Our checklist for buying a second home will help you to understand the ins and outs of the process, from remortgaging your existing home to the costs associated with selling a second property.
1. How to buy a second home
Every year, thousands of homeowners decide to buy a second home for a multitude of reasons.
If you’re looking to buy a second property to rent out, you’ll have to opt for a buy-to-let mortgage. View our buy-to-let checklist for everything you need to know about purchasing a home for renting.
If you don’t plan to rent your second home to others and want to keep your original home too, there are two possible ways to go about it: remortgaging your current home or, if you’re an older homeowner, releasing equity from it.
Remortgaging your existing home
For many, remortgaging is the most suitable way of funding the deposit on a second home - or in some cases buying it outright.
There are plenty or remortgaging options out there; when searching for one remember to consider the ‘true cost’ of any deal as opposed to basing your decision solely on the headline interest rate.
It’s also worth noting that there are some restrictions on remortgaging for older borrowers. That said, some lenders will accept borrowers who exceed retirement age so long as they can prove their mortgage is affordable and - as with anyone - their application passes the ‘stress test’.
A ‘stress test’ relates to circumstances that might impact your ability to meet your mortgage repayments, such as interest rates rising or if you lose your job.
You can access the equity (or cash) tied up in your home through ‘equity release’ if you’re over the age of 55. You can take the money you release in full or in several smaller amounts. This option is designed to enable older borrowers to unlock their current property wealth to pay for an additional home.
The most common equity release scheme is called a ‘lifetime mortgage’. Interest on the lump sum of this type of mortgage builds up over time and is repaid when the borrower goes into long-term care or dies.
Going down the equity release route can affect your entitlement to state benefits and will reduce the value of your estate, so we’d recommend seeking professional advice first.