6 things you should know about buying a second property in 2017

Published: 10/01/2017

Our property guru Emma Coffey explains…

Location, location, location

In the long-term, your investment is going to be all the more valuable is you do your research when it comes to location. Areas set to undergo development – such as Liverpool’s Baltic Triangle area, for example – could bring you future profits.

Equity or buy-to-let mortgage?

One option is to remortgage your first property and use the equity released to put the deposit down on a second property or, if possible, buy it outright. If you’re taking out a second mortgage, you will need to prove to your mortgage provider that you can afford to pay off both.

A buy-to-let mortgage should be taken out if you plan on renting out your new property. A minimum deposit of 24-40 per cent will typically be needed to score a great deal.

It’s also worth mentioning that the PRA is introducing new rules for the buy-to-let market this year, putting in place stricter underwriting standards for buy-to-let mortgages.

No more mortgage tax relief

There are new tax relief for landlords coming in April 2017. After April 2017, landlords will still be able to deduct these expenses but higher rate taxpayers will only be able to deduct part of their mortgage interest rate costs from their rental profits.

Don’t fret however; most basic rate-paying landlords (those earning less than £40, 000, for example) won’t be affected.

Stamp Duty

When buying a second property, there is an additional 3 per cent charge to the standard rate of Stamp Duty Land Tax (SDLT) which works out as follows:

** 3 per cent on the first £125,000

** 5 per cent on the portion between £125,000 to £250,000

** 8 per cent on the portion between £250,000 to £925,000

** 13 per cent on the portion between £925,000 to £1.5 million

** 15 per cent on anything over £1.5 million

Brexit

Uncertainly remains over what leaving the EU will mean for the UK property market in the long run. Some have suggested that possible restrictions on migration may mean less demand for rental properties.

Legal implications

Purchasing a second property, especially if buy-to-let, can be a complicated process. That’s not to mention the legalities surrounding life as a landlord. It is absolutely always advised to seek the assistance of a solicitor experienced in property law.

Content correct at time of publication