THE UK HAS SOME of the best locations in the world, from our fantastic cities and breath-taking coastlines to our rolling green countryside. This love of our towns, cities, counties and regions has seen significant numbers of people choosing to lay down some additional roots in their favourite location, through the purchase of a second home.
With many buyers seeking the benefit of a rural retreat alongside their urban primary residence, demand for second properties has grown since the start of the pandemic. Many of these second purchases have been motivated by lifestyle factors in desirable areas where they can spend leisure time.
SIGNIFICANT DEMAND FOR PROPERTIES
This has lead to a significant demand for properties in places like the Cotswolds, Somerset and Cornwall, as more people shift their mind-set from seeing their homes simply as a place to sleep, to places where they are going to live, work and play. But before you commit to purchasing a second home, you will need to decide how to finance it. There are a number of mortgage options available depending on your financial situation. For many, releasing equity to buy another property can be an option, while investors may need a buy-to-let mortgage.
INCOME AND COVERING COSTS
You should factor in additional expenses such as Stamp Duty Land Tax (SDLT) and potential capital gains tax on a second property in the future when doing your calculations, as these can add significantly to the overall cost. There will also be ongoing
expenses to consider such as council tax, insurance and utilities, which can all add to the cost of buying a second home.
Owners who choose to rent out their second home do so for a variety of reasons, but a source of income and covering costs are the primary drivers. Security purposes
and avoiding leaving the property empty are other motivators.
INFORM YOUR INSURER
If you are considering making a decision about how to use your second home, you need to check whether your insurance is valid to use your home as a holiday let or if you need to obtain permission and inform your insurer.
If the property is leasehold, will the landlord permit the intended use and do you need planning permission from a local council to let your property for a set period of time, which may constitute a material change of use. You must also ensure that any agreement to let is for a specified time so that the holidaymakers must vacate at the end of the term.
EXPLORING YOUR OPTIONS
If you are buying a second home, you have to pay extra SDLT. In England and Northern Ireland you’ll pay a 3% surcharge on each band. In Scotland, Land and Buildings Transaction Tax (LBTT) on properties is charged at an additional rate of 4%, and in Wales rates on properties are charged at an additional rate of 4%.
All things considered, the summer holidays can be a great time to use and enjoy a second home. If you’re interested in exploring your options, book a meeting with our advisers today.