Buying a second home can give you and your family all kinds of lifestyle options. It can also be a really sound investment, especially when you consider the fantastic range of city and country luxury homes currently available. As with any major purchase however, the prospect of such a big decision can be intimidating. Whether you are thinking about treating yourself to buying a weekend home or wondering if buy to let is worth it, we can help. Here are our top tips on buying a second property.

Great reasons to buy a second home

Being the owner of a luxury second home can be a wonderful experience but the home you chose can sometimes depend on the use to which you intend to put it. It is true of course that a luxury property can be both a home and an investment but deciding exactly what it is you need your new home to do will help you make the right choices for you. Here are a few ideas of how you might use your second property.

• You might decide to finally own a family retreat in your favourite holiday location
• You could have some fun trying your hand at a bit of property development
• You might want your home purchase to serve as an investment
• You may have family members who would benefit from a home base
• You perhaps fancy the luxury of a dual town and country lifestyle

Of course it may well be that you want your second home purchase to cover a range of opportunities. For example, if you choose the right luxury holiday home, it will be a long-term investment as well as a place for you and your loved ones to enjoy. Once you understand your plans for your new second home, it is easier to make the right decisions when it comes to purchase. We take a look below at some of the important points you need to consider.

Buying your dream luxury holiday home

For many people the nuisance of choosing and booking holiday accommodation every time they want to get away can be a real chore. Whether you fancy city breaks or country pursuits, purchasing your own holiday home can relieve this pressure and give you instant access to your dream location whenever you or your family need it. Imagine leaving work and arriving at your holiday home to find everything just as you left it. You will feel at home in your relaxed environment and be able to escape at any time from the stress of work, to the lifestyle you love.

Few property purchases are lifetime ones but even before you choose to sell it, your luxury holiday home can also represent a fabulous investment. If you find yourself unable to use it as much as you would like to, you will be able to let it out to select clients for short-term or holiday periods. This can be done through high-end letting agents who understand the luxury rental market and will remove any possibility of pressure from your shoulders.

Should you require a mortgage for your second home, holiday home mortgages are often easier to arrange than you might expect, especially if you aren’t planning to let your new property out. You might have to choose your lender carefully but as long as you take into account stricter affordability criteria and larger deposits, you shouldn’t have any problems. The choice of lenders is more restricted for properties that you plan to rent out but mortgages in these circumstances are also readily available.

Buy to let and investments

Buying a second property isn’t always about relaxation and family fun; it can also make sound financial sense. When you purchase a buy to let property you give yourself the opportunity for two different streams of financial gain, rental income and growth in value. Property can be a changing market but overall the outlook for investors remains good. Private rents are still rising steadily at a rate of around 1.5% and the demand for rented property is still high. Post coronavirus, our homes, and the outdoor and indoor spaces they provide have become a priority, and many people are reconsidering their property options.

Second homes – tax and finance

Whilst buying a second home is an investment, it is important to take all of the second home taxes and other financial implications into account before choosing your dream property. As well as the usual legal and service fees you will need to consider the following.

Stamp Duty – This is a tax that most people are required to pay when they are buying land or residential property in England or Northern Ireland. The rate for stamp duty on second homes is usually a bit higher (currently 3%) than that for main homes. The rates for stamp duty in England and Northern Ireland are currently being held at a lower level until March 31st 2021.

Council Tax – You probably already pay council tax on your main home but it’s worth remembering that you will also need to do this for your second home. Council tax payments are calculated on the value of the property and most luxury properties are liable for the top band (properties worth over £320,000). Different councils charge council tax on second homes at different rates. There are also a few other relevant exemptions from council tax so it’s worth talking to your financial advisor before making any decisions.

Capital Gains Tax – It is worth remembering that you will be required to pay capital gains tax on second home sales. This tax won’t affect you when you buy your new property but it will have an impact when you come to sell it. The amount of capital gains tax you pay depends on the increase in value of your property. If you are wondering how to avoid capital gains on second homes, there are a few things you could do that might help.

• Bear in mind that capital gains tax is only paid on the profit you make on a property, and that your personal capital gains allowance is taken off before any calculations are made.
• Consider the fact that you do not have to pay capital gains on your main residence, so think carefully about how you classify your properties.
• Remember that if you pay higher-rate taxes at the time of sale, your capital gains tax will also be higher.

Just as with any other major purchase, it is important to make sure you understand all of the financial implications of your second home purchase. We recommend you talk to property and finance experts before making a decision.

In these strange and unprecedented times property remains a sound investment. Whether you are considering buying a second home for pleasure, investment or both, our experts are here to help. Here at Arlington Residential we understand the luxury property market in Central and North West London better than anyone. We offer a unique and individual service and are happy to discuss your thoughts and desires whether you are considering a main or second home purchase. For professional help and advice on property sales and lettings, please feel free to make contact with our team today.