Ways to avoid a second home mortgage

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.

·         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.