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Second charge mortgages for Buy to Let properties

Want a Second charge mortgage on your buy-to-let? Don't know where to begin? With our full guide to buy-to-let second charges, you can find out everything you need to know.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2024-07-17
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Second charge mortgages for Buy to Let investment properties.

Want a Second charge mortgage on your buy-to-let? Don't know where to begin? With our full guide to buy-to-let second charges, you can find out everything you need to know.

A second charge mortgage on a buy-to-let (BTL) property can be quick and easy way to get additional funds for your investments, giving landlords access to funds for emergency repairs, growing their portfolio, or any other reason.

In this article, we'll talk about how BTL second charges work, how to apply for one, and why getting advice from an expert broker can save you thousands of pounds compared to going it alone.

Can you get a second mortgage on a home that you plan to rent out?

Yes. There are a lot of lenders who offer second charge buy to let mortgages, which is good news. And they are usually much easier and cheaper to set up than a remortgage, which takes time and has many of the same costs as a regular mortgage.

There are no fees for moving or paying off a buy-to-let second charge early. And keeping the loan separate from your main mortgage, you can pay it off faster and save money on interest.

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What do you have to do to be eligible?

When figuring out who is eligible, rental yields will be one of the most important things to look at. When it comes to BTL second mortgages, many lenders will require that your rental income cover at least 125% of the total monthly cost of your first and second mortgages.

The type of property is another important factor, since not all lenders will give loans for all types of property.

Among these, you may not have as many lenders to choose from:

  • Constructions that aren't the norm (Non-standard constructions)
  • Flats on top of a commercial building
  • Semi-commercial properties
  • Used to be owned by the council
  • Houses of Multiple occupancy (HMOs)
  • Let to buys

LTV (loan to value) is a big part of a lender's decision. A higher loan-to-value ratio means that the lender is taking on more risk, which can cause rates to go up and make the loan less affordable. And some lenders will only let you get a second charge if you keep at least 20% equity (some will let you keep up to 30%).

Some HMO providers have rules about the number and size of bedrooms, as well as whether or not there is joint or separate liability. When it comes to this type of loan, HMO second charges are a bit of a niche, so you should always talk to an expert before taking out a loan.

Other standard criteria for getting a mortgage for a second charge on a BTL are:

  • Borrower(s) income (some lenders require each borrower to make at least £25,000 per year)
  • Credit files (while your credit files are looked at, it's often easier to get a second charge with bad credit than to get a personal loan because lenders have the security of your property)
  • Portfolio size (some lenders set a maximum portfolio size of 20 properties)
  • Affordability \ Age

How to get a buy-to-let mortgage with a second charge?

Follow these steps to give yourself the best chance of being accepted:

Figure out how much money you need.

Whether you're doing repairs, buying a house, or something else, it's important to know exactly how much you need. At this point, you may just be guessing, so be honest with yourself and be realistic. It's better to borrow a little more than you need than to have to borrow again later at higher interest rates.

Think about reviewing your whole property portfolio.

Check the equity, the amount of loans you still owe, and the interest rates on all your loans. This will put you in a position to think about all your borrowing options and make sure you choose the one that costs you the least.

Get in touch with a BTL second charge broker.

Talk to a broker who knows everything there is to know about second charge mortgages. A whole-of-market broker, Revolution Brokers will be able to find you the best deal for your situation if you give us full information about your property portfolio and a clear idea of what you want to achieve.

Interest rates in general

Rates change based on how well you match the lender's risk profile. This means that you might get a high rate from one lender or even be turned down, but you might be able to get a good rate from another.

At the time of writing, these are the typical interest rates for this type of loan:

A fixed rate is 9.69%

6.55% for a variable rate

Many borrowers choose to pay only the interest instead of the principal to keep their monthly payments manageable. Whether or not this is the right choice for you will depend on your current situation and plans for the future.

For example, you might prefer an interest-only deal if you plan to:

  • Sell the house.
  • Fix period on you first charge is coming up for renewal and you will be able to refinance the second charge loan on to you first charge mortgage at a better rate.
  • Sell some of the other properties you own to pay back the money you borrowed.

Where can you get a second charge loan?

There are a lot of lenders who will approve BTL second charge mortgages, but if you don't know much about the business, it's hard to know which one is best for you.

For example, Barclays, Santander, and Virgin Money are all well-known banks that offer this kind of loan. But if you use a specialist lender that doesn't have a high street presence but focuses on niche mortgage products, you may get a much better rate.

Many of these lenders only work with people who have been referred to them; they don't take direct applications.

Find a broker who specialises in second mortgages for buy-to-let properties.

To get the best deal on a niche loan, you need to know a lot about it. Revolution Finance Brokers is a whole of market brokerage specialising in different kinds of mortgage lending.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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