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Everything you need to know: Buying a second home

Are you looking at buying a second home? Whether you’re looking for an investment property or a holiday home, we’ve compiled a guide to help.

Second-home

Are you looking at buying a second home? Whether you’re looking for an investment property or a holiday home, we’ve compiled a guide of the most frequently asked questions people ask to help get you started.
 

Can I get another mortgage?

If you’re wondering whether you can get a second mortgage whilst repaying your first, the answer is yes. This extra mortgage is called a ‘second mortgage’ and you can apply for it for both residential or buy-to-let homes. However, in order to get a second mortgage you will need the following:

  • A large deposit - with your second property you will have to put down a larger deposit than you did for your first. You are usually expected to have a deposit of at least 25%, but 85% mortgages are now available. However, the incredibly high interest rates make sense for buy-to-let investors who are looking to invest in second homes where property prices are low.
  • A good credit score - if you missed or had delayed payment on your previous mortgage it may be harder to get approved for a second mortgage.
  • An income high enough to pay both mortgages - second home mortgages come with higher interest rates than the first, so you will have to prove you can afford to pay them both off.
  • A statement about whether you want to live in or rent the property - any income earned from renting will be taken into consideration by your mortgage broker.

Contact Trinity Financial for mortgage advice
 

What costs will be involved?

The first cost to be aware of is stamp duty which is slightly higher on a second home.  Since April 2016 there is now a stamp duty surcharge of 3% applied on second homes:

  • £250,001 – £925,000: 8%
  • £925,001 – £1.5m: 13%
  • Above £1.5m: 15%

Another cost which you’ll need to consider is Capital Gains Tax (CGT). This tax is payable on your possessions worth over £6k, and only affects your second property and not your main residence. When you sell your second property, any increase in value will be taxed as opposed to the whole amount. On the upside, some local authorities offer a reduction in council tax for second homes, which can go as high as 10% discount for holiday home owners.
 

Is it different if I’m buying for a relative?

Whether you are buying for a relative or not, the home will still count as a second home and therefore be liable for all taxes, charges and conditions as listed above.
 

How can I rent out my second home?

If you initially bought your second home to live in then you will need to remortgage it to a buy-to-let mortgage. Once this is done you can proceed with having a valuation of your home by a letting agent, and then putting it on the market.
 

Is it worth buying a holiday home?

Owning your own holiday home has many attractions. If you grow to love a place enough then it's definitely worth buying a home you can escape to. If you're worried about the house being empty, then the good news is you can actually rent out your house to other holidaymakers while you are not there - and you don't need a buy-to-let mortgage to do it.

A standard residential mortgage will suffice if you only plan to let it for a few weeks a year, however if you are thinking of doing it for longer then you may need to get a holiday let mortgage. Whilst renting out your home may have tax implications, you can also get relief if you are renting it out for more than 105 days a year.
 

Are you looking to buy sell, let or rent? Get in touch.

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