You want to buy a second home. Is it going to be easy? On the one hand, you already know how to buy a house. Therefore, the details aren’t as daunting as the first time around.
On the other hand, you also know about the challenges of owning a home. As a result, you might have some hesitation about buying a second place.
Plus, buying a second home requires you to consider different factors from buying a first home. That said, it can be a great investment. Just do your homework, so you know if it’s the right time for you to make this purchase.
Will You Live in the Second Home?
The most important question when you buy a second home is who will live there? Answering that question will help direct the answers to many other questions.
For example, let’s say that you want to purchase a new home to live in. You intend to rent out your existing home. Therefore, you will need to consider the things that impact your daily life, such as location. You will need to buy a second home that meets your needs for a place to live.
Similarly, if you are want to buy a second home as a vacation property, then you need to consider what you want from a place where you will spend a portion of the year.
In contrast, you might wish to buy a second home as a real estate investment. If that’s the case, do you want something that you can rent out immediately for extra income? Or do you want something that might not bring in a lot of money now but that you can hold on to and sell down the line? Those factors will determine when, where, and how you buy a second home.
Get Your Money Straight Before You Buy a Second Home
You already have one home mortgage. Can you really afford another one? Don’t forget to consider all of the costs involved, from the down payment to the mortgage. Remember that there may be additional fees than what you pay for your first home. For example, if you are going to rent out the property, then you may need to pay a maintenance person or property manager.
One of the biggest differences between first time home buying and when you buy a second home is the types of loans that you can get. As a first time homebuyer, you can qualify for government loans. These are low-interest and fairly easy to secure. In contrast, you don’t have such an option when you buy a second home. Therefore, you need to get a conventional mortgage.
Many people work with the mortgage lender from their first home to buy a second home. That’s a good place to start but don’t be afraid to shop around to make sure you get the best deal. After all, what worked for you when you bought your first home may or may not be the situation you are in today.
Sometimes people buy a second home using money from refinancing a first home mortgage. There is nothing wrong with that. However, it puts you in a lot of debt. It makes your own living situation a bit less secure. Therefore, it’s something you should think about carefully before you move forward. Work with a finance professional to get clear about your money before buying a second home.
We have already looked at the two most important things that you will consider before you buy a second home. How you will use it and how you will pay for it will be the deciding factors in the purchase. However, here are some other things to consider:
- Do you really know what it takes to be a landlord? Furthermore, do you want that for your life?
- What are the tax implications, both positive and negative, if you make this purchase?
- How will the property you’re not living in be cared for immediately and over time?
- What will you do if your finances change and you can no longer afford two houses?
If you can afford to buy a second home, then it can be a nice addition to your life. In fact, real estate is often one of the best investments that young people can make. However, you should do some thoughtfully and with complete consideration of the financial pros and cons.