Purchasing a second home in the UK can be an exciting prospect. Over 5.5 million adults in the UK own more than one property and use their additional ones for various purposes, including as a second residence, holiday lets or buy-to-let investments. However, the process is slightly different than your first purchase, and already having a mortgage can make this more complicated if you don’t do your research and know precisely what is required of you. Before you take the plunge, read the following tips for an easier process.
Ensure You Have at Least a 15% Deposit
The first step to successfully acquiring your second home in the UK is ensuring you have enough money for a substantial deposit. Generally, you need to have at least a 15% deposit saved up to obtain a mortgage. However, this number can vary depending on the lender and the type of mortgage you are looking to acquire. A larger deposit can help you secure a better rate and may even make you eligible for different mortgages.
It is also essential to be aware of any additional costs that may be associated with the purchase of your second home. Many lenders require additional funds for stamp duty, solicitor fees, and insurance. It is important to factor these costs into your calculations to ensure you have enough money saved up for the entire process.
Do Your Calculations Carefully to Ensure Affordability for Two Mortgages
Once you have saved up enough money for a deposit and any additional costs, the next step is to make sure you can afford two mortgages. You will need to calculate both mortgages’ total monthly cost and ensure it fits within your budget. It is important to consider other bills and expenses you may have to pay besides your mortgages.
If you plan on renting out your second home, you will need to factor in the potential rental income and ensure it is enough to cover the cost of both mortgages. It is also essential to ensure you can cover the cost of repairs and maintenance for both properties. Considering the long-term implications of taking out a second mortgage is also necessary.
Pay Attention to Stamp Duty
Stamp duty is a tax levied on all property transactions in the UK. It is essential to understand how much stamp duty you must pay and factor it into your calculations. Stamp duty rates vary depending on the property’s value and location. Second-home buyers can sometimes be eligible for a stamp duty refund if the property meets specific requirements. It’s best to check eligibility to see if you can claim any or all of this payment.
Be Realistic About the Type of Property You Need and How Often it Will Be Used
Before you search for a second home, it is essential to be realistic about the type of property you need and how often it will be used. If you plan on using the property as a rental, it is important to ensure the property meets all safety and quality standards. You will also need to ensure that the property is in an area desirable to potential tenants.
If you are purchasing the property as a vacation home, you will need to ensure it meets your needs and is located in an area you enjoy visiting. You should also ensure that you have enough money saved to cover the property’s costs in the event that you do not use it as often as you had anticipated.
Purchasing a second home in the UK is an excellent option for many homeowners who want to expand their portfolio or provide additional living facilities to accommodate their lifestyle. Whatever your reason, ensure you know exactly what this involves before taking the leap.