Second home mortgages and deposits

Can I buy a second home using equity?

Yes, you can use the equity from your main home to buy a second property. A second home mortgage typically requires a 25% deposit. To see if you have enough equity, subtract the remaining mortgage balance on your primary home from its current market value. The result is the equity you can potentially use.

How much deposit do I need for a second home?

Indeed, the deposit for a second home is higher than for a primary residence. While a typical first home mortgage may need only 5-10% deposit, a second home generally requires at least 25%. You might use the equity from your first home by remortgaging to cover the deposit for the second property.

What are my second home mortgage options?

When buying a second home, you'll need a specific mortgage tailored to second properties. These mortgages come with stricter checks because lenders need to ensure you can manage repayments on both homes. Depending on your plans, you might need:

  • Buy to Let Mortgage: For renting out the property.
  • Holiday Let Mortgage: For letting the property to holidaymakers.

Are second home mortgages more difficult to get?

Yes, securing a mortgage for a second home can be more challenging. Lenders will scrutinize your financial situation closely since you already have a mortgage on your main residence. Besides a larger deposit, you must prove you have sufficient income to cover both mortgages. Lenders will also consider your age and how long you can maintain your current income.

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How does buying a second home impact your taxes?

Buying a second property affects your taxes. You’ll pay higher stamp duty rates compared to your primary home. Here are the current rates for additional properties:

  • Up to £250,000: 3%
  • £250,001 - £925,000: 8%
  • £925,001 - £1.5m: 13%
  • Above £1.5m: 15%

You’ll also need to consider capital gains tax if you sell the second home. Basic rate taxpayers pay 18% on any increase in value. However, if the gain is below the annual allowance (currently £3000), you won't owe capital gains tax. Additionally, council tax will apply to your second home unless you qualify for specific exemptions. Check with your local council for possible discounts or exemptions.

What additional costs are there?

When buying a second home, be prepared for these costs:

  • Mortgage Arrangement Fees
  • Valuation Fees
  • Conveyancing Costs
  • Buildings Insurance

These are standard expenses you’ll encounter during the purchase process.

Darlows can help with your property search!

Interested in buying a second home? Darlows can guide you through the process. Contact your local branch today to explore your options and find the perfect property.