Buying that Dream Home in the Sun
Everyone dreams of owning their own place in the sun – a refuge from the dull UK climate and culture – a place you can go to at any stage of the year, by yourself or with family and friends. Spain and the Canary Islands have long been the most popular investment choice with UK buyers.
Although thousands of second homebuyers successfully invest every year, there are still some considerations to be taken into account. Getting a mortgage for example. It’s often more difficult to secure a second mortgage than to secure a primary mortgage. Higher down payments are often required too as lenders are less confident that borrowers for a holiday home will stay up to date on their payments.
Even if you’re fortunate enough to be afforded a second mortgage, there are still a number of financial and lifestyle considerations to take into account before you go ahead.
The costs
Apart from the actual cost of buying the property, you’ll also have to pay and keep paying additional costs like property taxes, and utility bills etc. – all the traditionally costs you have to pay on your primary residence. Most people seem to forget this, seeing as they’ll only be there for short periods during the year.
If you’re renting the property out you can sometimes be no longer eligible for certain tax exemptions and in some cases even liable for more tax payments.
Your holidays
You should also ask yourself if you’d you like to spend the rest of your life going on holiday to the same destination or would you like to travel to new places. If so, you might end up spending additional money on hotels and other services that the holiday home was meant to negate.
Also, whether or not the location is suitable for holidays all throughout the year – in Spain for example, it gets cold during winter, whereas on the Canaries you get non-stop sunshine and warmth all year long.
All the costs involved with buying the second home might actually limit your ability to take vacations anyway.
Before you buy…
Research is the key to a safe and sound investment. Before you sign on the dotted line, make sure you thoroughly research both the area and the property. Definitely spend some time there, (if you haven’t already) before you decide.
Have a look around at different property and investment options. Some work out a lot cheaper in the long run. Less expensive timeshares, although not particularly glamorous, can make you feel just as at home as a grand luxury villa but could save you a lot of hassle and substantial amounts on property taxes, fees etc.
What you’re planning on doing with the property (live in it, rent it out etc.) can greatly affect your personal tax situation. So find out exactly what you can and can’t do with it before you decide. Speak to a tax professional. There’s plenty of them throughout Spain and the Canaries – both Spanish and English speaking.
Benefits of owning your own holiday home
Apart from making going on holidays a much more pleasurable experience, buying a second home in a healthy property market can provide long term benefits through property appreciation and short term income through renting. On the Canaries for example, you can rent out at any stage of the year at tourist prices – a quick and handy way to pay off your mortgage.
You can eventually retire to your holiday home.
If after years of watching the place go up in value and making good income from rentals, you decide you want to have the place all to yourself, what’s to stop you – it’s yours.