Last year, Beatrice Anderson and her husband decided to purchase a beachfront property in Hawaii that they fell in love with on their honeymoon a decade ago. They bought the sprawling property that offered a stunning view of the beach as a vacation home where the entire family can spend their summers happily frolicking in the sun and sand. “Ten years ago we stayed in this beautiful beachfront inn as a newly wed couple. We always had plans to buy a second home in Hawaii so when we found the property up for sale we jumped at the opportunity,” says Anderson.
Andersons are not alone in their quest for a second home, in fact many Americans dream of purchasing a seconds home as a summer get away, investment property or a source of income. In fact a second home can serve all three purposes – it can be a vacation home where you retire when tired of the hectic life at the city, rent it out at other times to earn a steady income and finally resell it after a while at a greater value.
All the points that required careful consideration during purchase of your primary residence hold true at the time of buying a second home as well. While buying a second home you possess some additional advantages though, the most important of which is time in hand. Since, you already own a home there is no hurry to close a deal and you have all the time in the hand to carry out a comprehensive survey of different properties to arrive at a final decision. Even if you do find a place that you absolutely love immediately let is stand for a while. Since you are under no compulsion to buy immediately, it is a smarter choice to weed through multiple properties at different locations before making a final decision.
“A rash decision can come back to haunt you later. While purchasing a second home patience is a virtue that the buyers need to cultivate. Only fools rush in without properly weighing the pros and cons and live to regret it. So don’t be a fool, take your time to find the right fit,” advices real estate agent Peter Jones.
Another advantage a buyer has while purchasing a second home is the equity he enjoys on his primary property. If you are not planning to rent out the secondary property then it is not considered to be an investment property and you may even be able to get the same mortgage rate as your primary residence. It might even be possible to deduct the mortgage payments on the second home from your income tax in certain select circumstances.
Despite all the advantages associated with purchase of a second home think long and hard before jumping to saddle yourself with a second mortgage. Ask yourself whether you truly can afford such a huge investment at this point? A second home whether as a vacation escape, rental property or as an investment can prove to be an enjoyable and profitable proposition but not if you go broke making the purchase. If you can afford it then here is what you need to keep in mind while buying it:
Ask any real estate agent and he will tell you that finding the right location is the most important criteria when it comes to buying property. So compile a list of possible locations and research the areas by visiting and speaking to the locals. Remember to buy property in an area that has the scope to grow in value is you are looking to profit on the property.
Get your finances straight before buying a second home. If you have credit card debts, student loans or any other debts then this is definitely not the right time to take on the burden of a second mortgage. Calculate the annual cost taking into consideration not just the down payment and mortgage rates but also taxes, associated expenditure like garbage collection, maintenance, landscaping, renovations etc.
A very important decision needs to be taken regarding which type of home desire to purchase. Do you want a spacious single family home or is a luxury condo more to your taste? May be you want a house in suburbs with big yard for the kids to spread their wings.
Find a good realtor who specializes in second home purchase. A professional agent will have access to larger number of properties and will be able to locate good deals for you. Hiring an experience agent will cut down the total amount of time and effort invested in the hunt for the right second home. Also if you are hunting for a reliable real estate agent stick to a local agent as he/she would be able to provide accurate information regarding the property and the neighborhood. A local agent will know whether the house next door keeps the neighborhood awake with all night parties or whether the next door neighbor is planning to carry on construction obstructing your interrupted view of the beach.
Ask your real estate agent to provide photographs of the property at different seasons. A house may seem to be crowded from both sides due to lack of leaves on trees in winter might look less so during summer. It is also a bad idea to expect prices to fluctuate according to seasons for it rarely works out that way.
Once the choice of property has been made it is time to start looking for a mortgage lender. Beatrice Anderson and her husband went to the lender who had handled the mortgage on their first home. This is indeed a good starting point but it is important to understand that many lenders have altogether different set of standards while lending for a second or third home. There are lenders who go out of their way to attract such borrowers while others refuse to touch secondary home purchase and still others who provide same mortgage rates on second home as on primary residence. The trick is to find the right lender best suited to your needs.