So you’re thinking about buying a second property – maybe for short or long-term lets, or to have somewhere to escape the hustle and bustle at the weekends.
What do you need to know? Here we break down some of the basics – but if you’d like more information about your specific circumstances, speak to one of our expert property solicitors in the Highlands.
Tax on Second Properties
You can’t avoid paying tax. It’s a question we’re often asked and, while we’re not financial advisers, we can say for certain that there’s no way around it!
If you’re buying a second property you’ll have to pay an extra 6% of the total value , on top of any LBTT due. This applies whether you buy the property under your own name or under a company – you can’t cheat the system.
Many buyers forget about LBTT – and this additional tax – when setting their property budget. Remember to factor in all additional costs when deciding how much you can afford to spend on a property.
Couples Buying Second Properties
Now let’s look at a more complex situation:
John and Melissa live in a rented house, first as a cohabiting couple and then as husband and wife. Melissa owns a house that her parents live in. If John buys a property in only his name, is this classed as a first home?
Because John lives with someone that owns a property and they are a cohabiting couple, they are seen as one person, not two, for second home tax purposes.
Although Melissa and John do not live in the property Melissa owns, it is still classed as their first property, so any property bought by either of the couple is classed as a second home. Therefore, the extra 6% tax will be added to the cost of the property.
It can be easy to be caught out by situations like this – which is why it is so important to speak to an experienced property solicitor if you’re considering buying a second home.
Mortgages on Second Properties
Getting a mortgage for a second property can be more challenging than for a primary residence. Lenders may require a larger deposit (often at least 25%) and may have stricter affordability criteria.
You’ll also need to be clear about why you’re buying the second property. If it’s a holiday home, you won’t be able to rent it out with a standard residential mortgage. You’ll need a buy-to-let mortgage which may have different terms and interest rates.
Although we’re not mortgage brokers, we can point you in the direction of trusted mortgage advisers here in the north of Scotland.
Advice on Second Properties in the Highlands
If you’re thinking of buying property and need advice, contact Innes & Mackay’s specialist property law team. We’ve been proudly serving clients in the Highlands, Moray and across Scotland for 150 years – and are with you all the way in your property journey.
