Facts to Know before Buying Second Home
Key Factors when Buying a Second Home
When it’s time to move to a bigger home or even on that is more suited to your current lifestyle, you will probably find the process easier since you already have a good understanding of how everything works. In most cases you also have some equity in your present home, so buying a second home can definitely work to your advantage.
A second home purchase is very common in today’s market. Some people buy a second home because they choose to while others do it because of circumstances. It doesn’t matter what the circumstances are surrounding your decision to become a second time home buyer; it still requires special attention.
Helpful Tips for Purchasing a Second Home
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- Before buying a second home you need to consider whether you can afford the payments on both properties if you don’t sell your current home.
- Can you transfer your existing mortgage to another home? Will you incur any fees or brokerage fees if you cancel your existing mortgage when buying your second home? Should you think about a different type of mortgage when buying a 2nd home?
- What are my chances of being approved for buying my second home? Are there any credit or other financial issues that might negatively affect a new purchase?
- What fees will you have to pay when selling your existing home?
- When using equity to buy a second home will the lender offer me “bridge financing?”
The Feasibility of Investing in a Second Home
Buying a 2nd home for investment or simply as a second home requires a great deal of thought. One of the things you will discover while trying to decide how to purchase a second home is the lending requirements are much stricter than those you had to face when buying your first home. In addition, the standards are different for vacation homes as opposed to investment properties. There are benefits involved in choosing a vacation home instead of an investment property such as:
- It is easier to qualify for the purchase of a vacation home rather than an investment property
- Policies on down payments are usually more relaxed
- The interest rates tend to be more competitive on vacation homes
Another thing you want to keep in mind is the down payment will be higher than it would be if you were purchasing a home for your own personal use. In many cases that means you may need to come up with anywhere between twenty to thirty-five percent of the purchase price. The lender will also require a higher credit score in most cases.
How to Buy your Second Home In Seven Easy Steps
- Decide whether you can actually afford to buy a second home with all the expenses it entails.
- Consider the best place to buy a second home.
- Think how second home buying can affect real estate taxes and may affect income taxes if you choose to lease the property.
- You will need both short-term cash and long-term financing in order to buy a second home.
- Buying a second home with no money down may mean tapping into resources such as family members and friends.
- Research how to buy a second home for investment purposes.
- Before deciding how to buy your second home, think how you plan to protect your investment.
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Overview of Factors to Consider before Buying a Second Home
Can I buy a second home? This is a very important decision to make, one that is not likely to be very easy. There are so many factors to consider that revolve around how to buy a 2nd home. Some of the primary factors the lender will consider include your credit rating, down payment and debt to income ratio. Simply saying, “I want to buy a second home” doesn’t mean it is going to happen. Even if you qualify for a second mortgage you have to consider everything that is involved including the additional maintenance costs, advertising for renters if that is your plan and year round maintenance costs.