What You Need to Do for Buying a Second Home
While having a second house is still a luxury that a selected few can afford, the number of Britons who own several properties has increased significantly over the years. In fact, over 10% of the adult population now owns a second house, and the trend shows no sign of stopping down.
The reasons for buying a second home differ, as we’ll see in a moment; however, the process is usually the same as are the costs, and we’ll cover everything you need to understand in our guide to buying a second home.
Why do people buy a second home?
As we noted in the beginning, there are various reasons why homeowners decide to buy a second home. However, they usually fall into one of three categories:
#1 – Investments:
The massive increase in multiple property ownership is due to people buying a second home purely as an investment. The rise of the private rental sector has provided customers with a fantastic chance to invest in the real estate market through buy to let.
#2 – Houses for Vacation:
Another popular reason is to buy a second home as a vacation home, which can be purchased in either the UK or a completely different part of the world. Weekend retreats, usually in greener sections of Britain far off the urban sprawl, fall into this category as well, even if they’re not whatever one would think of as a holiday home.
#3 – Buying a Home for Someone:
Our third reason for buying a second home isn’t quite as common as others listed above, but a considerable percentage of owners still go in need to aid a loved one get on to the housing ladder. However, because of the current level of stamp duty, you must pay if you buy a second home; having another property in your name might not have been the better decision.
That’s why, before agreeing to buy the property yourself, experts recommend carefully understanding all of your choices and becoming their mortgage guarantor, gifting the money, or putting up a loan.
Different Ways to Buy a Second Home:
There are three basic strategies to achieve multiple homeownership, as there are three reasons why people buy second homes.
#1 – Getting a Mortgage for a Second Home:
It’s a popular myth that homeowners should pay off their current mortgage before applying for a new one, but that’s not true. You can have two mortgages at the same time. However, if you want lenders to take you more seriously, you should also have a few things in order. Here are a few of them:
- You must be able to show that you could afford the additional mortgage.
- Having a large down payment, usually and over a quarter of the new home’s cost
- Information on the property’s earnings potential
If you do want to buy a place to rent while maintaining your current house as an investment, another option to consider is a let to buy agreement.
#2 – Buy a Second Home Using Equity:
If you find yourself in a situation where your existing property has a lot of equity, you might like to release some to cover most of the new purchase and deposit. It is normally accomplished by remortgaging the main residence.
#3 – Using Money:
Buying a second home becomes a lot easier if you’re lucky enough to have money to spend. Find a property you like and is within your budget, perform the required checks, organize a survey, and move forward.
Consider Other Key Costs When You Are Buying a Second Home:
However, purchasing is just the first step. When buying a second home, there are additional costs to consider.
#1 – Stamp Duty Applies to Second Houses:
The stamp duty you’ll pay when buying a second home has been one of the main deterrents to it. The buyers needs to pay additional 3 % stamp duty to purchase their second home (Stamp Duty rates at the time of publish of this article).
#2 – Second Home Capital Gains Tax:
When it comes to selling, the costs will endure. When you sell your home, you’ll have to pay capital gains tax, due to that any profit over the current £12,000 allowance would be greatly decreased.
#3 – Council Tax:
Although if you consider buying and selling as two sides of a journey, there are plenty of costs to consider all along the way. One is the local government tax. You might be responsible to pay council tax for your second home if it is not Buy to Let. However, you may be eligible for a reduction if your property fulfils certain criteria.
I hope the below information will help you when you are buying a second home. If you are thinking of buying a new home and don’t have any idea regarding the process, then hire Mountview Financial Solutions, a mortgage broker in London. A mortgage broker in London has many years of experience to give mortgage advice.