Buying a Second Home

An estimated 712,000 households in the UK currently own a second home. Although, purchasing a second property isn’t as straightforward as buying your first as it involves more complex financial considerations.

As such, it’s essential to evaluate your situation carefully. Second home mortgages come with higher expectations, and affordability assessments are generally stricter, especially if you’re relying on potential rental income to support repayments.

To navigate you through the process, we’ve created this comprehensive guide, covering everything you need to know before buying a second home. We’ll go over:

What is a Second Home Mortgage and How Do They Work?

If you already own a home and are looking to buy an extra property, you’ll likely need a second home mortgage. These mortgages work much like standard residential loans, yet lenders carry out more rigorous affordability checks. This is because you’ll need to show that you can manage the deposit, monthly repayments, and any associated costs, all while keeping up with your existing financial commitments.

Why Buy a Second Home?

Purchasing a second home is a decision driven by a mix of lifestyle choices and financial goals. For some, it’s a practical investment; for others, it’s about creating a personal haven away from daily life. Second homes can serve multiple purposes, often combining personal use with monetary gains.

Here are some of the most common reasons for buying a second home:

  • A personal retreat: Many choose to buy a second home as an escape for weekends, school holidays, or seasonal breaks.

  • Rental opportunities: Letting out a second property, either short-term or long-term, can provide additional earnings to cover mortgage costs or generate profit.

  • Wealth building: Property tends to appreciate over time, and owning a second home is a way to diversify your assets and grow your wealth.

  • Supporting family: A second home can offer practical support, whether it’s helping children take their first step onto the property ladder or providing accommodation for ageing parents.

  • Planning for retirement: Some buyers choose their second home with the future in mind, securing a spot where they hope to eventually retire.

Can I Get a Second Home Mortgage?

Securing a mortgage for a second property is entirely possible, but it differs from financing your main residence. Lenders apply more stringent checks as you’ll already be responsible for an existing mortgage.

Here’s what you can expect when applying for a second home mortgage:

  • Larger deposits required: Second home purchases typically demand a bigger upfront payment. You’ll need at least a 15% deposit, while buy-to-let properties require 25% or more.

  • Tougher lending standards: Lenders will scrutinise your credit score, verify your income, and assess your overall financial stability. Expect more conservative loan-to-value ratios compared to those available for main residence or first-time buyers.

  • Affordability checks: You’ll need to demonstrate that you can afford two mortgages comfortably. This includes factoring in all monthly repayments, household bills, and any other financial commitments.

  • Buy-to-let mortgages: Renting out the property? You’ll need a buy-to-let mortgage, which comes with higher interest rates, additional fees, and tighter requirements. Most lenders will expect a forecast of rental income to ensure it covers a sizable portion of the mortgage repayments.

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What are the Costs of Buying a Second Home?

Buying a second home comes with a range of financial considerations that go beyond the purchase price. From tax on second homes to continuous maintenance, it’s important to budget for both the immediate and long-term expenses associated with second property ownership.

Stamp Duty Surcharge

When purchasing a second home in the UK, you’ll be liable for an extra 5% on top of the standard Stamp Duty Land Tax rates. The rates currently stand at:

  • 5% on the first £125,000

  • 7% on the portion between £125,001 and £250,000

  • 10% on the portion between £250,001 and £925,000

  • 15% on the portion between £925,001 and £1.5 million

  • 17% on anything above £1.5 million

Council Tax Premiums

You’ll still need to pay council tax on your second property. In certain areas, local authorities apply a higher rate or ‘second home premium’ for properties that are furnished but not used as a main residence. The amount of council tax you’ll pay on a second home can vary significantly depending on the local authority. In some cases, it might be double the standard rate or more.

Capital Gains Tax

Should you sell your second home, you may be liable to pay CGT on the profit, assuming it exceeds your annual tax-free allowance. For the 2025-26 tax year, the CGT allowance is £3,000 per person. The rate of CGT you’ll pay on property depends on your income tax band:

  • 18% for basic rate taxpayers

  • 24% for higher and additional rate taxpayers

Ongoing expenses

Even if the property isn’t in constant use, you’ll need to account for:

  • Utility bills: Including gas, electricity, water, and broadband.

  • Insurance: Such as buildings, contents cover, and landlord insurance if the property is being let.

  • Maintenance and repairs: The property will require routine upkeep to remain in good condition.

  • Renovation costs: If you plan to make home improvements, which requires shrewd financial planning or additional borrowing.

Rental Income Tax

If you let the property out, any income generated will need to be declared to HMRC and could be subject to income tax, depending on your overall earnings. The first £1,000 of rental income may be tax-free under the property allowance.

You can also claim 20% tax relief on mortgage interest payments, which can reduce your tax liability. However, this relief is limited and no longer applies as a full deduction from rental income. Instead, it’s offered as a basic-rate tax credit.

Pros and Cons of Buying a Second Home

Benefits

  • Capital growth potential: A second home serves as a valuable investment, increasing your wealth as the market grows.

  • Rental income opportunities: Letting out your second home as a traditional buy-to-let or a holiday rental (such as via Airbnb) provides an additional source of income.

  • Lifestyle advantages: A second home is ideal for holidays, weekend breaks, or simply escaping everyday life.

Drawbacks

  • Tighter lending criteria: In the current climate of high interest rates and economic uncertainty, mortgage lenders are applying more thorough affordability checks.

  • Substantial financial commitment: Second home mortgages require a deposit of 15-25%. Beyond the purchase price, buyers must factor in stamp duty surcharges, legal fees, valuation costs, and any necessary renovations.

  • Limited liquidity: Property is not a liquid asset, meaning your money is tied up in bricks and mortar. If you need to sell quickly to access funds, it could take months and incur extra costs such as estate agent fees and capital gains tax.

How to Buy a Second Home

If you're thinking about purchasing a second property, one option is remortgaging to buy a second home. Rather than taking out a completely separate mortgage, you could release the equity built up in your current home and fund the deposit that way.

To explore this route, start by calculating how much equity you hold. This is done by subtracting the outstanding balance on your mortgage from the market value of your home. If you have sufficient equity, you can increase your existing mortgage to free up funds for the second property purchase.

At The Mortgage Genie, we specialise in helping our UK clients secure second home mortgages, from holiday homes to investment properties. Our team of experienced mortgage brokers will work closely with you to find the most suitable mortgage solution, tailored to your financial circumstances and aims.

We'll be with you every step of the way, giving you expert advice and clear guidance to guarantee the process is smooth and stress-free. If you’re ready to get started, then call us at 01915809890 today. And why not see how much you could borrow up to right now by using our mortgage calculator?

The above blog has information contained within which was correct at the time of publication but is subject to change.

Mortgage Details

This information is a guide only and should not be relied on as a recommendation or advice that any particular mortgage is suitable for you. All mortgages are subject to the applicant(s) meeting the eligibility criteria of the specific lender. You should make an appointment to receive mortgage advice which will based on your needs and circumstances.

Company Information

The Mortgage Genie Limited is Registered in England and Wales with Company Number 9803176. The Mortgage Genie Limited is an Appointed Representative of PRIMIS Mortgage Network, a trading name of First Complete Ltd. First Complete Ltd is authorised and regulated by the Financial Conduct Authority. Most Buy-to-Let Mortgages are not regulated by the Financial Conduct Authority. The guidance contained within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Depending on the complexity of your mortgage there may be a fee for our mortgage advice and arrangement service, which will be discussed and agreed before you make a mortgage application. A typical fee is £293 and will never be more than 1% of the mortgage amount.