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Buyers Market – Tips for Buying a Second Home

28 June 2011

The subdued housing market, means now is a great time to investigate how manageable it is for you to buy and maintain a second home.

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The latest housing market publication by Hometrack reveals June sales increased by 10.6 percent from May, which is the highest monthly increase since March this year of 12.6 percent.

They suggest this improvement is largely the result of greater realism by sellers as prices fall to enable movement.

Hometrack shows agents are keen to ensure prices are at a level where transactions can take place to support revenue.

The average price of a UK home fell by 0.1 percent in June, highlighting how prices remain a downward pressure. The supply of homes for sale continues to grow well ahead of demand too, so buyers are likely to have a good choice for their money.

However, if the market continues to move and sales volumes increase, prices will soon follow, so those considering buying a second home should act fast.  Although, average prices today are 3.9 percent lower than this time last year.

Holiday Home

Buying a second home as a retreat when everyday life becomes too stressful, is not the best way to save money on holiday funds.  It is not recommended therefore, that you buy a second home simply as a means to reduce your holiday costs, as a second home will cost a lot more and it is only a sensible move if you are planning on making it an investment too.

However, if there is a part of the country you are particularly keen on, and have been thinking about buying a holiday home for a while, now is a good time to look as you could get one for a good price.  Just remember to factor in the costs of maintaining it.

Future Investment

A second home could prove to be a good investment and if you have the money to put into one, then now is the time to take the plunge.

Any property you buy now will be likely to grow in value considerably when the market picks up, and as previous recessions have proved, the housing market does tend to bounce back.  So when this happens, and properties for sale are high in demand, then this is the time to sell as you are likely to be able to sell it for a lot more than what you bought it for.

Retirement Income

The investment you make on a second home could also go towards your retirement too.

Even if when you come to sell it the value has not risen as much as you had hoped, with a bit of renovation, you could easily add more to it.

The main difficulty those looking to purchase a second home may find will be attaining a mortgage.  However, if second home buyers have already paid off a mortgage then they are likely to find it easier to be accepted than a first time buyer.

Analysis from a leading comparison site recently revealed, mortgage rates are very competitive at the moment, providing further incentive for second home buyers to act now. 

The figures show the average interest rate across two-year fixed rate mortgage products are at their lowest since the base rate was dropped to 0.5 percent.  The average two-year product now stands at 4.25 percent.

 

  • Hi Pauline, I have done a bit of research that may be helpful to you. Going directly to a lender is not always the best option. A lender can usually only offer products from their own company, which may not be the most cost effective or correct solution for your individual circumstances. There are plenty of finance brokers out there who will look at the wider picture for you, usually they have more than 1 lender available and if they are an 'advised' broker you can take comfort in the mortgage advice that is given to you. Note however that Buy To Let is not regulated by the FSA and is therefore not an 'advised' sale. Most brokers that are worth their salt will not charge any upfront application or finders fees etc. and they will usually find you an offer with no obligation for you to go ahead. There has been a lot of press recently regarding dual pricing, where lenders have different rates depending on the route the customer has reached them through. Sometimes using a broker can actually result in lower costs and rates than going directly to the lender, even if the broker charges an admin fee of their own. Other choices to consider include taking a homeowner loan on your residential address rather than mortgaging your rental property. Although rates are usually slightly higher for homeowner loans, you may find that they are more flexible - you can usually clear a homeowner loan with only a months notice with a maximum of 1 months worth of interest charged as an early repayment charge. Many mortgages will charge you up to 5% of the mortgage amount if you were to clear it before a certain date. Homeowner loans can usually raise anywhere between £5000 and £100,000. . . Hope some of this helps? Duncan (......and no I'm not the one off the telly!)

    Duncan P Bannatyne  |   Birmingham  |   16 Aug 2011

  • I just spoke to Woolwich today on buy to let mortgage to release money on a house we own with no mortgage. The application fee is £1999 plus solicitor cost s £389. Where is it so expensive to borrow money. These costs used to be about £199 not £2000. There seems to be no protection for the average consumer and massive over charging us for financial services. Pauline. Who is the fairest lender?

    Pauline  |   Twyford  |   15 Aug 2011

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