Top things to know before buying a second home

Published Feb 13, 2024

4 mins read

Whether you are looking for a second home, holiday home or investment property, these top things to know before buying a second home will provide valuable insight.

Navigating the complex finances, laws and location choices for a second home can be daunting. With that in mind, we’re guiding you through the key steps — from saving for deposits and securing mortgage finance to managing tax implications and rental yields if you do not plan to use the property yourself.

Maybe you covet a scenic countryside cottage? Or perhaps you’ve got your eyes on a modest city flat?

Whatever the reason for buying a second home, make it a reality with our guide to the top things to know before buying a second home.

Is a second home right for you?

With benefits such as rental income, a personal holiday getaway, building wealth, and the flexibility to use the property as you want, it’s understandable why more British buyers are seizing second home opportunities.

For many buyers, smart financing, and understanding of tax on second properties and potential cash flow make second homes a savvy move. Even better if it lets you enjoy more family trips or semi-retirement time in your dream location.

Just make sure to evaluate your career, income, family, and health projections, and ensure that the location you’re considering for a second home and the type of property you think you’d like to buy, align with your position and plans.

If the timing and budget feel right based on realistic forecasts, you could be perfectly poised to make a second home work for your situation.

If unsure, it’s always worth using an accountant or solicitor to address money and legal matters. Focus instead on how a second property aligns with your bigger life vision.

What is the cost of a second home?

The cost involved is one of the top things to know before buying a second home. Beyond the purchase price, buying and owning a second home involves some upfront and ongoing expenses.

Stamp duty

Brace for higher stamp duty costs when buying a second residence, whether for personal use or rental income.

Current rules impose an extra 3% stamp duty on the entire purchase price, on top of the standard rates.

That can equate to thousands extra upfront, so budget the stamp duty into your deposit from the outset.

Mortgage payments

If you’ll be taking a mortgage to when buying a second home, don’t overlook increased mortgage costs when budgeting.

Consider the different scenarios when considering rates and terms, an experienced mortgage broker would be a sensible advisor to enlist when buying a second home.

Maintenance and overheads

Even if not occupied full-time, maintenance costs, periodic improvements, and even emergency repairs apply for a second home.

Not only that, but there’s the council tax to think about if you plan on using it as a holiday home. You’ll also need to pay for utilities.

Management fees

For investment homes, if outsourcing to a rental agency, their cut of proceeds earned can range anywhere from 6-15% depending on location and popularity.

Carefully projecting all these elements will give you the truest sense of long-run expenses from a second property. An expensive proposition yes, but one that many find worthwhile.

Choosing the right location

Another of the top things to know before buying a second home is where to buy. You should consider the strategic balance of lifestyle appeal, rental income potential, and growth forecasts.

Research Appreciation Potential

Finding the perfect second home requires careful consideration and a list of your must-haves.

Factor in some of the following when looking for a second home:

Proximity to the primary home

Opting for a closer second home allows easier access for those all-important last-minute getaways. But more distant investment properties often promise higher returns and lower purchase prices, especially if you’re located in the south and buying closer to the north.

Countryside vs cities

Bucolic country cottages hold enduring romantic appeal while city flats better suit shorter getaways and lets, especially with professionals looking for a weekly base closer to their work. Review area features against your personal needs and decide if a flat with sweeping skyline views or a bolthole retreat makes more sense.

Do your homework to discover less obvious gems matching your second home vision – the extra legwork pays off long-term in enjoyment and equity.

Renting out your second home

A prime motivator for many second-home buyers is to enjoy the property themselves, a second home can be self-supporting and cover costs of maintenance for example, if it is let to holidaymakers for a portion of the year.

Shorter lets maximise high season rental rates for holiday homes but means occasional gaps too.

Whichever route you choose, renting shifts your property’s classification and will likely have differing tax implications so engaging the services of a good accountant or tax advisor who has experience in this area is a recommended step.

Insurance premiums can also change when renting a property, so be sure to factor this in too.

Getting the most from your second home

Having a second home doesn’t mean one or the other between letting it out and having a place to retreat to on the weekends. You can do both. For instance, using the property for short-term holiday lets means you can earn an income from it when you’re not staying there.

But should you wish to visit for a long weekend or during the summer, you can block those dates out.

Having a second home can be a flexible endeavour, one that gives you the benefit of both worlds — a place to stay when it suits you and a second income.

If you do have the intention of letting the property you’ll need to factor this into locations you are considering as it might be an unsuccessful letting option if you purchase a second home in an area that holidaymakers are not particularly interested in, where demand is low.