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How Many Mortgages Can I Have?
In theory there is no limit on how many mortgages you can have whether they are for residential properties, buy to lets, holiday homes or for a pied-à-terre. Each lender will have a policy guiding them to a maximum level of debt they are comfortable you can support. The key thing is understanding how this policy changes depending not just on the number of mortgages you have but the type of mortgages and how the underlying property is used.
Can you have 2 residential mortgages? As a residential mortgage is usually designed to be taken against your main residence (the property you or your family use most of the time) it is not always straight forwards to obtain more than one. Lenders want to avoid offering residential mortgages against properties that will actually be let out, so they will require a good explanation for why you want to take on an extra property and how you will use it.
Second homes that will be used to accommodate relatives, to reduce commuting times during the working week, as a holiday retreat or even to get into a particular school catchment area are good examples of situations that will often be accepted.
Holiday lets are slightly different as you would be renting the property out rather than using it all for yourself. As a result these typically fall into the buy to let category with specialist lenders the most likely to help.
You can read more about this in our second home and holiday let mortgage guide.
For the average buy to let landlord multiple mortgages is commonplace and lenders often have no issue with this as long as each property is fully self sufficient i.e the rental income full covers any existing mortgage payments with an additional amount on top as a stress test.
For example, if you wanted wanted to borrow £100,000 on a buy to let mortgage then rental income must cover the mortgage payments by at least 125% at a nominal interest rate of 6%. The calculation is usually conducted on the basis of having an interest only mortgage. This works out to be a monthly payment of £500 meaning the rental income would need to be £625 to be acceptable to the lender. This kind of calculation is often applied to all mortgages that you hold to assess the healthiness of the existing portfolio as well as the new buy to let mortgage application. Every lender has their own rule book which is why it is so important to take advice when dealing with multiple mortgages.
The more mortgages a landlord has in place, the harder each new application typically becomes as banks will see this as a riskier loan. Many standard retail banks will be unhappy to help once you move past 3-5 total mortgages so you will need to consider approaching specialist buy to let lenders.
Specialist buy to let mortgage providers have a much better understanding of the buy to let market place and therefore often feel more comfortable lending larger sums or lending to people who have larger portfolios of property. For landlords with large portfolios it can be possible to obtain a mortgage stretching across all the properties. The downside is that these lenders can often be more expensive than the average offer on the high street.
Residential mortgage contracts require that the loan is secured against the property as a ‘first charge’. This means that in the event that the mortgage is called in, and for instance the property is sold off by the bank, the lender has first claim to the proceeds of the sale before anyone else that you may owe money to.
As a result of this you can only have one residential mortgage registered against your property at a time. The exception to this are loans that are organised as a ‘second charge’. The lenders that offer this service usually charge higher interest rates and fees in exchange for taking a higher risk than your main mortgage provider. This is a complex and risky market place so advice is highly recommended if you want to explore that path.
Applying for mortgages can be like spinning plates, for the untrained even spinning one can be a daunting task let alone two mortgages (or more!). If you choose to try it yourself then it can be easier to apply to the same lender for multiple mortgages. This can cut down on paperwork, conversations and centralise your efforts. The major drawback of this is that you may have to sacrifice better mortgage rates in order to find a bank flexible enough to offer you all of the loans. We recommend arranging a callback with our experts who can provide a full range of mortgage advice and take on the administrative burden.