Remortgage For A Second Home

Is it a good idea to release equity to buy another property?

It’s going to depend on the situation. If it’s a good idea for you and your individual circumstances, then yes. It comes back to how essential this second property is, and whether it’s going to make things financially uncomfortable.

It is very much a client dependent situation as we’ve all got different levels of incomes and outgoings.

Taking a positive view, it would mean you’ve got two properties that are hopefully increasing in value. That would of course be a good thing, but you’ve also got two sets of running costs.
It really is down to the individuals concerned.

What tax do you pay when buying a second property?

We’re not here to give tax advice, so I’m going to keep this quite vague. Do remember that stamp duty rates are subject to change.

When buying a second property you would pay an additional 5% on top of the standard stamp duty rate. You do pay extra tax when buying a second property and not replacing your main home.

A tax specialist can give you specific advice, but there is an HMRC stamp duty tax calculator available online if you want to know more. Do check the current details before you proceed.

What are the disadvantages of owning a second home in the UK?

If you’re running two homes, you’ve got two sets of costs, so the downside is related to running these properties day to day. Also, some locations are starting to increase council tax on second homes and holiday homes.

I’ve done one quite recently for a client here in Nottingham, buying an additional property for her sister to move into. Her sister wasn’t able to get a mortgage in her own right at the moment. This situation works for this client, as she was previously paying rent for her sister and buying a home has saved them money. So in some cases, it can work really well.

But there are disadvantages in having to run and maintain two properties. Sometimes improvements or remedial works on property can be expensive. You’ve got twice as much chance of something going wrong, theoretically.

How much stamp duty would I pay on a second home?

We’ve already covered this on the tax question, but please check before you proceed. I do speak to a lot of clients who are not aware of that extra stamp duty liability when buying a second home.

There’s no other tax implication on the purchase itself. But it’s worth looking at all related potential taxes, and not just when you buy. For example, there may potentially be Capital Gains Tax on the sale of a property, and legislation can change around that. So do look into all of that before you proceed with this.

Do I have to declare a second home?

I don’t know if you can secretly buy a property, as you’re going to register the purchase with the Land Registry. Solicitors are involved and will make sure it is declared. So I don’t think there are any options around declaring it – but also there’s not really any reason not to.

What else do we need to know about arranging a remortgage for a second home?

It makes sense to seek advice when you’re doing these things. A good broker or an advisor should be able to put a lot of the detail together for you in the early stages, before you commit to anything.

We all want to go into any big financial decision with our eyes open, and our numbers as accurate as can be. So speak to an advisor for information about what you’re considering.

We do this stuff all the time. We offer free initial appointments, so if you want to run through your ideas with somebody, just get in touch.

It is a bit more complicated than a standard transaction. But in all cases, given that there are thousands of mortgages available to you, having an expert make a recommendation about your options is always the right way forward.

Think carefully before securing other debts against your home.

Your home may be repossessed if you do not keep up repayments on your mortgage. You may have to pay an early repayment charge to your existing lender if you remortgage.