Should I buy a Second Home / Vacation Home
What is a Second home / Vacation 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).
Questions you should consider:
1. What is the main reason/s you want to purchase a vacation home?
For you and your spouse weekend get-a-way, big family get together,
Do you plan to vacation in the same place year after year?
Do you plan to move to your second home when you retire?
2. How will you finance this purchase? It really matters:
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.
3. Will it be for personal use, investment property, or both?
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.
4. What will a second home cost me?
Keep costs within the budget. Consider the costs it will take to cover the monthly mortgage, real estate taxes, assessments, regular maintenance, homeowners’ insurance, flood insurance, furnishings, major repairs, travel costs……….
The good news, however, is that vacation homes come in many sizes and types, therefore finding one in your budget is very likely.
5. How far do you want to travel? (1 hour or 2 hours) Consider the cost (gas, tolls, miles….)
6. Determine the frequency of use.
How much time will you spend in your vacation home? (every weekend, only vacation, once a month……)
6. What type of activities do you like to do?
horse back riding, skiing, white water rafting, …………
7. Should I purchase in a community?
Today’s real estate market offers a greater array of housing choices than ever before, including various types of planned communities and multi-family developments. These range from small townhouse developments of 50-100 units to massive planned communities with integral recreation and commercial areas and thousands of homes.
There are a number of pros and cons to this type of living and your choice to consider a planned community will depend as much on personal preferences as investment considerations. Of course these developments can vary widely in price, location, and amenities, so what is true of one planned community may not apply to another.
Keep looking for my next post giving you the pros & cons……
or contact me now, Anna Green, 267 243 5176 to get your copy.