You may have all sorts of reasons for buying a second home. You could want it as a holiday home, as accommodation for a son or daughter at university, as a weekend retreat, or as a pied-a-terre in London or some other big city.
Whatever your reason, the lure of owning a second home is strong. But don’t take on such a hefty commitment without thinking it through first.
For a start, unless you have money put by, you will certainly need a mortgage for your second home. Mortgages for second homes are not necessarily exactly the same as a mortgage on a first home, for a number of reasons.
1. Mortgages for second homes are a luxury not a necessity. You give high priority to the mortgage payments on your first home, because you have to have a roof over your head. A second home mortgage is different. You need to make sure your finances are in a good state, and that you have some savings for a rainy day. There’s really no justification for getting into serious debt over a second home.
2. Lenders don’t necessarily treat mortgages for second homes the same way as they regard first mortgages. They probably won’t offer the cheaper deals, and in some cases might refuse altogether.
3. Borrowing on mortgages for second homes will be restricted by the amount owing on the first home, and by other debts and commitments. You would be well advised to pay off other debts before even considering a second home.
So what are your options for a second home mortgage?
• You can use a new lender, in the normal way. Lenders work on affordability criteria so they will look at any existing mortgages you have in relation to your income.
• An alternative is to remortgage your existing property. This way you can avoid valuations, surveys etc. on your second home (though of course you should not buy it without having it surveyed for yourself). The lender will only need to be satisfied that you can afford the higher repayments (and you need to be sure of this yourself!). You can remortgage with a different lender if you can get a better deal that way.
• A third option is to split the borrowing between the two properties, rather than raising the whole sum on one property or the other. One advantage of doing this is that although it incurs two sets of charges, it is likely to keep the borrowing on both properties below 70 per cent, thus keeping interest rates and charges lower.
Whichever option you choose, you must be certain that you really want this property before you let yourself in for all this expense. And make sure you want it for its own sake – as a home – rather than as an investment. If you are just thinking of it as an investment, you could be disappointed! Mortgages for second homes can be a major undertaking – get it right, make it a place where you can be happy, and the trouble and expense will be worthwhile.
Holiday Let Mortgages are the UK’s premier broker for holiday let mortgages and holiday home mortgages. You can visit our website here: http://www.holidayletmortgages.co.uk