Can you have two mortgages? What you need to know

Can you have two mortgages at once?

The question ‘Can I have two mortgages?’ is a common one, and the answer is yes. It is possible to hold two mortgages simultaneously, though the specific circumstances depend on your goals. 

For example, taking out a second mortgage on the same home might involve securing a loan against your current property to fund another purchase. On the other hand, you can also obtain a separate mortgage for a second property.

To qualify for a second mortgage, you’ll need to meet several eligibility requirements. A strong credit history and a low debt-to-income ratio are essential, as they indicate financial stability.

Lenders will also expect a sufficient deposit for the second property. This deposit is often larger than required for a first-time purchase, typically around 25% for buy-to-let properties.

Additionally, proof of income is necessary to demonstrate you can afford the repayments for both loans. Lenders may evaluate factors like your salary, rental income, or other sources of revenue.

It’s worth noting eligibility criteria vary between lenders, so obtaining tailored advice can make a significant difference. Speaking with a mortgage broker can help you understand your options and compare two mortgages effectively.

What are the reasons for having two mortgages?

There are several situations where having two mortgages can make financial sense.

One common reason is buying a second home for personal use, such as a holiday property. A second home can be a retreat or long-term investment if it’s in a desirable location.

Another reason is purchasing an investment property, typically through a buy-to-let mortgage. This option is appealing to those looking to generate rental income or build long-term wealth through property.

It’s important to note buy-to-let mortgages often have stricter requirements and higher interest rates than residential loans.

Supporting family members is another motivating factor. Parents may help their children purchase a property by securing a mortgage on their behalf or by acting as guarantors. This can be a valuable way to provide financial support while enabling independence.

Modern lending offers flexibility to accommodate these scenarios, but holding multiple mortgages increases financial obligations and risks.

Before proceeding, it’s essential to carefully evaluate your options and, where appropriate, compare two mortgages to determine which best suits your financial circumstances.

Can you afford two mortgages?

Asking yourself, ‘Can I afford two mortgages?’ is one of the most critical considerations when exploring the possibility of taking on multiple loans. Affordability is assessed by examining your financial situation in detail. 

Lenders evaluate the combined cost of both mortgage repayments alongside other expenses, such as insurance and maintenance for both properties. Your credit score and credit history also play a role in determining affordability.

For example, if you earn £70,000 annually and have existing outgoings of £1,500 per month, lenders will calculate whether your income can comfortably cover two sets of repayments.

If your current mortgage costs £900 per month and the second is projected at £800, the total of £1,700 will need to fit within your disposable income while leaving room for other financial commitments.

It’s vital to consider the potential risks. Unexpected changes, such as a job loss or market downturn, can strain your finances. Lenders conduct stress tests to evaluate your resilience to such scenarios, but it’s wise to build a personal financial cushion as well.

Finally, remember the additional costs of purchasing a second property, such as stamp duty land tax (SDLT). From 1 April 2025, SDLT rates for second homes and investment properties will rise significantly. 

For example, buying an additional property worth £300,000 will result in an SDLT liability of £20,000 under the new rates, compared to £17,500 under the current system. This increase highlights the importance of factoring higher tax costs into your budget if you’re considering a second property.

What are the alternatives to having two mortgages?

If managing two mortgages feels overwhelming, there are alternatives worth exploring.

These options can provide flexibility and financial benefits while helping you achieve your property goals.

Remortgaging

Remortgaging allows you to release equity from your primary property to fund another purchase. This approach can provide the necessary funds without requiring a second mortgage.

However, it’s important to account for the terms of your remortgage, such as interest rates and potential penalties for early repayment.

Offset mortgages

Offset mortgages link your savings to your mortgage balance, reducing the amount of interest you pay. For instance, if you owe £200,000 on your mortgage and have £50,000 in a linked savings account, you’ll only pay interest on £150,000. 

This option can be particularly appealing for individuals with substantial savings who want to reduce their financial burden.

Guarantor or family offset mortgages

Guarantor mortgages or family offset arrangements enable you to help relatives secure a mortgage without them taking on full responsibility or by allowing them to pay less interest.

For example, parents can be a guarantor for their child, so they can buy a home with no deposit or if they have a bad credit history, or use their savings to reduce the amount on a mortgage, reducing interest costs.

However, it’s essential to understand the risks involved. As a guarantor, you could be responsible for repayments if the borrower defaults, potentially putting your own home at risk.

Do you need professional mortgage advice?

Managing multiple mortgages is complex, and expert guidance can be invaluable.

A mortgage broker or financial adviser can help you navigate affordability checks, the lender’s criteria, and potential risks. They also have access to specialist products and lenders that may not be available to the general public.

For tailored advice, Unbiased will connect you with an experienced mortgage broker or financial adviser who can assess your situation and recommend suitable options.

Whether you’re exploring a second mortgage, remortgaging, or considering alternative solutions, professional support ensures you make informed decisions that align with your financial goals.

Get expert financial advice

While you can have two mortgages at once, managing them requires careful planning, a solid understanding of your finances, and consideration of all associated costs, including rising stamp duty rates. 

By weighing your options, seeking professional advice, and preparing for future changes, you can make informed decisions that align with your financial goals and ensure long-term stability.

Let Unbiased match you with a professional financial adviser or qualified mortgage broker who can help you navigate the complexities of managing two mortgages and make the best decisions for your financial future.