Buying a second home can be an exciting and rewarding experience, but it can also come with its own set of challenges. Whether you’re looking for a vacation home, a rental property, or a place to retire, there are many factors to consider before making the decision to purchase.
In this blog, we’ll share five tips to help you navigate the process of buying a second home and make the most of your investment.
Tip #1: Do your due diligence.
Before committing to the purchase of your next home, it’s important to examine all your options. This includes researching different locations, types of properties, and price ranges to find something that best fits your needs.
Consider factors such as:
- proximity to amenities like schools, shopping centres, and transport links;
- proximity to family members or friends;
- potential rental income opportunities;
- access to recreational activities; and
- whether you need a property with existing infrastructure or one with potential for development.
Tip #2: Investigate costs associated with buying a second home.
In addition to the sale price of the property, there are other costs associated with obtaining your second Brisbane home loan and purchasing a second home.
These include stamp duty (levied by each state), legal fees, mortgage insurance costs (if your deposit is less than 20%), and any applicable renovation costs.
There may also be additional costs related to maintaining or renting out your investment property should you choose to do so.
Tip #3: Consider tax implications.
Owning more than one property has implications come tax time. This is because rental income is taxed differently depending on which jurisdiction your property is located in.
Some of the taxes you may need to consider (depending on your state) include:
- Capital gains tax: If you sell your second home for a profit, you will likely have to pay capital gains tax on the amount of the profit.
- Land tax: Some states in Australia charge an annual land tax on properties that are not your primary residence.
- Stamp duty: When you purchase a property, you will likely have to pay stamp duty, which is a tax on the transfer of property ownership.
- Rental income: If you decide to rent out your second home, you will have to declare any rental income on your tax return and pay income tax on it.
Seek professional advice for the most up to date and accurate information about tax laws and regulations that apply in your situation.
Tip #4: Get a home inspection.
Before you make an offer on a property, it’s a good idea to get a thorough home inspection to make sure there are no major issues with the property that could be costly to fix.
This will give you a better understanding of the condition of the property and help you make a more informed decision about whether to buy it or not.
Read: Why are Building & Pest Inspections So Important?
Tip #5: Speak to a mortgage broker before you buy a second home.
Securing financing for your next home is often more challenging than buying your first home due to lenders placing stricter lending criteria on second home buyers.
Make sure you shop around and speak with different banks or a mortgage broker Brisbane North who can help you understand the different loan requirements. They will be able to provide advice on which Brisbane home loan product best suits your circumstances.
They can also help assess how much deposit you need and answer any questions you have about repayment options or interest rates.
Some questions around buying a second home
How does equity work when buying a second home?
Using the equity to buy second home to pay for deposit is a great way to offset the upfront costs involved in the process. For example, if your primary residence is worth $500,000 and you still owe $300,000 on your mortgage, you have $200,000 in equity.
You can then use that for your deposit. This way, you can just worry about coming up with the remaining amount to reach the purchase price.
Another way to use equity when buying a second home is by taking out a home equity loan or line of credit, which allows you to borrow against the equity in your primary residence.
Is there a second home buyers grant QLD buyers like me can benefit from?
Yes, in the form of the Family Home Guarantee scheme (available for single parents with only a 2% deposit). Feel free to message us for more information.
Are you a second home buyer? Let the brokers at North Brisbane Home Loans help with your next home purchase
Remember that a second home is a big financial commitment, which is why it is always a good idea to seek professional advice from a mortgage broker before making a decision.
Don’t hesitate to call our NBHL mortgage brokers today. We will help you shop around for great Brisbane home loans that might help you buy a second home.
Patrick Cranshaw, a Certified Mortgage Professional for over 21 years, founded North Brisbane Home Loans in 2002. His career began with ANZ Bank in New Zealand, where he progressed over 16 years to a Business Banking role in Virginia. After moving to Brisbane in 2000, Patrick led the QLD market for a home loan agency, helped set up the REMAX Real Estate Finance division, and practiced as a broker.
