Second Home Mortgage: Comparison, Lenders & Rates

Explore the competitive rates of second home mortgages from various lenders.

Updated: May 22, 2024
Matt Crabtree

Written By

Matt Crabtree

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Are you interested in purchasing a second home? If you are looking for financing options, a second home mortgage may be one option you should consider.

Selecting one of these mortgages has many pros and cons. However, choosing one can require you to consider a few factors. You will need to compare lenders and rates to make the perfect choice.

So, which second-home mortgages are the best on the market? Which lenders offer the best rates? We have used and reviewed these options for you.

Keep reading this article to find a comparison of the best second home mortgages, their features and rates to select the ideal option and purchase the ideal second home.

ProviderScoreDetails
1. Gen H★★★★★Click Here
2. HSBC★★★★★Click Here
3. Leeds Building Society★★★★★Click Here
4. The Co-Operative Bank★★★★Click Here
5. NatWest★★★★Click Here
6. Halifax★★★★Click Here
7. Barclays★★★★Click Here

What Is a Second Home Mortgage, and How Does It Work?

You might need a second mortgage if you own a home and want to buy a new one.

This option helps you purchase a second property. It is ideal if you want to buy a property to rent out and earn rental income. It's also handy if you want to purchase a holiday home or alternative investment property.

A second mortgage works similarly to your first or existing mortgage. You require a deposit before you consult a mortgage broker or lender. You can then make your application. Your lender will check whether you can make the mortgage repayments.

Your mortgage for a second home will be a secured loan. Since it is a secured loan, you will put your second home forward as collateral. With this collateral, the lender can protect themselves against risks. For example, if you default on the mortgage, they can seize the second home to cover the cost of the mortgage.

Factors to Think About When Purchasing a Second Property

Remember, if you decide to make the second property your main residence, you might need to pay capital gains tax. To avoid paying this if you sell the property, you must tell HMRC within two years of moving into the home.

Other factors you should consider are your budget and additional expenses. You will pay two mortgages, so consider whether your budget can stretch to handle these costs. You will also pay other costs, such as taxes and fees.

What Are the Features of a Second Home Mortgage?

Mortgages for second homes have multiple features you should consider when choosing a lender.

Our financial experts have gathered the main features you need to consider before applying.

  • Interest rates — A second home mortgage comes with interest rates. The rates represent how much you need to pay for borrowing funds. Many range lenders in 2024 set rates for 5.25%, but this varies from lender to lender.
  • Loan term — Your mortgage for a second home will have a specific loan term, which is the duration of the loan. Some loan terms last for five years; others last for 30 years. You can negotiate with lenders to determine the loan term. The lender will think about a few factors before setting this term. For instance, they will look at your financial situation.
  • Fees and charges — You'll have to pay a few fees and charges for this mortgage type. For example, your lender might ask you to pay an arrangement fee for establishing the mortgage. You may also have to pay stamp duty or broker fees if you choose a mortgage broker to establish the loan.
  • Deposit — You will require a deposit before lenders approve you for a mortgage for a second home. The lowest deposit you will require is 15% of the property value. However, depending on the type of second mortgage you apply for, you may need a higher deposit.

Second Home Mortgage and Property Pros and Cons

Getting a second home mortgage comes with several advantages, but it also has a few drawbacks.

Consider the all-important pros and cons in this section before you select this home financing option for your next property.

Pros

✔️ High loan amounts — If approved for a mortgage for a second property, you can get high loan amounts. Since the loan-to-value range can be between 75% and 80%, you can receive up to 80% of the property's value from lenders. These high loan amounts are possible because your loan is secured against the value of your home.

✔️ Potential for portfolio diversification — Once you invest in a second property with a mortgage, you can diversify your investment portfolio. This diversification means you split your investment risk across several classes of assets, with one of the assets being your second home.

✔️ Potential for additional income — If you are investing in a rental property and get approved for a second mortgage to pay for the property, you can earn additional income. This income is ideal for covering costs and expenses.

