With mortgage rates still at some of the lowest numbers in years, now may be the right time to buy that second home. If this idea is lingering in your head, there are a few things to think about before making the decision.
First, you need to ask yourself; why am I buying and does it make financial sense? Is it an investment property, a nice place to vacation, or are you looking to buy a house to retire in down the road? Whatever the reason may be, make sure you’re buying a home that will have potential to appreciate and is a preferred destination. Combine both market research and personal preference, but don’t base your decision solely on either. When you’re looking at the price, consider expenses past the initial price tag, such as taxes, insurance and ongoing maintenance. Will you still return a profit or will the numbers put you in the black?
Next, take a look at the tax implications. Taxes are no way avoidable, but sometimes buying a house over a town line can save you thousands of dollars per year. If you’re looking for a vacation property you’ll have to consider the amount of time you’re going to spend there because that will affect how much you pay in income tax.
Third, put down short-term cash for a lower rate long-term financing. The more you can put down in advance, the less you’ll have to pay monthly. The suggested amount of cash to put down on a house is 20 percent of the purchase price. Start with that if you can. If not, use the equity from your primary home, or borrow against your life insurance policy. Whichever way you choose, make sure you shop around. There are several loan options out there, and if you look long enough you’ll find the right one for you.
Lastly, a second potential property owner needs to consider all options for protecting your second home. This starts before handing over that chunk of change and purchasing the house. Make sure the inspection is done by a reputable source that is thorough and efficient; this protects you from having to make unnecessary repairs after you’re the owner. Also; often times the lender will require that you take out hazard insurance. This is typical in second homes because you won’t be there as often as your primary and more often than not, they are destination homes that are more susceptible to severe weather.
Being able to purchase a second home is exciting and can be very profitable. It’s just very important to take the proper precautions when doing so.