Second home mortgage: how does it work?
A mortgage for a second home is a mortgage loan that is requested from the bank to finance the purchase of a second home . Under this generic name we include houses or flats that will not be our usual home, but we will use them as a holiday destination (on the beach or in the mountains, for example), to live temporarily outside our home or, simply, as an investment.
The operation of the second home mortgages is the same as that of the first home mortgages with the only difference that the requirements to get them are different. In fact, these are more demanding products and they have more difficult concession conditions, since they imply a greater risk of non-payment because they are not habitual residence. So, if we want to get a mortgage for a second home, we must show the bank that we have a good economic profile and sufficient solvency to meet all the monthly payments.
3 steps to get a vacation home mortgage
Currently banks have stricter conditions to grant financing that are even harder to get a second home mortgage . This is because these products have a greater risk of default, since in case of economic difficulty is left before paying these fees than those of a habitual residence.
Now, although it is more complicated than a few years ago, following the following steps we could get to sign a second mortgage:
1. Compare a minimum of 3 offers from different banks
The first recommendation that we must take into account to find the best second home mortgages is the same as with the rest: do not stay with the first offer we find, even if we find it interesting.
And is that the ideal thing is to compare products from a minimum of three different banks, so we can see what conditions are being offered in the mortgage market for a second home mortgage.
This task, we can do it using tools such as the mortgage comparator HelpMyCash.com, which will allow us to see all the offers that exist in the market without going to each entity personally.
2. Ask for all the information
Once we find a bank willing to make an offer, we must ask the FIPER (Personal Information Card) in which the costs of the second home mortgage are shown . In this way we will have all the information in writing to study it and compare it.
And although we believe we know the mortgage loans well (because surely we already signed one to finance our usual residence) the conditions may be different in a second home mortgage.
In short, when looking for a mortgage for second home we must collect as much information as possible about the different offers to be able to compare their particularities and sign the one that really interests us.
3. Negotiate good conditions
Once selected those offers that we consider more interesting, it is time to negotiate with the bank the conditions that our new mortgage will have. In this sense, the better our economic profile and greater solvency prove, the more options we will have to get real cheap mortgages, since the bank will know that we will not have problems to assume our quotas even if the Euribor goes up.
If we request a second mortgage in the entity where we already signed the first, the bank will know our ability to assume the fee, which can serve as an extra guarantee. However, it is advisable to ask for offers in at least three different entities , since a mortgage is fully negotiable until the signing, so if we know the conditions that are offered in the market, we can negotiate and get to sign one of the mortgages cheaper for our second home.
Particularities of a mortgage for a second home
The requirements that we must meet if we want a second home mortgage will be stricter, since their risk of default is higher and they are products that finance homes with a location with worse options to reposition in case the bank executes the guarantee and stays with the property. Therefore, to get a second home mortgage, we must take into account that they have the following characteristics:
1. Lowest financing
The main difference between mortgages for second homes and those of habitual residence is the amount that the bank will lend us. This is due to the fact that, in case of economic difficulty, the risk of default in a holiday home is greater , since the fee will be paid earlier than that of a habitual residence.
Thus, the financing they grant for a second home mortgage is usually lower than for a residential mortgage. Specifically, the bank usually grants between 50% and 75% of the appraised value of the property or its sale price (always the lower of the two, as in the rest of mortgages).
This is opposed to 80% financing, or even 100% in the case of mortgages for bank floors, which we can find when we seek to finance this type of housing. So, given that the financing is lower, to ask for this type of mortgage, we must have more savings.
Despite this, since 2016 there are some entities willing to finance up to 80% of these homes, the result of a start of economic recovery and the real estate sector, although to get these offers you have to have an excellent financial profile. In the same way, if what we want is to obtain mortgages at 100% financing, we will have it even more difficult , but if we show very high income and a stable job and in a rising sector we may be able to negotiate.
2. Requires having greater savings
For a first home mortgage you usually need to have saved 35% of the value of the home, being 20% to cover the part that does not finance the bank and between 10% and 15% for the costs of buying a home and open a mortgage. However, in a second mortgage financing usually stays at 70% or 60% of the value of the second home , so in some cases the necessary savings can amount to 50% of the value of the home.