✔️ Flexible repayment options on your mortgage — Many lenders will allow you to select repayment plans that match your financial circumstances. You can manage your budget effectively when making monthly repayments with flexible repayments.

Cons

❌️ Interest additions — You must pay interest in addition to the monthly payments. The interest increases the value of your loan and property cost, so you will need to factor this into your budget.

❌️ Reduced cash flow — With high mortgage repayments comes restricted cash flow. You may find it difficult to allocate funds to other expenses when paying for mortgages for second homes. 

❌️ Extra expenses — Extra expenses are also required with a mortgage for second homes. Some examples include property taxes and insurance. These costs can also affect your budget.

❌️ Potential to lose the second property — If you cannot repay your second home mortgage, you may lose the second property. This disadvantage occurs because the lender is within their rights to take the property to cover the costs you cannot pay.

Best Second Residential Mortgage Rates Available in the UK

We took out seven-second residential mortgages available in the UK with different providers and collected information about the rates, deposits and lenders.

If you've decided that a mortgage for a second property meets your requirements, check each lender we reviewed in this section to discover the most competitive rates available in the UK.

1. Gen H

We used Gen H to apply for a mortgage for a second home worth £300,000. Our second mortgage was fixed, and we requested £175,000. We noticed that the initial rate was 4.57%.

Once the initial rate ended, the standard rate of 8.25% was applied. This rate applied after 24 months and was among the higher rates we reviewed. The 8.25% was a variable rate, meaning the market conditions counted towards fluctuations in this rate.

Gen H required us to pay £979.70 monthly for this second mortgage. We found that the annual percentage rate of charge, including the interest rate and fees, was 7.75% within the initial period. These amounts are applied to a mortgage for a second home with a loan-to-value rate of 58.3%. We paid approximately £24,511 during the initial period, including lender fees.

This lender offers various loan-to-value rates, from 60% to 95%. When we applied for a 95% loan-to-value mortgage for a second home, the rate increased to 5.78% for a fixed mortgage for the initial two years.

A 2% early repayment fee would have applied to us if we had repaid the mortgage early.

2. HSBC

When we used HSBC for a mortgage for a second home, we found that the rate was 4.59% for the initial two years. This rate applied when we chose a home worth £300,000 and requested £175,000.

After the initial rate period of 24 months ended, we were switched to the standard rate of 8.25%. This rate was slightly higher than some alternative lenders we looked at. It also fluctuated, being a variable rate, in line with market conditions.

This mortgage lender required us to pay £981.70 each month. Regarding the annual percentage rate of charge, this equated to 6.65% in the initial period, including fees. Fees of £999 applied to this mortgage. These costs applied to a second home mortgage with a loan-to-value rate of 58.3%

In total, we paid £24,560 during the initial period, which included lender fees. HSBC offers several loan-to-value rates. These rates range from 60% to 75%.

Even though we didn't have to pay an early repayment charge, we noticed that HSBC set this fee at 2%, which would have applied to us if we repaid the mortgage early.

3. Leeds Building Society

Using Leeds Building Society for a mortgage for a second home gave us reasonable rates. For a home worth £300,000 and a mortgage worth £175,000, our rate was 4.6% (at the initial rate).

This initial rate lasted for 27 months until the lender switched us to the standard rate of 8.24%. This rate also increased and decreased according to market conditions since it was variable.

Our monthly repayments were £982.67, but we also had fees to pay. Our fees were £1,198, which added to our expenses. The annual percentage rate of charge for this lender, including fees, was 7.68%. During the initial period, we paid approximately £27,730.00, which included lender fees.

We could ask for up to 90% of our home's value with Leeds Building Society.

We didn't need to pay an early repayment charge, as this did not apply to us. However, a fee of 2.5% would have been required if we repaid the loan early.

4. The Co-Operative Bank

We wanted to buy a second property and checked The Co-Operative Bank's rates, which were also reasonable. Our ideal home was worth £300,000, and we needed a mortgage of £175,000. The initial rate we received was 4.86%. The initial rate lasted 27 months.

