In the market for a second property? More and more people are. In fact, around 10% of Brits now own a second home, and that number is only rising. 

There are lots of reasons to buy a second home. Maybe you’d like a place in the sun, an extra stream of income, a way to invest your savings, or perhaps you want to help a family member get on the property ladder. 

Whatever your motivation for expanding your portfolio, here we look at everything you need to know about buying a second property.

Our guide to buying a second property 

How does buying your second home differ from buying your first? 

Buying a second property is slightly different to buying your first home. The main differences have to do with tax and the boxes lenders want you to tick before they let you borrow. But seeing as this isn’t your first step on the housing ladder, there won’t be too many surprises in the process itself. 

You’ll still have to search and view properties, place offers, apply for a mortgage, and go through conveyancing and completion, just as you did when you bought your main home. 

And because people use their second properties in different ways, you’ll need to find the mortgage that suits your intentions. 

  • Residential mortgage: This is for people who plan to split their time between their primary residence and their additional property. You’ll have to jump through some hoops to prove that you can comfortably make mortgage repayments on two properties.

  • Buy-to-let mortgage: This is for people who want to rent their additional home to someone else and collect income as their landlord. You can’t legally rent out an additional property to long-term tenants without this kind of mortgage.
  • Let-to-buy mortgage: This is for people who need to rent their existing home to buy a new one. These mortgages can be complicated to arrange, but they can help release the funds for your new deposit if it takes longer than you’d like to sell your first home.

  • Holiday let mortgage: This is for people who want a holiday home to make an extra income. The magic number for this deal is 210 days per year. If you’re going to make your property available to holidaymakers for less time than that, a residential mortgage should cover you. 

How easy is it to get a mortgage for a second property? 

Getting a second mortgage for your new property can be harder than it was for your first. That’s why it’s often a good idea to bring in a mortgage advisor or work with a mortgage broker like Habito to find the best deal. We can search 20,000 mortgages from over 90 lenders to find the one that works for you.

The difficulty in getting a second mortgage is simple to explain: mortgage lenders are risk-averse. While you might think the fact that you’re already paying one mortgage is evidence enough you can cover a second, lenders see the amount you have to repay on your first mortgage as debt – and debt equals risk. 

What will I need to get a second mortgage? 

To get a mortgage loan for your second property, you’ll need:

  • Documents to calculate your credit score (which lenders will want to be excellent). Your lender will need reassurance that you're reliably paying back your existing debts – your mortgage payments, credit and store cards, and other loans. 
  • Proof of stable employment and income that would comfortably cover both of your mortgages. This can include a plan for how much you would charge your tenants in a buy-to-let or holiday let property. 
  • Bank statements that prove you can make a large deposit. Although you might be able to get a mortgage for your own holiday home with a 15% deposit, most buy-to-let mortgages start at a 25% deposit and can go as high as 40%.

    If you’re buying a £220,000 home, that means a deposit of at least £55,000. The repayments on the mortgage are often at a higher rate too, which means you may not save much month-to-month in exchange for the larger initial payment.  

What are the tax implications of owning a second home?

The extra work around a second mortgage application can put some people off buying an additional property. But once the property is in your name, almost all that extra work is behind you. 

Something you’ll have to keep thinking about is the tax implications of buying a second home. This can affect you for the entire time you own the property – even when you choose to sell it.

Here’s a breakdown of what to consider:  

When you buy

  • Stamp Duty Land Tax: The Stamp Duty holiday fuelled a house-buying rush in 2020/21, but it ended after September 2021. From October 2021, you’ll have to pay stamp duty on all property purchases (including second properties) over £125,000. Stamp duty rates go up in line with the value of your property, and as well as paying the standard rate of Stamp Duty, there’s a 3% surcharge for your second home. This applies even if you’re not planning to live in it yourself.

While you own

  • Income Tax: If you make money as a landlord, it counts as income, and you’ll be taxed on it. Your rental income might also push you into a higher tax bracket.
  • Council Tax: You’ll have to pay the full rate of council tax on your second property as well as on your first. The only exception is for some furnished holiday lets, which can qualify as small businesses. 

When you sell

  • Capital Gains Tax: CGT is a tax you pay on the value that your property gains while you own it. For example, if you bought your house for £300,000 and sell it for £360,000, you have to pay tax on the £60,000 difference. You have a CGT allowance of around £12,000 (this can change every year), which in this example reduces the amount you’d pay tax on to £48,000.

    However, you’ll still end up paying around 18% as a lower rate taxpayer or 28% if you’re in a higher bracket. This can significantly cut into the profit you make from the sale, which can then affect you if you need the cash to put down a deposit on your next property.

Additional costs of owning a second property

Don’t forget that buying a second home also comes with the responsibility of maintaining a second home. This can mean extra costs, especially if the property is far away from your primary residence. You may need to hire someone to cut the grass or employ a cleaner for a holiday let. And you'll also have to deal with unexpected expenses, like replacing the boiler if it breaks down. 

With buy-to-let mortgages, there’s also the risk that your property will stand empty for a long period between tenancies. Not only are you then liable for the full mortgage payment, but you’ll also have to cover the utilities usually paid by your tenants.

Finally, whether you're buying your first home or adding a tenth property to your portfolio, it's impossible to predict the housing market. 

Many people invest in a second home to renovate and sell at a profit, but there's no guarantee that the housing market won't stall in the time it takes you to get the property ready for its new owners. A second home can be an excellent investment, but it's also a risk. 

Buying a second property is a big decision. Before you start searching, get to grips with the numbers by using our buy-to-let mortgage calculator.