Update: Mortgage constitution expenses are subject to legal disputes between clients and banks as to who should assume each of them, since the Supreme Court considers it abusive that all are charged to the mortgaged. The items under debate are notary, agency, registry or even appraisal, although the IAJD must always pay the mortgaged according to the latest ruling of the high court.
3. High and stable income is required
If we want to get the bank to grant us a mortgage for a second home, we must meet a series of requirements that, above all, will focus on our financial profile meeting the following conditions:
- High monthly income: normally, banks usually request payroll over 2,000 euros among all the holders for the granting of a mortgage loan for first residence. In the case of mortgages for second homes, these required income tend to be higher, since the risk of default is higher in a second home, so the guarantees increase. Generally, between all the holders, a minimum of between 2,500 and 3,000 euros per month is required.
- Stable workplace: having a fixed or indefinite contract and a good seniority within the company (at least three years) will help us to add points to get this type of financing. In addition, working in a rising or stable sector, as is the case of officials, will provide us with a better profile in order to obtain a mortgage of this type.
- Savings capacity: having a healthy economy, with all payments per day and no delays in other loans is key. If we apply for the mortgage for a second home in the same entity where we have the first mortgage, the bank will know our history better and we may have more options, as long as we are up to date with all our fees.
The more of these requirements we meet, the fewer problems we will have to get a mortgage for a second home, but we must be clear that the bank can ask for more conditions.
4. Other requirements
If we have another mortgage from which we still have a large part of the capital to be amortized, if we appear on delinquent lists such as ASNEF or RAI , or if we have never complied with the payment of our installments in personal loans or previous mortgages, it is It is likely that the bank will see us as a risk profile and will not approve a mortgage for second homes. In the same way, if our level of indebtedness is already high because we have many debts or expenses that account for a large part of our income, they would not grant us more financing either.
If we do not have an excellent profile, having a person willing to guarantee our mortgage loan will give us more points to get a second home mortgage, since the bank will have an extra guarantee of payment, since in case of non-payment by us, the guarantor must respond.
How to get a mortgage if the house is free of charges?
How to sign a second home mortgage can be more complicated than getting a first one, we propose two possible options to give facilities to request a second home mortgage :
Apply for a mortgage for a second home directly, assuming the conditions that the bank will impose on us, which, as we have already explained, will surely be stricter than for a first mortgage. We remember that we will only get the second home mortgage so if we have a high financial profile and we comply with all the requirements.
Re-mortgage the habitual residence to obtain a mortgage for a second home: mainly for the purchase of houses in environments that have difficult exit (abandoned dormitory cities, rural environments …) and that, ultimately, the bank is not interested in mortgaging, due to its difficulty to place them if I had to execute them.
Why are second home mortgages more difficult to obtain?
Faced with a bad economic situation, it is logical that a person stop paying the mortgage for the second home before the mortgage loan of the habitual residence. The home is the last thing you are willing to lose, so it is understandable that you stop paying the second mortgage before the first. The banks took note of this during the crisis, when many people could not pay their debt and lost their holiday residence, so now they demand a more solvent profile to access the financing.
In conclusion, the reason why a second home mortgage is harder to get is that the bank is at greater risk . In addition, for an entity it will always be more difficult to re-sell a second home (usually located in tourist areas) than one that is in the middle of an urban core, which also explains why these mortgage loans are stricter than the first mortgages.
Financing up to 100% with bank floors
If what we need is financing above 80% because we do not have enough savings to open the second home mortgage directly, since the financing of these is usually lower, we can opt for the acquisition of one of the bank floors, with the that sometimes finance the entire home.
While it is true that the offer of second homes is lower, it is not impossible to find a bank home to spend the holidays, as they were the first to which families resigned when they had problems paying. Of course, if we bet on one of the floors of the bank or the Sareb (known as bad bank) must be clear that we will not have better conditions on our mortgage, except that the financing is usually higher.