Buying a Second Property : A Helpful Guide


Buying a Second Property : A Helpful Guide

Have you been dreaming about owning a second home? Do you need a small place closer to work, or a rural bolthole for family getaways?  One in ten people now own a second property, and if you are thinking of taking the plunge, then this blog is bursting with tips and information to help you.

Why buy?

You need to identify the pros and cons of owning a second home. Your reason for buying may be about having your very own getaway, to have a holiday home in the countryside (or city, for that matter), or to be closer to work without leaving your primary residence completely. You may be unable to sell your current home, so you’re hoping to purchase a new property to live in whilst renting out your existing home in the meantime. The purchase of a second property is also a great investment to leave to your family.

One of the main perks of owning a second property is the ability to make money from it if you so choose. Many people let out their homes to boost their income. The two options in letting out your second home are:

  1. Make your home a ‘buy-to-let’: this allows you to rent your home out to long term tenants, creating a stable and secure form of income.
  2. Turn your home into a holiday let: this way, you can still stay in your property as well as renting it out to holiday makers when you’re not there.

The harsh reality

It is important to bear in mind the additional costs and responsibilities that come with your second property purchase. When you buy a second home, your first home will become known as your ‘primary residence’ for tax purposes. Your second home will then become your ‘secondary residence’ for tax purposes. You will be required to pay an additional stamp duty charge compared to buying a primary residence – until 31st March 2021, the stamp duty on second homes is 3% for properties up to £500,000. There will also be legal fees, arrangement fees, valuation costs, and early repayment fees to bear in mind – so make sure you find out the full true price before making your decision.

Timing it right

If you are buying a new main residence, timing is everything! If your current property hasn’t sold, but you have purchased your new home, you will have to pay the additional charge. As long as the sale goes through within 36 months you can claim a refund on the stamp duty that you paid. You don’t want to miss that window!

How do I get started?                                                    

To be able to secure a second mortgage on your new home, just like your first, it is recommended to be able to prove the following:

  • A large deposit – typically you will need to be able to put down at least 25% of the value of the property
  • A healthy income – you need to prove to the lender that you can afford the repayments on both the mortgage on your main home and second mortgage
  • Details of any rental income – if you’re planning to let out your second property, you need to provide potential mortgage lenders with details of the likely income
  • A good credit score – lenders will want to see you are a reliable borrower before they consider you for a second mortgage

You will also need to be secure in knowing that you will be able to pay all of the additional costs after the purchase, such as bills and council tax. If you eventually decide to sell the second home, you will also have to be able to pay Capital Gains Tax – the amount of which is dependent on the value of the property, how much profit you’ve made from the property, and which tax bracket you fall into.

Feeling ready to make the next step in buying your second property? Or are you still unsure if it’s something you can even afford to consider? Give us a call or drop us an email at Ten Forward, and we can help you with advice and planning. [LINK TO NUMBER AND EMAIL ADDRESS WHERE HIGHLIGHTED]

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