Whether you're making your first foray into rentals, or eying up a holiday home on the coast, second house purchases aren't known for being cheap. The additional three per cent Stamp Duty fee (on top of the SDLT you already pay) can make the punch to your purse all the more gutting.

So unless you've got a pile of cash lying around, you'll likely need a loan - a new mortgage package separate to the one you took out for your current residence.

But are second mortgages any harder to get than your first mortgage package? What, if anything, is different? In this article, we answer all.

Can I get another mortgage if I already have an existing mortgage?

Yes, you can take out a second mortgage if you have an existing mortgage. However, there are a few more loops to jump through if you want to get your hands on one.

What's different about a second mortgage?

On the surface, not much. If you're taking out another residential mortgage, you'll have to apply for it the same way as you did your current mortgage.

What changes is the criteria you need to fulfil for your application to be accepted.

Mortgage providers take your first mortgage into consideration when they assess your lending potential. That is, they will view your original mortgage as an outstanding loan, despite the fact you've been making regular repayments.

As a result, you will need to prove to mortgage lenders that you can pay the monthly repayments on both loans comfortably. They'll look at:

• How much you earn
• How much you owe on your current property
• How much your second property costs
• The purpose of your property purchase

The purpose of your property purchase dictates the type of mortgage you should apply for.

Which type of mortgage do I need?

There are three popular packages to choose from in the mortgage market:

• Residential
• Buy to let
• Holiday let

The type of mortgage you need depends on the purpose of your second property. Let's take a look at their criteria:

Residential mortgage

If you're planning to live in both your residences, you'll need a residential home mortgage. Whether you're using your new home as a summer house, or splitting your time between destinations, a residential mortgage should cover these intentions.

Average deposit: 15%

Remember: If you're thinking of purchasing your new home for a family member to live rent-free, you can use a residential mortgage, but there is potential for tax implications.

You may be liable for Capital Gains Tax (CGT) when you sell the property, as it's in your name and you aren't living there. Your estate may also be liable for Inheritance Tax as your estate might exceed the bracket - this can take a big chunk out of the total value of your estate.

Buy to let mortgage

If you want to boost your income by renting your new house to someone else, you'll need a buy to let mortgage.

It's important to note that buy to let mortgages are interest only, as the objective of your investment is to make money from rent during the term of the mortgage. Once the term is over, you can sell the property to pay the rest off.

Average deposit: 25 - 40%

Holiday let mortgage

If you want to purchase a property for the express intent of renting it out as a holiday home (no AST agreement), you'll need a holiday let mortgage. To apply for one, you'll need to rent out your let for more than 210 days a year.

As they are a unique product, the few mortgage providers lending holiday let mortgages tend to be smaller, building societies, but you still shouldn't have trouble finding one.

Average deposit: 25%

How to apply for a second mortgage to buy a new house

If you're concerned about the process for applying for a second mortgage for a new property, you can put most of your worries aside. The process is very similar to the process you went through for your first home:

1. Begin by checking out available mortgage providers for offers
2. Choose the right mortgage for your new property
3. Get your documents in order
4. Request an Agreement In Principle from your mortgage lender
5. Instruct a conveyancing solicitor
6. Submit your full mortgage application
7. Await the receipt of your mortgage offer

There are some key differences between your first and second mortgage application however, and these depend on the type of loan you apply for, with some requiring certain documents. You will also need proof of your ability to make repayments on both mortgages.

Hire a mortgage broker

If you're applying for a new mortgage for a second property, you should always get in touch with a mortgage broker. You may have heard the term 'mortgage advisor' or (if you're familiar with the online services that brokerages have helped establish) 'online mortgage advisor'. For all intents and purposes they are the same thing.

For a fee, mortgage brokers analyse your financial situation and intentions to help you find the right mortgage provider and package. Brokers can provide sage mortgage advice to homeowners looking to splash out on a second home, and can help you get acquainted with lender criteria.

How to find a mortgage broker

It might seem like a no-brainer to click the first website you find on a Google search, like 'locate a mortgage online ltd', but your best bet is to ask a property expert for their recommendations. Local estate agents are a great source of knowledge and may have affiliates in the industry.

Always remember to check a range of online reviews (Google and Trustpilot) to make sure the recommended broker is the right fit. You can also check their Companies House profile to verify their legitimacy.

Residential mortgage

If you're applying for a residential mortgage, you'll need the following documents ready for your application:

• Proof of a high credit score rating, along with evidence that you have been repaying your credit card debts, loans and existing mortgage on-time and in-full.
• Evidence that you are ready and able to put down a mortgage deposit. The size depends on the lender and the size of the loan, but second residential mortgages generally require a deposit of at least 15%.
• Documents that indicate you are in stable employment and receive an income.

