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There are several ways to raise capital against a buy-to-let property, one being a second charge buy-to-let mortgage. Here you'll learn all you need to know about this type of borrowing, including how to secure it and how we can help.
Can you get a second charge mortgage on a buy-to-let property?
Yes. It is possible to secure a second charge mortgage against a buy-to-let property but there are limited lenders available for this type of finance. Second charge buy-to-let mortgages are usually provided by specialist lenders and are rarely found on the high street.
Also known as buy-to-let secured loans, these products have largely the same eligibility requirements as first-charge investment mortgages, but your lender will be keen to see that your rental income is high enough to service both mortgages at once.
The second charge would be placed behind your original buy-to-let mortgage as a secondary debt, secured against your equity in the property. The secured loan lender would be second in the queue to be reimbursed in the event of a repossession.
Why get a second charge buy-to-let mortgage?
They can be useful to help landlords raise capital from their properties quickly. Here are some of the scenarios where they can be worth considering:
- To buy another property: Landlords looking to expand a property portfolio often consider secured loans to raise deposit funds.
- Renovation work: Second charge mortgages can be used to make improvements to a buy-to-let property to increase their value and rental potential.
- Debt consolidation: The funds from a second charge can be used to pay off debts, but keep in mind that you will be spreading the cost of them over the whole term.
- Emergency funds: Landlords are sometimes hit with unexpected bills for repairs or legal costs, which a secured loan can cover if no other back-up is available.
The main alternative to a second charge buy-to-let mortgage in the above scenarios is remortgaging to release equity. Landlords typically consider a secured loan when they are fixed into a buy-to-let agreement and cannot remortgage, or if they are happy with the terms of their first charge mortgage and do not wish to change them by refinancing.
Lending criteria
You can apply for a second charge buy-to-let mortgage with either your current lender (provided they offer them) or a different one. The lending criteria is as follows:
- Lender consent: If you are using a different lender to your first charge buy-to-let mortgage provider, they will need to consent to the second charge being placed on the property as there will be implications for them in the event of repossession.
- Equity requirements: The typical loan-to-value (LTV) ratio requirement for a second charge buy-to-let mortgage is 60-85%. Lenders will look at the combined debt of both charges when calculating the LTV, so you will need at least 15% equity overall.
- Rental income: The property’s rental income will need to cover 125-145% of the combined repayments from the first and second charge debt.
- Loan purpose: Expect the lender to ask what the funds are for. Some purposes, such as debt consolidation, may have a lower LTV cap.
- Other requirements: You will need to be at least 21 years old to get a second charge buy-to-let mortgage. Having clean credit and landlord experience will also increase your options, as will being under age 75 for the duration of the term.
How to get a second charge buy-to-let mortgage
Second charge buy-to-let mortgages can sometimes be complex and it isn’t always clear whether they should be chosen over alternative options, such as a remortgage.
With this in mind, a sensible first step is to speak to a broker who specialises in secured loans. They can go through all of your options with you, help you choose the most suitable one, and then guide you through the application process from beginning to end.
We have brokers on our team who are experts in second charge buy-to-let mortgages, and they will take you through the following steps to full application:
- Determining whether a secured loan is the best option
- Seeking consent from your first charge lender
- Finding the best deal and securing the lowest rate
- Guiding you through the application process
You can arrange a free, no-obligation chat with a broker who specialises in second charge buy-to-let mortgages to find out what your options are below:
Connect with a second charge buy-to-let mortgage expert
Which lenders are available?
Second charge buy-to-let mortgages are usually offered by specialist mortgage providers. Below you will find examples of them along with some of their specific criteria:
- West One Loans: Offers second charge mortgages for landlords, consumer buy-to-let mortgage holders and expats (on broker referral only).
- Mercantile Trust: Offers buy-to-let secured loans of up to £250,000 for any legal purpose and considers landlords with adverse credit.
- Together: Offers secured loans to individual landlords and those who own their buy-to-let properties via a limited company. Interest-only options are available.
- Spring Finance: Offer second charge buy-to-let mortgages up to 75% LTV and accept landlords for some forms of adverse credit.
The above is merely a sample of the lenders potentially available - speak to a second charge mortgage broker for a full list of your options
What kind of rates to expect
The interest rates on second charge buy-to-let mortgages are usually higher than they are for first charge buy-to-let. Your chances of securing a competitive rate will improve if you have clean credit, substantial landlord experience and plenty of equity in your property.
Why choose Teito for your second charge buy-to-let mortgage?
At Teito, we have brokers on our team who specialise in second charge buy-to-let mortgages, and their knowledge and experience can help you secure one.
Here are just some of the reasons landlords choose us for their secured loans:
- Our brokers are experts in buy-to-let and secured loans
- They can help you access exclusive deals
- We are 5-star rated on leading review websites
- Your first consultation is free, with no obligation to proceed
Ready to take advantage of a free, no-obligation chat with a broker who specialises in second charge buy-to-let mortgages? Get started here.
FAQs
Yes, but both lenders will need to agree to the other holding a charge against the property and the two charges will be factored in when affordability is being assessed. Using a broker is highly recommended in this kind of scenario, as they can liaise with each party throughout.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.