There are plenty of reasons why you might consider buying your second home. For some, it’s because they want somewhere to holiday, for others it’s an investment. From buy-to-let properties to short term investments that you hope to flip for a profit, there’s been an increase in people buying second homes in the UK.
Whatever your reasons, buying a second home can be a very different experience from buying your first. So if you’re considering it as a real option, there are some key things that you need to know.
A New Mortgage
If you’re buying a second home, you’re going to need to take out a whole new mortgage. Many people transfer their current mortgage to the new property, but even then, you’re still going to have to make a new application that will need to be approved. In most cases, people buying a second home are buying somewhere more expensive than their first home, which will need to be factored in when you start managing your budget.
You’re going to need to talk to your mortgage advisor. Make sure that the conversation covers any equity available on your first home, as this could help with the deposit on your second. That can be particularly useful if the second home will be less expensive than the first.
Paying the Tax
You’ll have to give serious thought to the tax situation when you’re planning how much you can afford to spend on a second home. Buying a second home, even if it’s going to be a buy-to-let, means that you will now have what’s called a secondary residence. So as well as the Stamp Duty that you’ll have to pay, there will be an additional 3% surcharge to pay too.
If you are buying a second home to rent one of your properties out, you’re also going to have to declare the income that you receive from your tenants when they pay the rent. That income will have Income tax applied, so you will have to fill out a Self-Assessment tax return. One piece of good news is that your council tax bill might be lower than you expect. Second homeowners are often offered a discount, so check with your local authority.
Top tip: Hire an accountant before you start the process of buying a second home. They can ensure that you get all of the tax breaks you may be entitled to.
While not every property purchase involves being in a chain of dependent sales and purchases, the majority are. If you’re trying to buy a property from someone and they are dependent on another seller they’re trying to buy from, delays can easily happen. A chain disruption can slow everybody down, and they can even collapse entirely.
The smart move here is to try to only find those houses available that have short or non-existent chains. It’s also a good idea to have your solicitor and your mortgage advisor on speed dial, as they can make sure that any loose ends are tied up quickly. They can also chase people in the chain to try and speed everything up.
You will have dealt with a conveyancer when buying your first home. Having gone through the process before, you’ll know that the earlier you retain the services of a good conveyancing solicitor, the easier it will be to speed up your purchase.
The estate agent handling the house sale will usually recommend someone they know to do the conveyancing. Tread warily, as these recommendations often involve commission fees, so they aren’t exactly unbiased. Shop around for a good conveyancing solicitor, and always pick one that has a no-sale-no-fee offer. You won’t have to pay the legal fees if your house purchase falls through.
Don’t Rush Into a Second Home
You already know that it takes time to view, make an offer, and get all of the paperwork filled out when you’re buying a property. It’s not helped by the fact that lenders are increasingly wary when it comes to mortgages. So it’s vital that you take your time to get everything right.
You’ve been through the experience of buying your first home. Get as much prepared in advance as possible and buying your second home could end up being significantly easier.