Buy to let mortgage

If you're applying for a buy to let mortgage, you'll need the following in order:

• Proof of an excellent credit score rating.
• Evidence that you can afford a large mortgage deposit. Some providers can ask for a 40% down payment, but 25% is more typical.
• Documents that demonstrate that you can afford the monthly mortgage payments on the new property. You'll need information on your expected yield, rental income and data on the rental market in the area.

You may also need to demonstrate that you are an owner of an existing property already - a main residence where you live. If you're not a homeowner, many providers won't lend to you.

Holiday let mortgage

If you're applying for a niche product like a holiday let mortgage, you will need to demonstrate that your property can actually function as a holiday home. You'll need:

• Proof of an excellent credit rating.
• Evidence that you can afford a substantial mortgage deposit.
• The property's title deeds to ensure there aren’t any restrictions that will limit its intended use as a holiday let.
• Projected gross rental income to prove that your mortgage repayments can be paid by your holiday home's income. If you want a realistic idea of your property's potential income, get in touch with a holiday letting agent in your area.
• Evidence that the property has no unusual features that will limit its use. Lenders will not finance boats or lodges.

How much can I borrow with a second mortgage?

While most lenders will allow you to borrow over four times your salary, with a second mortgage there are a few more variables to consider:

• The equity you have in your current property: The more equity (how much of your property you own) you have, the better the deal you can expect.
• Your credit history: Candidates with an excellent history of repaying loans will be best-placed when applying for a second mortgage.
• The type of mortgage you apply for: The amount of money you can borrow is determined by the type of mortgage you apply for. Mortgage packages for buy to lets for example, require a larger down payment.

You may be required to pay further fees in the form of higher rates and insurance. If you haven't paid off your current mortgage, you will constitute a higher risk.

Such fees can include:

• Mortgage insurance
• Landlords insurance
• Homeowners Association fee (HOA)
• Property taxes

How can I increase the size of my second mortgage?

If you're looking to increase the size of your second mortgage package, your financial profile needs to be appealing to potential lenders. The best way to do this is by ensuring you have paid off a good percentage of your first mortgage.

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What taxes do you have to pay when you buy a second home?

If you're thinking of buying a second home with another mortgage, it's not just the initial deposit and repayments you'll need to think about. There are several taxes to pay:

Stamp Duty Land Tax (SDLT)

If you live in England and you're buying a property worth over £125,000, you'll need to pay SDLT. Second home buyers have to pay an additional 3% on top of the SDLT they already owe.

Welsh Land Transaction Tax (LTT)

If you live in Wales, the equivalent of SDLT is LTT. If you're buying a property worth over £180,000, you'll need to pay LTT. Second home buyers have to pay an additional 4% surcharge on top of each of the tax bands.

Scottish Land and Buildings Transaction Tax (LBTT)

In Scotland, Stamp Duty is known as LBTT, and you’ll need to pay it on properties worth over £145,000. If you're buying a second home however, you'll have to pay an additional 4% on top of its total value.

Council Tax

As with your first property, you'll need to make regular council tax payments on your second home.

Income Tax

As with your salary, you will be liable for tax on any income you make from your second home. You can reduce the tax you pay by turning your home into a holiday let. As holiday lets are classed as businesses, any expenses can be deducted from rental income before any tax is paid.

What are the implications of selling a second home?

We've covered the aspects of buying your second property, but what are the implications of selling it?

With selling a second home, there are two main tax implications to consider:

• Capital Gains Tax (CGT)
• Early repayment charges (ERC)

Capital Gains Tax

Capital Gains Tax is a tax on belongings that have increased in value since coming into ownership of them. If your property is not your main residence, you’ll be liable for CGT.

If you pay higher rate Income Tax, you'll pay:

• 28% on gains from residential property
• 20% on gains from chargeable assets

If your property is a business asset, like a holiday home, you may be able to get some tax relief. If your second home was occupied by a dependent relative, you may not have to pay any CGT at all.

Early repayment charges

Selling your second property before your new mortgage is paid off could land you with an early repayment charge. Selling before the end of the agreed fixed mortgage period will almost definitely result in such a charge.

You may also be liable for early repayment charges if you overpay your mortgage. Homeowners are often allowed to exceed their repayments by a certain annual percentage, but exceeding this allotment can result in an ERC.

So how expensive are early repayment charges? They are usually one to five per cent of the outstanding loan.

Whether you already have a mortgage, or are yet to buy a second property, you can find out more by reading the terms of mortgage agreements carefully, or by speaking to lenders.

Summary: Take control of your finances

There are a number of different variables to consider when applying for a second mortgage for a new house. The type of property you're looking to purchase, as well as its intended use, will greatly affect your prospects.

Ultimately however, your priorities should lie with your finances. Mortgage lenders will only consider clients with excellent credit histories and a good amount of equity in their current homes.

Maximise your attractiveness to lenders and they'll be hard-pressed to decline your application.