While buying a second home is still a luxury that only the lucky few can afford, the amount of British people who own more than one property has grown massively over the last few decades. Now, more than 10% of the adult population owns a second home, and this rise shows no signs of stopping.
The reasons why people opt to buy additional property can vary, but the process largely remains the same, check out our top tips and things you need to know, below.
Reasons why people buy a second home
The reasons homeowners often choose to go through the process of buying an additional property can vary dramatically, but they usually fall into one of the following three categories:
Buying a second home purely as an investment is what has driven the sharp increase in multiple homeownership. More and more Brits are buying second homes in order to rent these out to others as an extra source of income. The growth of the private rented sector has given those who have the opportunity to do so a great way to invest in the property market via buy-to-let.
Buying a second property as a holiday home is one of the most popular reasons people purchase a second home, whether it’s here in the UK or somewhere sunny abroad, more and more homeowners are opting to buy a second home as a holiday home.
Of course, holiday homes can also be seen as investments as well, with many owners opting to rent out the property to other holidaymakers when the home would otherwise be unoccupied, but it usually isn’t the driving force behind the decision to buy a second home.
Buying for someone else
Buying a property for someone else isn’t anywhere near as popular as for investments or holidays, but a large number of homeowners do still purchase a second home for a loved one to help them get a foot on the property ladder.
Buying for someone else, however, is not always the smartest choice as it will add more bills and outgoings thanks to stamp duty that you will have to pay on your second property.
Due to this, there are easier ways to help loved ones get their own homes, including, being their mortgage guarantor, gifting the money, or setting up a loan, before committing to purchasing the property yourself.
Ways to buy a second home
Just as there are three key reasons why people buy second homes, so there are three main ways in which people make multiple homeownership happen.
Getting a mortgage for a second home
A common misconception is that homeowners need to pay off their existing mortgage in order to get another, but that isn’t the case. You can have two mortgages running concurrently, and pay them both off at the same time.
There are, however, a few things you’ll need to have in place if you want lenders to take you seriously. These include:
- Being able to demonstrate that you can afford the additional mortgage
- Having a credit rating that is beyond reproach
- Having a sizeable deposit, usually in excess of a quarter of the new home’s value
- Information on potential income to be made by the property in question
Let-to-buy is another option to consider if you are thinking of buying somewhere new to live whilst keeping the property you currently call home as your investment.
Using equity to buy a second home
If you find yourself in a position where your existing home has a large amount of equity behind it, you could consider releasing this in order to cover a percentage of the new purchase. This is usually done by way of remortgaging the original property. This will make it easier to go about buying your second home.
If you’re lucky enough to have cash to spend, buying a second home becomes a lot more straightforward. Find a property you like that is within your budget, run the relevant checks, get a survey done, and proceed.