Copyright (c) 2011 Robert Gray
These days owning a second property is not just something done by the rich and famous. More and more people’s dream of owning a second property is becoming a reality as people look for alternative ways to invest their money and create a nest egg for the future. Pensions, it seems, are not always the favoured option for planning a secure financial future. This article looks at why owning a second property may not just be a distant dream and the reasons that many people take that step to become the owner of two (or more!) properties.
People’s reasons for purchasing a second property can range from a purely financial investment – a way of investing money without entering into a pension scheme – , to buying a property for the sole purpose of renting it out to create an additional income, or purchasing a holiday home, perhaps by the sea, to be enjoyed at weekends and in the holidays.
If you have a substantial amount of equity in your first property you may be able to release some of that equity by remortgaging and use the money you have released to help fund the second property. Alternatively, if you do not have enough equity in your first home you would have to apply for an additional mortgage for the second property you wish to purchase.
Your mortgage lender will take into account the purpose for which you are purchasing a second property when assessing how much they are willing to lend you. If your intention is to rent out your second property you will need to apply for a buy to let mortgage. The mortgage lender will assess the property’s potential rental income and this, not solely your own income, will depend on how much you are able to borrow.
Alternatively, if you are purchasing a second property as a holiday home for your own use – i.e. a property that is not going to generate an additional income for you – your mortgage lender will ask you to produce documentary evidence to show that you would be able to keep up the mortgage repayments on the second property, as well as those on your first property.
It can be seen, therefore, that with proper forethought, sound advice and careful financial planning and may not be out of the realms of possibility to take the step of purchasing a second property.
Need specialist Moving Home Solicitors?
Gray Hooper Holt are Redhill and Reigate Solicitors?