Things You Need to Know when Buying a Second Home

Are you looking  to buy a second home then there are a few things you need to know first. Here are some tips you need to take into account the below tips because it will make your purchasing decision way easier and it will also give you the chance to make the best choices regarding your future home. If you want to find out more then take a look below.

Different Mortgages

One thing to take note of is that when you buy a second home, you may need to take out a different kind of mortgage. A second home, whether it’s one that you intend to rent out or lend to your kids, has a lot of different processes. It may be that you need to take out a second mortgage or that you need to apply for a specific type of mortgage when renting out to strangers. Some lenders will not allow this under their current terms and conditions, so you need to keep that in mind if you can.

If you are buying a property that is in a tourist hotspot and you want to lend it out on a regular basis then you need to look into a buy-to-let mortgage. In any instance, it’s important that you use a mortgage advisor as they can work with you to discuss your needs and they can also help you to know if there’s anything you need to know about your finances moving forward.

You Need a Good Deposit

You need to put up cash for a deposit on your second home. If you have enough equity at your main residence then it may be possible for you to remortgage and for you to increase your home loan. This will release cash for a deposit and it will also help you out for your next property. You may have your property repossessed if you do not keep up with the mortgage repayments. You will also need to show you have income at a level that shows you can afford to take on another home, so keep that in mind.

Affordability is Key

At the end of the day, affordability is key. You need to make sure that you have a high income as well as a chunky deposit. As much as this, however, your lender will review your second mortgage and any debts that you have going out. You will have your finances scrutinized and you may even find that you end up experiencing the financial burden of having a second home if you’re not ready for it. If you do get declined then this will obviously come with certain effects but either way, you should find that you are able to work through the issue if you get your paperwork in order. Things like this are crucial when trying to get a second home.

Mortgage Rates can be Higher

When you have a second home, it’s important to know that your mortgage rates might be higher. You may end up paying more for your home when compared to financing your main home. This is the case with a lot of buy-to-let mortgages. Of course, the capital sum, or the price that you agree to buy the property for is often paid upon completion. With that being said, it is possible for you to get a repayment mortgage where you pay both the interest and the capital for the home right from the start. 

Asking for Proof

It may be that the lender asks for proof too. A lender may want some proof that you are buying a second home and that you own at least one property already. They may also want to know why you want to buy a second home. If you are letting the property then show that your rental income is exceeding the price you are paying for the home. If you can do this then you will soon find that it is easier for you to get the result you want.

Selling the Property

You also need to give some thought to selling the property. If you are renting it then the time you sell it may be unpredictable. You may have to sell sooner if there are issues or if you need the capital back because you cannot find a suitable tenant. Either way, you need to remember that it is not always possible for you to get the money you need if you don’t give thought to selling it. If you can do this then you will soon find that it is easier for you to anticipate anything that may happen down the line. If you want to work with a quality real estate agent then be sure to check out MGP Property.

Taxes

When you buy a second home you will need to pay taxes as well as stamp duty in some instances. You may need to pay income tax on any profit you make and you may also have to pay for building’s insurance. If you can, you need to contact the relevant council so you can find out what fees you have to pay and why. If you can do all of your calculations now then this will save you a great deal of time in the future, not to mention that it will also help you to work out what you can do in order to get the most out of your money.

Are you intending on buying a lot of properties then it is wise for you to try and give thought to things like this because if you don’t then they can eat into your profit. One way for you to work around issues like this would be for you to hire an accountant, as they can talk you through what you need to pay and why. You can also find out if you can do anything to try and get a good rate on your home while aiding you with claiming expenses, so keep that in mind if you can.