Second Charge Buy-to-Let Mortgages

There are several ways to release capital from a buy-to-let property, and one option is a second charge buy-to-let mortgage. In this section, we explain how this type of borrowing works, how to arrange one, and how our team can help you secure the most suitable deal.

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, although the number of lenders offering this type of finance is limited. These products are generally provided by specialist lenders rather than high street banks.

Also referred to as buy-to-let secured loans, they usually have similar eligibility requirements to first-charge investment mortgages. However, lenders will want reassurance that your rental income is sufficient to cover both mortgage payments.

The second charge is secured against the equity in your property and sits behind your existing buy-to-let mortgage. This means the second lender would be repaid only after the first charge lender in the event of repossession.

Why get a second charge buy-to-let mortgage?

Second charge mortgages can provide a quick way for landlords to raise capital from their existing properties. Common scenarios where they may be worth considering include:

• Buying another property – Landlords seeking to expand their portfolio may use a secured loan to raise the deposit funds needed for an additional purchase.

• Renovation work – A second charge can fund improvements to a rental property, helping to boost both its value and rental yield.

• Debt consolidation – The funds can be used to pay off existing debts, though it is important to remember that this spreads the cost over the full term of the loan.

• Covering unexpected costs – Secured loans can help landlords deal with unforeseen expenses such as major repairs or legal bills if no other funding is available.

The main alternative is to remortgage in order to release equity. However, landlords often consider a second charge when they are tied into an existing buy-to-let deal and cannot remortgage without incurring penalties, or when they are satisfied with the terms of their current first charge mortgage and prefer not to refinance.

Lending criteria

You can apply for a second charge buy-to-let mortgage either through your existing lender (if they offer them) or with a different provider. Typical criteria include:

• Lender consent – If you apply with a different lender to your first charge mortgage provider, their consent will be required before a second charge can be placed on the property. This is because of the implications for them in the event of repossession.

• Equity requirements – Most lenders set loan-to-value (LTV) limits between 60% and 85%. The combined borrowing from both charges will be taken into account, so you will usually need at least 15% equity overall.

• Rental income – The rental income from the property must cover between 125% and 145% of the combined monthly repayments on the first and second charge mortgages.

• Loan purpose – Lenders will want to know how you intend to use the funds. Certain purposes, such as debt consolidation, may come with a lower maximum LTV.

• Other requirements – You will typically need to be at least 21 years old. Clean credit and landlord experience will broaden your options, and many lenders require the loan to be repaid before you reach the age of 75.

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

Second charge buy-to-let mortgages can be complex, and it is not always clear whether they are the best option compared with alternatives such as remortgaging.

For this reason, it is sensible to begin by speaking with an adviser who specialises in secured loans. They can review your circumstances, explain all the options available, and guide you through the entire process from start to finish.

They will support you every step of the way, including:

• Determining whether a secured loan is the most suitable option

• Obtaining consent from your first charge lender

• Finding the best available deal and securing the most competitive rate

• Managing the application process through to completion

Which lenders are available?

Second charge buy-to-let mortgages are generally provided by specialist lenders rather than high street banks. Below are some examples of providers and the types of criteria they may apply:

• West One Loans – Offers second charge mortgages for landlords, consumer buy-to-let mortgage holders, and expats (available via broker referral only).

• Mercantile Trust – Provides buy-to-let secured loans of up to £250,000 for any legal purpose and will consider applicants with adverse credit.

• Together – Lends to individual landlords as well as those who hold buy-to-let properties within a limited company. Interest-only options are available.

• Spring Finance – Offers second charge buy-to-let mortgages up to 75% LTV and is willing to consider some applicants with 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

Interest rates on second charge buy-to-let mortgages are generally higher than those available on first charge buy-to-let products. However, your chances of securing a more competitive rate will improve if you have a clean credit history, significant landlord experience, and a healthy level of equity in your property.

Frequently Asked Questions