It is possible to take out a mortgage on a second home even if you already have an active mortgage on your primary residence. Many people have the option of purchasing a new apartment without selling the one they already own. If you're one of them and want to know how to handle a second mortgage and its requirements, be sure to read on.
What are the reasons for taking out a mortgage on a second home?
In many cases, a second-home mortgage allows you to purchase another property that you won’t use as your primary residence, but it will give you the option to:
- Extra income from renting it out.
- It's a good investment if you can later sell it for a higher price.
- A place where you can relax or spend your vacation.
Whichever option you choose will open up new opportunities for you. If you've already decided to purchase a new property, The requirements are described below.
Requirements for second-time homebuyers applying for a mortgage
Almost all the terms and conditions for applying for a mortgage—whether it’s a first or second mortgage—are very similar. However, a second mortgage will have slight differences in terms of:
- Funding. Your payment terms, monthly income, and other factors will always be carefully reviewed. However, in almost all cases, this loan amount will be lower than the first one.
- Return period. The repayment period for the loan you receive is shorter than that of your first mortgage.
By the time you're ready to buy a second home, you'll certainly be better prepared financially.
The basic requirements for obtaining a second mortgage
The bank will have slightly more detailed requirements, since you will no longer be taking out one loan, but two. For that reason, they need to protect themselves and ensure that both loans will be repaid in full. As a result, you will need to provide them with:
Bank statements showing a steady income. This income must be sufficient to ensure that both mortgages can be paid without any problems or delays.
- Other than your primary mortgage, you should not have any other outstanding debt. In addition, the payments on the primary mortgage loan must be up to date.
- All your utility bills must be paid in full. You cannot be listed as delinquent with ASNEF, RAI, etc.
- Proof that you have savings. Remember that the loan amount you’ll be approved for will be lower than the first time. It’s essential that you’ve started saving before you begin the process of buying your second home.
Keep these three points in mind. If you’ve got them covered, then don’t hesitate to contact the financial institution of your choice to apply for a second-home mortgage.
What documentation is required for these cases?
Each bank will provide you with a list of the documents you’ll need to submit to apply for a new mortgage. But you’ll generally need the following:
- If you are a U.S. citizen, your Social Security number. If you are a foreign national, your Alien Registration Number.
- Proof of income. The company where you are employed will issue a document stating your salary and how long you have been working there. It should also list the monthly deductions from your pay. If you are self-employed, an accountant must issue your income certification.
- The income tax return.
- If you have loans with different financial institutions, please provide your most recent paid statements.
- Transactions in your other bank accounts. The last six months.
- An up-to-date summary of your work experience.
If someone is going to act as your guarantor, they must provide:
- Your Tax ID Number (NIF) or Foreign Resident ID Number (NIE), as applicable.
- Proof of income.
- The income tax return.
The property must be appraised by a professional appraiser. Based on the appraised value, the bank will tell you how much you’ll be approved for. Then, go ahead and buy your second home.
