Whether you’re buying a holiday home in Pembrokeshire, a property to commute from in Cardiff or somewhere new to share with a partner, thousands of people make the step towards owning a second home in Wales every year.
What’s more, with house prices on the rise, buying a second property could also be one of the best investments you could make. However, buying a second home can be very different to purchasing your first. What do you need to consider?
Do Your Research
Just like buying your first home, purchasing your second property is a big deal. So it’s essential to do all your research. Are you completely happy with the location? Does it represent a secure investment? Can you afford it over the long term?
Read more: FAQ Series: Can I Move into my Buy-To-Let Property?
Find the Right Mortgage for You
Unless you have a cash lump sum to pay for your home, you’ll need to get a mortgage. Many people choose to raise money for a deposit on their second home by re-mortgaging the first property.
The mortgage that you can get depends on what you choose to do with your second home. If, for instance, you plan to rent it out then you’ll have to secure a specific buy-to-let mortgage. The amount you be loaned will be limited to the amount you can expect to earn from rental income.
Don't Forget Tax!
If you’re planning on making money from your second home, and many do, then you’ll have to remember that there are tax implications.
Any income that you make yearly from renting out your second home will have to be declared on a tax return. If you’re paying the higher rate of tax then this rental income will also be taxed at this upper tariff. However, you will be able to limit the amount of tax you pay from rental income by claiming expenses on things such as:
• Mortgage interest
• Maintenance costs
• Buildings and contents insurance
• Utility bills and other costs
You may also have to pay capital gains tax if you sell the home and it’s not certified as your main residence.
As with first homes, council tax is also payable, although some councils will allow you to enjoy a reduction if you only live in it for a set amount of time every year.
Read more: Buying Several Properties? Beware Combined Stamp Duty!
Get Covered with Insurance
As with your first home, it’s important to protect your investment with the necessary insurance. You’ll need buildings insurance to protect against any structural problems as well as contents insurance if you’re not renting it out.
Remember that you’ll have to tell your insurer if you’re planning not to live in the property for sustained periods of time. Unfortunately, this will make some premiums more expensive.
Let Howells Help
If you're considering purchasing a second home in Wales, our trained conveyancing solicitors or solicitors in Cardiff can help. Call us free on 0808 178 2773 to arrange a meeting to discuss your purchase today.
