If you’ve been thinking about buying a second home, now is a good time to take the leap. With homebuyers enjoying an advantage in many markets, now may be the time to buy that second home. But there are some vital things to do before you start shopping. Follow these steps to make buying a second home a smooth process:
The best way to start the search for a second home is to find a real estate agent who is familiar with your desired location. Please don’t hesitate and call us! The Aladin Group can provide you not only information about neighborhoods, but also about market prices and the pros and cons of particular properties.
With an eye toward the long-term value of a property, we can fill you in on price histories and how comparable sales have fared, and resale prospects. Factors that tend to help properties hold or increase in value are proximity to a major metropolitan area, ease of access and the availability of year-round amenities.
Evaluate your needs and long-term goals.
Be realistic about what type of second home suits your lifestyle. If you’re looking for a weekend getaway, staying within a day’s drive of your primary home could be a good move. If you’d like your second home to someday serve as a retirement spot, assess the home’s accessibility and check out health care services in the area.
Decide what type of home is right for you.
Think about how much time you’re willing to devote to maintenance when deciding between a condo and a single-family home. Condos are a good choice for buyers who only plan to use their homes occasionally and don’t want to deal with year-round maintenance. But if you don’t want to sacrifice privacy, stick with a single-family home.
Be sure you can afford two mortgages. You have to qualify for a second-home mortgage, which is on top of any mortgage debt on your primary home.
Typically, you will need to make a down payment of at least 10 percent, meet credit standards and debt-to-income requirements, and provide documents for income and asset verification.
If you have a good relationship with the mortgage lender on your primary residence, that might be a good place to start your quest for a second-home mortgage. If you don’t have a good mortgage lender yet, we can connect you with the best lenders we have worked with over the years.
Factor in additional costs. Today’s second-homebuyers are more interested in enjoying their properties rather than getting a quick return on their investment.
Still, you should consider that you will be away from the property a lot of the time, which usually entails additional costs, such as having a management company check the place in your absence for water leaks, frozen pipes and other problems.
Getting insurance for a second home may be more challenging than it is for a primary residence. If you are considering a second home on the beach, for example, you’ll need flood insurance in addition to regular home insurance. It has become more difficult to get flood insurance in coastal communities, and the cost has increased greatly in some markets.
Take into account the tax implications of your purchase. If you use your home as a true second home, you could get a deduction for mortgage interest and property taxes, just as you do with your first-home mortgage.
Be aware that under the new federal tax law, the cap to the mortgage interest deduction will be lowered from $1 million to $750,000. So if you already have a $750,000 mortgage and get a loan for a vacation home, you won’t be able to deduct the interest on the second mortgage.
If you rent out your second home, you will have to consider additional tax ramifications, particularly if the rental period extends beyond 14 days a year.
No matter if you plan to buy a second home or if you are a first time home buyer – please reach out to us at 480-359-6789 and we will sit down with you and guide you through the home buying process!