Buying a second home

It is estimated that the average buy-to-let property in Britain increased in value by almost £15,000 since the start of the pandemic, proving to be a worthwhile investment for many. But for those wanting to invest in the sector for the first time, what are the advantages or pitfalls involved in becoming a buy to let landlord? Paralegal Jen Haynor explains:

How does the process of buying a second home differ to buying a main residence?

The conveyancing process for a second home remains the same as purchasing your main residence, the Stamp Duty however will differ together with the type of mortgage you might need on the property.

Is this the same process for buy-to-let properties?

Yes buy-to-let properties will need a buy-to-let mortgage if you need finance, and Stamp Duty will be the higher rate. However, with buy-to-let properties there are often further conditions in the mortgage offer that you need to comply with when considering the tenancy agreement being drawn up.

Also, if you are letting the property to tenants the EPC rating will need to be an E or higher and you will then need to ensure the gas and electrics are checked regularly. Buildings insurance will differ as you need landlords’ insurance, any deposit will need to be held in compliance with the Tenancy Deposit Scheme.

Income and capital gains tax should also be considered and discussed with your accountant. This is not an extensive list.

What are the tax implications of buying a second home?

In respect of Stamp Duty, the purchase of an additional home will be subject to the higher rate of Stamp Duty - an additional 3%.

How does the process of buying a second home abroad differ?

The actual process of buying a home abroad will be subject to that country’s legal system and laws governing the house buying process, we can only purchase properties in England and Wales. Buying a second home abroad will be subject to that country’s tax policies, however if you then come and buy a home in the England you may be subject to higher rate Stamp Duty tax unless you are selling the home abroad – our Stamp Duty rules mean that if you own a property/have interest in a property anywhere else in the world you are subject to higher rate of tax. Also, if you are buying a home in England whilst you are abroad you might be subject to a 2% surcharge for non-UK residents.

What are the key factors you should be aware of when buying a second home?

When purchasing a second home you should consider how you will use the property, if renting to tenants, you must also think about your obligations as a landlord. You must allow for legal fees to draw up a tenancy agreement, consider the Stamp Duty, and ensure you still thoroughly research the property as you would a main residence. Property is expensive and a huge investment whether a second home or buy-to-let and skipping on the searches for example could impact re-sale should something be discovered that you could have found out about prior to purchase.

For more information contact Jen Haynor on 01935 846074 or email jen.haynor@battens.co.uk