The UK real estate market is volatile. It experiences fluctuations every now and then which make it pretty much difficult for purchasers to make the right decision. This has resulted in many purchasers to consider second homes even if they want it as a buy-to-let investment.
This is probably a good idea it is not simple as it seems. Check here if you are looking out for a second home mortgage. Nevertheless, there are several things to take into account before looking out for second home mortgages. Here is a list of few of the factors:
- Different types
There are two general types of mortgages that are available in the UK. The first one is second home mortgage which are ideal for purchasers who want to purchase properties not for the purposes of their own residency. It might be purchased as a holiday property. It is normally not used for purposes of profit. The second kind is buy-to-let mortgage which will interest purchasers who wants to put it on rent. If you are planning to generate profit through the property, then this mortgage will be an ideal choice.
However, it must be considered that second home mortgages are difficult to get hands on in the UK. This is because the borrower needs to show that there is adequate income to pay the mortgage.
- Stamp duty
The government has recently come up with the regulation of stamp duty where additional 3% duty will be charged irrespective of the reason of purchase. This factor must be taken into account before purchasing a second home mortgage.
- Capital gains
The tax is reduced to 20% when it comes to capital gains. However, the owners of multiple properties are excluded from the reduction. Consequently, property investors pay higher rates. Those who are possessors of second homes and want to sell properties will have to pay the higher rate. This factor is to be taken into account before purchasing any property. Acquiring the property may not prove to be worthwhile in a number of cases.
- Credit rating
This is one of the important factors to take into account when purchasing a second home mortgage. Lenders consider this aspect when a purchaser applies for the mortgage. Borrower is less likely to get his application approved if the credit rating is not good. Having a bad credit results into a lesser tendency of getting a mortgage for second home.
This is something one must consider even before planning to purchase a mortgage. Plan out a budget and think whether you can pay the monthly repayments. Regular incomes and salaries will be taken into account by the lender before approving the application.
Purchasing a second home mortgage is not an easy task. It requires a lot of decision making. Given that it is a technical area, it is recommended to consult experts to get a better idea of how the field works. Do your homework before purchasing a second home mortgage.