Should I Buy a Second Home?

Real Estate Agent with REMAX Advance Realty II 3233262
If you’re doing well financially, you might consider buying a second home. It can be a nice family retreat or turn into a retirement home for your golden years. Also, since the real estate market usually goes up over time, when looking at a long period, you will probably make money on the investment. When the prices are low, people often explore this option.
What is a second home? 
A second home is a vacation home, away from yours. You may not buy a “second home” down the street. Lenders have distance requirements for the second home (usually it needs to be 50 miles or more from your primary residence).
Your lender will probably define a second home differently from other lenders. They may have their own requirements. Check with them to make sure what they expect before you settle on a mortgage loan.
What is the difference between a second home and an investment home? 
Lenders will treat a second home very differently from an investment home. An investment home is designed to be rented out, while a second home is your home away from home.
Usually you can get a good deal on the loan for a second mortgage (assuming your credit, income and assets qualify). Lenders are more comfortable loaning you money for a second home, because it is still yours.
Lenders are counting on the fact that you will treat it well. Second homes are important to their owners and are often intended to be passed down to their children.
Investment properties usually get beaten up a bit and therefore lose value. Renters don’t have any attachment to the home, as it is a temporary living space for them. Owners also don’t feel a special attachment for the home, as it is just a business deal for them. Some never even see the house.
Can I afford a second home? 
Of course you’ll have the normal mortgage expenses, but you must consider all the extra expenses when you make this calculation. Think of all the costs you have with your primary residence when considering what expenses you’ll have with your second home.
Most likely you’ll need to add on a management fee, as you’ll want someone to watch and clean your home if you don’t visit it often.
You also should consider that you’ll need to furnish and decorate this home.
Can I qualify for a second home? 
You will need to carry two mortgage loans. This makes most lenders nervous. The qualifying procedure is similar to that of a primary residence, except that it will be tougher. The lender will charge you a higher interest and will probably ask you to put more money down.
They will also want to see a higher credit score, because the risk is higher. If something goes wrong, you are more likely to throw everything you have into saving your primary residence, letting go of the second home first.
Is it the right decision for me? 
Do you remember what it was like when you first bought your home? Many homebuyers are surprised by all the extra work involved, as well as the extra expenses. If you buy a second home, these factors increase.
Ask yourself a few questions:
  • Do you plan to vacation in the same place year after year?
  • Do you plan to move to your second home when you retire? 
  • Is the real estate market low now? 
  • Are you certain that you’ll be able to afford the extra expenses long term?
If you answer yes to these, it probably is a good choice for you. However if you’re not sure how long you’ll enjoy that location or if you’re unsure of your future income, it is best not to commit yourself just yet.

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Jose Francisco Sanchez

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