Articles:
Buying a second home: why do we do it?
SB May 2007
More and more people have two homes. One reason
for the growth in numbers is that the economics
of buying a second home have never been better.
Mortgage rates, though rising, are still
low, and council tax reductions of up to 50 per
cent are still in operation (though this may not
last for ever).Another reason for the mushrooming of the second
home market is the growth in cohabitation.
While married couples are liable for Capital
Gains Tax on selling the second home, unmarried
couples can have two homes without paying CGT.
This virtually makes buying a second home a
tax-free investment.
A third reason is the boom in property prices.
If your home has increased in value and you have
a lot of equity, it’s much easier to afford a
second property.So what would your reasons be for buying a
second home?
As a
holiday home,
either in the UK or abroad. This is the
most popular reason. But there are plenty of
others.
As an investment. Many people are disillusioned with the stock market and
regard bricks and mortar as a more secure
home for their money – whether buying a
second home as a buy-to-let, or to resell at
a profit. As with other forms of
investment, you can lose as well as gain!
As a pension.
Some people like the idea of buying a second
home and putting it into their pension pot.
This has become possible under changes to
pension rules in 2006. There are
complicated legal restrictions which apply
and you need to look into these carefully.
You won’t be able to live in the property
when you retire, as it will have to be sold
to pay the pension. And DON’T put all your
pension into a second home – diversify.
As a pied-a-terre.
More and more people are now buying a second
home in town where they work, so they can
live there during the week and spend the
weekends with their family at their main
home in the country. Conversely, some
families live in the town home during the
week and enjoy their second home as a
weekend retreat.
As a “handout” property.
An increasingly popular reason for buying a
second home is to provide accommodation for
a son or daughter at university. Parents
can avoid tax liabilities by putting the
property in the child’s name and acting as
guarantor for the mortgage.
Whatever your reason for buying a second home,
you need to consider it carefully and take the
best advice. As long as you go about it the
right way, it can be an exciting and profitable
purchase.
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