Buying a Second Home? Facts You Should Know

According to recent data collection, almost one million people in the UK own a second home, and many see this as an encouraging figure when considering whether to invest. Owning a second home has become increasingly popular, as owners can reap the benefits of spontaneously escaping to a coastal getaway, having a convenient property in the city to relieve the hassle of commuting, or generating a profit from a buy-to-let property.

Whilst it may be an immediately attractive prospect to purchase a second home, there are financial implications to consider, which could be long term. Please do not hesitate to get in contact with us today if you would like to discuss and evaluate whether purchasing a second home would be beneficial for you.

What do I need to buy a second home?

Since mortgage lenders tend to be much stricter when lending for second properties, it is best if you have paid off the mortgage on your main home.

Once you have assessed your finances and come to a conclusion regarding how much you can borrow, you can apply for an Agreement in Principle document from a lender. This agreement will show estate agents and sellers that you have the paperwork in place from mortgage lenders, which allows you to buy a house. It is essential that you have the documents ready for your application such as bank statements, pension plans (where applicable) and payslips.

It is beneficial to have generous savings in place, as the higher the deposit you put down, the lower the interest rate of a second mortgage. You will usually need a larger deposit to buy a second home than you would need for a primary residence.

It is essential to have a good credit score when applying for a second mortgage, to show lenders that you are a reliable borrower.

Factor in arrangement fees, valuation costs, legal fees and early repayment fees when creating a budget for your second property.

The benefits of owning a second home

Buying a second home can be a great investment, but it depends on how you plan to use the property. For example, if you plan to buy-to-let, it is beneficial if the rent is higher than the mortgage repayments and could generate a second income. However, if you buy a holiday home, it is not as beneficial as the home becomes an outgoing cost.

The property could become a long term investment if you believe the property will increase in value over the years. For example, if you believe an area to be up-and-coming.

You could own a home in your favourite holiday destination and enjoy sporadic retreats.

Are there any disadvantages?

When purchasing a second home, UK law requires buyers to pay a stamp duty land tax (SDLT) surcharge of 3%, which must be paid on top of the normal rate of stamp duty tax.

Mortgage rates are usually higher when buying a second property and in order to take out a mortgage, you will need a deposit of at least 15% (or 25% if you intend to rent the property).

After purchasing the property, you will then be responsible for maintenance costs (insurance, energy, council take, decorating costs).

As an independent estate agent in Stevenage, we can make decisions quickly and tailor our property service to meet your specific requirements. Contact us today on 01438 367753 or via sales@own-homes.com.

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