During the initial rate period, we paid approximately £1009.00 per month. However, we had to pay 8.12% when the initial rate expired. This rate was an increase compared with the initial rate but higher than some other lenders. It was another example of a variable rate that could go up or down depending on market conditions.

The total we paid during the initial period was approximately £27,243. This total included fees. The Co-Operative Bank offers a maximum loan-to-value ratio of 85%. They also offer several loan terms for fixed-rate options, including two, three and five-year terms.

We did not need to pay an early repayment charge; however, a charge of 2% would have applied if we had repaid the mortgage early.

5. NatWest

When we used NatWest for mortgages for second homes, our rate was 5.23%. This initial rate lasted for 26 months. NatWest switched us to a variable standard rate of 8.24% after this initial rate ended. This rate was subject to changes from Halifax since it was variable. It could increase or decrease depending on the market conditions.

With the 5.23% rate during the initial period, we paid approximately £1,047 per month. This sum equates to approximately £26,221 for the initial period. The loan-to-value ratio was 58.33%, and for the remaining 274 months, we had to pay £1,356.07 each month.

The fees were less expensive than those of some other lenders. With NatWest, we paid £102 as the total fees. We avoided paying an early repayment charge. However, had we repaid the mortgage early, we would have had to pay 1.5% in fees.

6. Halifax

Halifax's two-year fixed mortgage for second homes had a good rate of 4.88%. This was the initial rate for the first 26 months of the loan term. Once the initial 26 months had ended, Halifax charged us 8.74% as the standard rate. This variable rate fluctuated according to market conditions.

One factor we liked about Halifax's mortgages for second homes was the fees. They charged us £100 in terms of fees, which was part of our 8.17% annual percentage rate charge (a rate that applied to the first 26 months).

The sum we paid towards the mortgage during the initial period was approximately £24,360, the collective value of the £1,010.80 we paid each month. 

7. Barclays

With Barclays, we could get a two-year fixed mortgage for second homes at a rate of 4.64%. This rate was favourable and lasted for the initial two-year period. Barclays charged us 8.74% for the remaining term — a variable rate that fluctuated according to market conditions.

The loan-to-value ratio we got with Barclays was 60%. This lender expected fees similar to those of some other lenders. We paid £999 in fees. 

Although we did not need to pay an early repayment charge, we noticed that Barclays set this rate to 1%.

Best Second Residential Mortgage Options: The Verdict

Purchasing a second home and getting a second mortgage can be exciting and complex at the same time. However, finding good rates and lenders can significantly affect the expenses you will have to pay.

If you are looking to apply for a second home mortgage, look at the interest rates and fees. Once you have compared a few options, you can choose a lender that matches your budget. Selecting a mortgage for a second home doesn't need to be complicated. Use the options in this article as a starting point and make your application to secure your ideal property today.

Related Guides:

FAQs

Is It Hard to get a Mortgage on a Second Property?

Is It a Good Idea to Get a Second Mortgage?

What Are the Rules on Buying a Second Home?

Why Do Second Mortgages Have Higher Rates Than an Existing Mortgage?

What Is a Buy to Buy-to-Let Mortgage?

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Mentioned Banks

About Barclays Bank Barclays is a British multinational investment bank and financial services company. It was founded in 1690 and is headquartered in London. Barclays originated...
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About The Co-operative Bank Based in Manchester, United Kingdom, the Co-operative Bank is a large retail and commercial bank. It is the seventh biggest lender in Britain and the majority...
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About HSBC Bank HSBC is a British banking and financial services company. It is the largest bank in Europe and the seventh largest bank in the world. The bank originated in Hong Kong...
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NatWest, or National Westminster, is a retail and commercial bank based in the United Kingdom. It is one of the ‘Big Four’ UK clearing banks and has more than 7.5million personal banking...
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About Halifax Formerly known as Halifax Building Society, Halifax is a British bank. It is named after the town in West Yorkshire where it was founded in 1853 as a building...
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About Officially registered in 1875, the Leeds Building Society has a history that dates back to 1845. Unlike most building societies, the company has two international branches, in...
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