There are certainly some differences in purchasing a second home than purchasing a home for the first time. The loan options available before you for making this purchase may be different than purchasing a primary residence. You may be willing to own a second home for vacation purpose or many other purposes. Few possible reasons for keeping another home are listed below.
• You may be willing to purchase another residence for investment purpose. By renting your second residence you want to keep the inflow of money ticking.
• You may have to visit a particular place quite frequently for your job or business related matters. Your children may be located in a different place for study related matters. In such situations, you may be willing to keep another residence in another place.
• You may be of the notion that purchasing another residence has huge future investment potential.
These are some common reasons for keeping another residence. However, you should have clear idea on the purposes for which you are buying the second residence. If you are buying a new home for vacation purpose, you need to categorically state that to the loan officer because chances are there that you may end up purchasing a more costly investment property. Here we discuss about some guidelines that you need to follow while buying another residence.
1. Analyze your finances critically
Just like buying your first home, buying a second home is also a very big decision. You will not only have to repay the loans but also have to bear expenses for repair and maintenance purposes. You need to ensure that this purchase does not put financial strain on you. Make sure that you can afford this purchase.
2. Do a thorough research
Like in case of buying a home for the first time, in this case also, you need to conduct adequate research so as to find out the best offer. Many lenders will not be willing to offer loans for purchasing a second home. But at the same time, you will surely be able to find out some lenders who are interested to offer loans for the purchase of a second residence. Have a close look at the mortgage quotes offered by these lenders. You can also conduct an online research to get to know about different offers. You can also hire a professionally qualified mortgage broker. This will help you find the best deal.
3. Arrange the down payment
You have to make down payment for taking out the loan. The higher the down payment, the lower becomes the rate and vice versa. You need to ensure that the down payment amount is ready with you and this payment should not put huge financial stress on you.
You might have attained substantial equity in your primary residence. In that case, you can certainly utilize your home equity to take out a home equity loan (HEL) so as to purchase your second home too. However, you need to be aware of the implications of taking out a HEL.