In some ways, the process of buying a second home is like buying a primary home. However, there are several key differences that require consideration before you make an offer. Whether you have visions of curating your ideal vacation home, are planning for retirement, or view the property as an investment opportunity, a second home can be the answer to your real estate ambitions. Owning two homes, however, means your responsibilities as a homeowner will double. Keep the following information in mind as you work with your agent toward purchasing a second home.
Costs of Buying a Second Home
Purchasing a second home will typically come with all the expenditures you encountered during the process of buying your primary home. However, you may have to pay more up front for a second home, since loans for a secondary residence are riskier for lenders. Consider how making a lump sum payment may affect your financial health before beginning the buying process.
To get an idea of what you can afford, use our free Home Monthly Payment Calculator by clicking the button below. With current rates based on national averages and customizable mortgage terms, you can experiment with different values to get an estimate of your monthly payment for any listing price. By adding your resulting figures to your current monthly mortgage costs, you can make a well-informed estimation of your total monthly mortgage costs for both homes.
Financing Your Second Home Purchase
Finding the right financing for your second home purchase will depend on how you intend to use it. You and your lender will explore the different home loan types available to you to find the one that best suits your needs. Your lender’s rates and qualification requirements will vary based on how often you plan on living there and whether it’s an investment property, among other factors. If you plan to rent the property periodically, talk with your lender about what parameters would result in it being classified as an investment property. You’ll need to obtain a landlord insurance policy as well, on top of your existing homeowners insurance. These additional costs—along with rental maintenance expenses—need to be accounted for, even though renting out the property will help generate income.
Other Factors that Influence a Second Home Purchase
Besides being financially prepared, how will you know you’re ready to buy? For starters, finding and buying the right secondary residence is a matter of timing. It’s vital that the purchase of your second home aligns with your life goals. If you’re planning on purchasing the home for retirement, take time to investigate the area’s assisted living resources. If the area is a popular vacation destination, talk to your agent about how seasonality affects the local market conditions, whether you’re buying in a buyer’s market or a seller’s market, and how you can formulate your best offer.
If you aren’t familiar with the area, get to know the locale before you start sending offers. It’s helpful to schedule your visit off-season to get the clearest picture of what everyday life is like there. Plan to stay for enough time that you can get a sense of the atmosphere beyond a tourist’s first impression. Your experience there will help inform whether it’s the right time to buy.
For more information on second-home ownership, read our blog post on renovating your vacation home, with a seasonal breakdown of common home improvement projects.