Have you already met your other financial goals, like saving for retirement or paying off high-interest debt? If not, will the cost of owning a second home prevent you from achieving them? If you're looking to finance the purchase of a second home, the best type of mortgage may depend on how you plan to use the home. Lenders typically offer different rates and may have different qualification requirements for second homes than they do for investment properties.
More on those in the next section. If you use a jumbo loan or any other nonconforming or portfolio loan , most lenders will only consider the house a second home and not an investment property so long as you rent it no more than 14 days out of the year.
If you use a conventional loan , you can rent your second home for up to six months per year without it being classified as an investment property by your lender — so long as you didn't use the home's future rental income in order to qualify for the loan. Even then, the IRS may still deem your home an investment property, since they use their own set of rules. Government loans are generally not an option for second homes, no matter how you plan to use the property.
Only primary residences are eligible for mortgages backed by the Department of Veterans Affairs. The Federal Housing Administration makes some exceptions for commuter homes. Whether it's a vacation home or an investment property, lenders see second homes as riskier. The requirements for minimum credit scores are generally higher, and maximum debt-to-income ratios are lower than for a primary residence. That big down payment can substantially increase your upfront costs, but potentially lower your lifetime costs if it results in a better rate.
If you intend to use future rental income to help qualify for the loan — whether it's from renting the second home or renting your current home after you move into the second home — you'll face additional hurdles. Demonstrating income potential from a home that's already a rental isn't too hard, so long as the seller is willing to share that information. If the home isn't currently rented, the lender may want a rental appraisal to show that the property is marketable.
Even if you're confident you'll qualify for a second-home mortgage, take the time to comparison shop lenders to make sure you're getting the best possible deal. Finally, the fun part! Whether you're looking for a vacation home in a far-flung part of the country or an income-producing rental property in your neck of the woods, you'll want to work with a real estate agent who's local to that area. If you're looking long distance and can't visit the property in person, a good agent can be your eyes and ears and nose on the ground.
But even for a nearby property, a local agent may have a better understanding of what will make a promising rental property or, if you're moving up and out, how to make your current home more appealing to your future tenants.
To recap, here are the initial steps to buying a second home. Decide on your goal. How you plan to use the second home will help you fit it into your current financial picture, and consider its pros and cons for your future. Create a budget. Is buying a second home a good investment? It all depends on how much you spend on the property and what you plan to do with it. But you could see it as a way of investing in your future holidays.
You could let out your property to tenants. A rental income keeps the mortgage paid and may provide a modest extra income at the same time. Your second home could be your holiday home. Cons Lenders have become increasingly strict when choosing to lend enough money for a new mortgage. Buying a second home can bring in a rental income — or give you somewhere to relax with loved ones Costs of buying a second home There are the usual costs that you paid with your primary residence, including legal fees, building insurance and an arrangement fee.
You will also need to consider: 1. Stamp duty Stamp duty is more expensive when you buy a holiday home or a buy-to-let property than buying your main home. Find out more: Guide to stamp duty 2. Bills Make sure you will be able to keep on top of a second set of bills, such as: Insurance Energy Council tax Maintenance costs thought a broken boiler in winter was bad news? Imagine two broken boilers in winter Decorating costs 3.
Council tax On a happier note, you may pay less council tax. Buy-to-let mortgage deposit When you apply for a mortgage for a second home, you will have to explain the purpose of the property. This is designed to give some cover for any other costs or future rate rises So do your sums about how much monthly rent you will receive from tenants to be sure it makes financial sense. What if I am an accidental landlord? Find out: 10 things you need to know about buy to let Would I get tax relief?
Your lender will want to know that you can afford both your current mortgage payments as well as those on a second mortgage. You may also have to pay slightly higher interest rates and fees than on your first mortgage. These types of mortgages are available from lenders such as: Principality Building Society Leeds Building Society Ipswich Building Society We have a mortgage tool you might want to use. You might want to read: Best mortgage lenders in UK A good mortgage adviser should be able to guide you around which lenders are the best for these specialist loans.
The amount you pay will depend on your circumstances and how much profit you make. You get full relief on: The years you lived in the home The last nine months you owned the home, even if you were not living there at the time If you sold the property between 6 April and 6 April , you get relief for the last 18 months you owned it.
You've completed Guide to buying a second home. Find mortgage deals Search and compare mortgage deals. It only takes a couple of minutes and no personal details are required to search. Speak with a mortgage broker when you're ready. Product information is provided on a non-advised basis. This means that no advice is given or implied and you are solely responsible for deciding whether the product is suitable for your needs. Sign up to our newsletter Receive regular articles and guides from our experts to help you make smarter financial decisions.
First name. Last name. Read next. Here's an explanation for how we make money. Founded in , Bankrate has a long track record of helping people make smart financial choices. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy. Our mortgage reporters and editors focus on the points consumers care about most — the latest rates, the best lenders, navigating the homebuying process, refinancing your mortgage and more — so you can feel confident when you make decisions as a homebuyer and a homeowner.
Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy.
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. Bankrate follows a strict editorial policy , so you can trust that our content is honest and accurate. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.
We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site.
While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. This content is powered by HomeInsurance. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions such as approval for coverage, premiums, commissions and fees and policy obligations are the sole responsibility of the underwriting insurer.
The information on this site does not modify any insurance policy terms in any way. Second homes give people the chance to live another lifestyle, in another part of the country — or even outside the U. There were 7. The most popular place for a second home is Florida 1.
0コメント