Three Tips for Purchasing a Second Home
With interest rates still comparatively low and the economy improving in many areas of the country, now may be a great time to start thinking about buying a second home. While you should consider resale value when buying any property, the top reason for purchasing a second home is simply to enjoy spending time with family in a pleasant location.
- Focus on Location, Location, Location
A vacation home won't serve any purpose if it's in a poorly chosen location, no matter how good a "deal" it might be. Consider how easy it is to access the property, especially from major metropolitan areas. The availability of four-season amenities, quality health care and other services is also important.
- Consider the Maintenance Factor
Remember that because a second home is not your primary residence, you'll be away from the property most of the time. You may need to hire a management company to take care of maintenance and perform periodic checks for water leaks or frozen pipes. If the property is a condominium, a property service may be available. A detached home will have different maintenance requirements than a condo or a townhome.
- Know Your Financing Options
It's important to understand the difference between financing a second home and getting a loan for an investment property, because lenders typically charge higher interest rates and require a larger down payment for investment properties. Also:
- The down payment on a second home can be as low as 10% with a conventional loan
- Investment property down payments vary between 15% and 25% depending on the number of units
Lenders view second homes as "vacation homes" and expect borrowers to live there at least some time during the year. In other words, if the property is rented out continually or offered as a timeshare, it is considered an investment property and not a second home.
The mortgage interest on your second home may be tax deductible, depending on how much time you spend in the property. However, in some states, property taxes are higher on a second home than they are for a primary residence. Consult your tax advisor for information about tax deductions.
Think About the Memories
For many families, second homes are filled with many happy memories. For more information about loan options for second homes, contact Freedom Mortgage.