The Top Things You Should Know When it Comes to Purchasing a Second Home

Purchasing a second home can be an amazing investment and, for those that are ready, be an  excellent addition to someone’s real estate portfolio. Whether you’re putting one home up for rent, utilizing one as an Airbnb, or just want a second home so that your family has a place to stay in your chosen destination, buying an additional home can be extremely rewarding.

While purchasing that dream vacation house is exciting, you’ll want to be in-the-know about certain things to ensure you’re making a smart investment for you and your family. What’s more, once you decide a second home is in the cards, there are a few things you’ll want to make sure you’re aware of, and ready for, in order to actually make the purchase when the time comes.

Qualifying May Be Tougher

If you already own a house, you may need to have a higher credit score in order to get a competitive rate on your second home. In part, this is because your total outstanding debt will grow significantly with a second home purchase, making it even more important that a bank can count on you for your monthly payments. The good news is that, just like with your first home purchase, you can get pre-approved before shopping around to ensure you’re in a solid position to buy.

Re-calculating Your Expenses is a Must

If you’re a homeowner already, you know what it feels like to have unexpected costs rear their ugly heads out of nowhere. While owning a home is a fantastic investment, it’s not without its repairs that need to be made, changes you want to make, and in-home appliances/furniture that need updating and replacing occasionally. With that being said, keep in mind that a second home can bring about an entirely new set of expenses. Even if you’re planning on using one home as an investment or a rental, there’s money you need to set aside for large potential repairs, furnishing costs, upkeep, cleaning, pest control, and more. Really take the time to map out these expenses and see how they fit into your overall budget, along with your first home.

Know Your Tax Implications

Before making an investment as large as a new home purchase, it’s important to discuss the potential tax implications with a professional. While a second home can come with a lot of perks (deductions on mortgage interest, rental expenses, etc.) there may be some resulting taxation changes that you’ll need to weigh heavily. Whether good or bad, speaking with an expert will allow them to deep dive into your personal situation and help you decide if purchasing a second home will be a help or hindrance in the tax department.

Find the Right Real Estate Agent

Working with a real estate agent you trust is extremely important when it comes to finding the perfect second home. Not only do you want an agent that understands your tastes and what you’re looking for structurally, a good agent will take the time to understand what you’re truly wanting to accomplish with this second purchase, and will take that into account when it comes to areas, size, home type, etc. Likewise, working with an agent that you truly enjoy teaming with can make the process feel that much more enjoyable.

A Low Down Payment isn’t Off the Table

Purchasing a second home doesn’t necessarily mean your down payment will need to be around 20 percent. In fact, in the case that your second home is being used as your primary residence, you may qualify for a downpayment as low as around 3 percent. The most important thing is that you ensure you’re shopping around for the right loan and lender, and more, that you’re well aware of all of your options.

Adding a new home to your real estate portfolio can be an exciting experience. Whether you’re looking for a little place to get away to during vacations, or just want an investment that can grow your net wealth, a second home can mean more options and increased flexibility. Before taking the leap, be sure you truly understand what the purchase will do for your personal financial situation and more, what the process will look like specifically for you.