Do you find yourself consumed with thoughts of buying a second home? Perhaps the combination of low mortgage interest rates and life’s unpredictability makes now the time to buy. Here are things to ponder as you start your second home buying quest.
Shopping for a second home is an adventure. You’ll move through a series of hurdles on your way to finalizing a home purchase. Follow along as we look at three of the significant steps you’ll face on your way to owning a second home.
Second Home as an Investment
Buying a second home gives you a consistent place to spend time away from your stressful life. Whether you want a vacation home or are looking ahead to your retirement destination, there’s nothing more spirit-enriching than a second home.
A second home is an investment in your future, although it’s not an investment property. There are very different financial considerations and tax implications between a second house and a real estate investment.
That said, the right second home can be a terrific investment. The key is to buy a house that you can afford in a desirable location.
Second Home Tax Benefits
A terrific perk of owning a vacation home is the opportunity to obtain some tax relief. The IRS lets you make multiple deductions on your federal taxes if your second home meets the requirements.
To obtain homeownership tax breaks, you’ll need to prove that you live in the second home at least part of the year. You’ll be able to deduct mortgage interest, for instance, if you can show that you use the house as a second home.
You’ll also have other opportunities to lower your tax bill. In many cases, you can, for instance, deduct some of your local and state property taxes from your federal tax bill.
You can rent your home to vacationers to help pay for your new home. There are specific tax rules regarding vacation home rentals, so speak with a tax professional before buying. It’s smart to shop for homes within a price range that doesn’t depend on rental income.
No.2 – Think Before You Buy
It’s normal to feel energized, ready to love the first fabulous home in your favorite vacation area. However, you must take the time to think carefully before buying. A significant reason that people fall out of love with their vacation home is that they didn’t slow down to think.
Consider the questions below before you begin to actively search for a home.
How Will You Finance the Purchase
Can you afford to purchase your home with cash? Financing is a crucial question because it’s generally more challenging to get a mortgage for a second home. You’ll need double-digit percentage downpayment money and a high-quality credit rating to score the most advantageous home loan opportunities.
Do you have a substantial amount of equity in your primary home? If so, it might make sense to use some of it to buy a second place. However, you’ve worked hard to achieve a bundle of home equity, so be careful before investing it in another residence.
Can You Pay the Extra Expenses of a Second Home
Don’t underestimate the expense that comes along with buying that dream house in the mountains. Along with routine maintenance, you’ll have to pay for utilities, taxes, homeowner association dues, and surprise repairs. Investopedia notes, for example, that you should count on spending at least one percent of your second home’s purchase price each year on general maintenance expenses.
Budgeting for all of the potential costs will keep your new home from becoming a burden.
Does Owning a Second Home Fit into Your Long-Term Goals
Can you fund your retirement and own a beachside retreat? Successfully buying a second home requires that the purchase fit into your financial plans. Work with your financial planner for ways to enjoy a second home without straining your budget.
Once you decide that you can afford to buy, it’s time to speak with the professionals.
No.3 – Buying a Second Home
Buying a second home can seem like an overwhelming challenge. Between locating an affordable property and locking down an outstanding mortgage, you’ll be busy. Before you give up on your dream house, turn to the real estate professionals for help.
We suggest that you chat with an experienced home loan officer early in your home search. A top-level mortgage broker will examine your financial situation to match you with outstanding home financing opportunities. Knowing how much money you can finance makes it easier to locate appropriate properties.
Take the time to find a real estate agent who has an in-depth understanding of the local housing market. You’ll save time and heartache when you share your budget and housing needs with an expert. Realtor.com recommends that you focus your search on move-in-ready properties. After all, trying to renovate a home at a distance is extremely challenging. You’ll have the chance to jump into enjoying your vacation home if you stick with a ready-for-move-in property.
Are you planning to retire to your new place? If so, make sure that you look at the practicality before you buy into the community. For instance, is there decent medical care and public transportation in the area? Careful planning is key to finding a home that you’ll love now and into the future.
Lastly, buying a second home can be one of the best decisions you can make for your family. The surest way to purchase an ideal vacation home is to think through your needs and budget. Real estate and tax professionals have all the information you’ll need to buy a house that you’ll enjoy for many years.
At Strategic Mortgage Solutions, home loan officers know how to match our Eugene OR clients with fantastic home financing. Contact us today for the friendly, expert guidance you need to make your second home fantasy come true.