Articles:
Ways to avoid a second home mortgage
SB May 2007
Buying a second home is a huge commitment.
Whether it’s in Folkestone or Florida, Cornwall
or Corfu, Lanzarote or Liverpool, it is going to
be a massive part of your life. And financially
it is one of the biggest commitments you will
ever make – if not THE biggest.
So one of the first decisions you have to make
is – how are you going to
finance your second home?
For most people, a
second home mortgage is the obvious answer.
But not everyone is keen to get involved in such
a binding arrangement. Whichever way you want
to go, your first step should be to consult a
good
independent mortgage broker. He or she will
be best placed to find a plan that is tailored
to your specific circumstances.
The main thing to remember is that if you want
to avoid a
second home mortgage, you need to have
substantial resources at your disposal in order
to finance your purchase
If you already have a good sized house which you
own outright, you can sell it and buy two
smaller properties. This is a particularly good
solution if you are at or close to retirement,
when you might well be wanting to downsize
anyway. You may be able to avoid a second home
mortgage completely by this means.
You may have received cash reserves in the form
of an inheritance, or perhaps in City bonuses.
Many people see buying a second home as a good
way of using the money, as an alternative to
investing on the stock market. Again, it may be
possible to do without a second home mortgage
altogether, especially if you buy in certain
parts of the country where prices haven’t gone
through the roof.
A third option is equity release. If you have
paid off most or all of the mortgage on your
existing home, and particularly if it has
substantially increased in value, you may be
able to release sufficient funds to enable you
to purchase a second property outright. You
still need to apply for the funds from your
lender, or another lender, but you will avoid
most of the issues related to looking for a
second home
mortgage from scratch. Talk to a good
independent mortgage broker who will advise you
on the best way to do this. If you can’t raise
the funds to purchase outright, it can be a very
good way of finding a good-sized deposit, and so
reducing the amount you need to borrow through
your second home mortgage.
If you don’t have the resources for any of these
options, the good news is that an increasing
number of lenders are offering second home
mortgages on favourable terms. Talk to your
mortgage broker to find the plan
that’s right for you.
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