increase the amount of your existing mortgage, allowing you to cover the cost of the new property without changing your loan agreement, just the loan principal amount.
3. You take out an equity loan
Can you get 2 residential mortgages to take out equity from your home? Yes. This is particularly used by those who are over 55. For example, you can take out an equity home loan or lifetime mortgage on your property. This can even work alongside your existing mortgage since the equity you take out is from the percentage of your property that you own outright.
4. Consolidating debts into a second mortgage
If you have a high loan-to-value (LTV) on your property, then you can use its equity as collateral. This means you could take out a second mortgage and consolidate other debts into one repayment.
Say you have multiple debts that you have to pay off separately. You can consolidate them into one repayment plan and end up paying less overall. You do this by taking out a second mortgage. If you default on that second mortgage, the lender can force you to sell your home to get the money you owe. Since there’s collateral, you may be able to negotiate a more favourable interest rate on your repayments.
Frequently asked questions
Can you change a buy-to-let mortgage to a residential one?
Yes, you can absolutely switch from a buy-to-let mortgage to a residential one. If you start to live at the property again, you may even legally need to.
Do note, however, that if you do switch from a buy-to-let mortgage to a residential one, you may need to go through new credit and financial checks. This is because you’ve lost an income stream, so lenders need to double-check you can still afford your mortgage.
Is it legal to have two mortgages?
It is very legal to have two, three, or as many mortgages as you can afford.
How much can I borrow on my second mortgage?
How much you can borrow depends on your financial situation and assets. If you’ve mostly paid off your first mortgage, for example, then you’ll be more likely to get a second mortgage than someone who has only just started paying off their first mortgage.
Ultimately, lenders will only let you borrow what you can afford to pay back. You may need additional assets to use as collateral, higher deposits, and large income streams to qualify for more than one mortgage.
