By admin 2020-10-26 17:38:33

Remortgage A House and Buy a Second Home

Stepping in and making your way up the property ladder is not as easy as it might seem to be, however establishing a notification of low mortgage rates nearby could come quite in handy when you want to buy another property.

A remortgage may be primarily used to transfer to a cheaper mortgage, but it can also be used to release cash tied up in your equity home.

The increase of house prices between 2010 and 2019 has averaged to 33%, that means the value of your home that you might have owned for a very long time might not have gained significant increase however, it is a perfect time to be able to release some equity by remortgaging and buying a second property.

By doing this, you could enable yourself to buy your second home in cash or be able to put a down deposit for a buy-to-let mortgage.

Buying a Holiday Home

It is very much beneficial to buy a second property as a holiday home for many reasons, such as locations that you visit often or you can rent out your property to others on holiday for extra rental cash.

If you plan on renting it out longer, a holiday to-let mortgage is definitely what you need. By getting a holiday let mortgage means you want to borrow money to buy a property that you will rent to people on a short term basis. This will enable you to charge your customers a bit extra compared to long-term tenants with a buy-to-let arrangement.

Don't forget to do your research

Doing your research will help you decipher what to expect when buying a second home. Information such as:
  • Knowing how renting out a holiday home will affect your tax. A Self Assessment tax return should be conducted to declare the rental income that you will be receiving.
  • Discussing the new property purchase with your financial advisor is also mandatory.
  • Renting out more than a certain number of days a year could make you eligible for a specific allowance and tax reliefs.
  • Some purpose-built holiday homes do not have the planning permission to be residential all year round. Make sure you check the kind of use of the property before making the purchase and the move in.

Buying a Second Home to Start a Business

You can buy a property partly for business and still make it a home to live in for yourself. This is classified as a mixed-use property or also known as semi-commercial. The stamp duty will be lower, but you'll have to pay more taxes and business rates.

Owning two properties means the one you may consider your main home is your 'primary residence' and the other property after that as your 'second residence'. The extra costs in buying a second property come from higher stamp duty and capital gains tax (CGT).
  • Stamp duty - when you buy a property, you will need to pay stamp duty. With a second home, you'll have to pay an extra 3% on top of each stamp duty rate band, depending on the value of your property.
  • Tax - you'll have to pay capital gains tax on second homes if its value has increased when you sell. A financial advisor will be able to tell you how much you will have to pay.

For more info, visit SmartmortgagesUK and get a quote or speak to an expert.

Get in Touch