Advice for Buying a Second Home
As a homeowner you most certainly have experienced all of the excitement of going through the motions of purchasing a home. This includes all of the chaos of organizing paperwork, going through inspections and closing, but also all of the joy and pride of owning your own home as you build wealth. At a certain point you may begin to debate the purchase of a second home for several reasons including a vacation spot as well as another place to invest your money. Here are a few things to consider as you ponder the move.
First, consider how comfortably you could afford it. Rates are still very low, but second homes are somewhat of a different animal. Most often you may need to put more down on a second home and you may get a slightly higher loan rate than that of your primary residence. Your best bet is to consult with your mortgage lender on this so that you can do some firm calculations on costs.
Identify How You Will Use it
Before you begin your search, consider how you intend on using the home. This means, how often do you anticipate using it yourselves and do you plan on renting it out at all. When you decide on your own personal use, make sure you are realistic with your current lifestyle such as how much vacation time you get, how your kids fit into the plan and the like. If you decide to rent out the home at all make sure you investigate all of those details from whether or not the place can be rented as some HOAs have restrictions to how you set things up with your mortgage. There can be a difference in logistics between a second home or an investment property.
Similar and related to how you will use the second property, you will need to do some calculations for income and tax purposes. Plain and simple if you plan on renting out the home, consider the income received that you will have to pay tax on. You can take certain deductions in this case, but they are more complex which your accountant can advise you on. If you don’t rent it out and use it strictly as your vacation home then you will want to pay close attention to what the property tax is like in that area as you won’t be eligible for a primary residence lower rate.