Buying a Second Home

If you are a homeowner and want to buy a second home for you or your family to live in throughout the year or perhaps you want to buy a property and rent this out long term as an investment – Here we look at this in detail and explore how this can be achieved.

Mortgages on second properties are not always that different from mortgages for your main residence, except that the rate may be slightly higher, and what is available to you may depend on you meeting certain criteria. The type of mortgage you’ll need will depend on what you intend to use the property for.

There are many reasons to purchase a second property. Maybe you want a second property to work from, or to help a family member onto the property ladder, or maybe you would like to purchase a holiday home in your favourite holiday spot in the UK or, perhaps you want to purchase a Buy to Let to receive rental income and make a long term investment.

If you are looking to buy a second home, where you would only have yourself and your family using it, you should be able to take out a residential mortgage on the second property. Selected banks and building societies do offer these mortgages. The new mortgage lender would have to assess that you can afford your current mortgage and your new mortgage. Reasons why people buy second homes are:

• They would like a holiday home that only the family will use.
• Maybe they need a second place to live due to work commitments.

With these types of mortgages they are available:

• Up to 85% of the property value.
• You could purchase these on a repayment or Interest Only basis or potentially Part Repayment and Part Interest Only.

You would not be allowed to rent this property out at all.

If you are looking to purchase a second home, as a holiday let and let it out on a regular basis you need to do this as a holiday let mortgage. There are building societies and certain lenders that can provide these mortgages. More underwriting is required on these cases to make sure the affordability is sustainable long term and additional questions will be asked such as:

• Occupancy rate throughout the year – You are unlikely to be able to rent this property out consistently throughout the year, so roughly how much of the year do you expect to earn an income?
• Expected income – Many holiday let properties have low and high seasons, where the rental income can vary throughout the year, so what actual income will you receive?
• Running Expenses – with multiple occupiers changing regularly perhaps every week, the upkeep and maintenance will be a lot higher, so this additional expense will need to be factored in.
• Experience – Have you had any previous Buy to Let & Holiday let experience?
• How you do intend to market the property? If you want to use AirBnB for example only specific lenders may be happy with that.

With these types of mortgages you will more than likely be required to put down a 25% deposit and the rates will be higher when compared to standard residential mortgages.

If you are fortunate enough to have lots of equity within your main residential home or in another property you own, could you potentially capital raise against this property to allow you to purchase the second home outright? Or you could raise a bigger deposit, so you will have more mortgage options available for the second property – This is something your mortgage adviser can discuss with you.

To know what mortgage options are available it is best to speak to a mortgage adviser who has knowledge and experience in this area. The mortgage advisers at, The Money Hub, would be happy to help and talk you through your options. Please complete the above enquiry form or call the office to discuss.