June 2018

Thinking about a second home?

Whether you're looking for the getaway of your dreams, an additional source of income or a mixture of the two, buying and financing a second home is a different experience than you may be used to.

The rules for second-home mortgages may not be the same as the ones you dealt with when buying a primary residence. If you have an existing mortgage on your home, for example, it may be a factor for anyone assessing your eligibility for financing on a second home.

A second home could still be worth the effort. But be sure to weigh the pros and cons before you start browsing through local real estate magazines.

Interest rates
Expect a higher interest rate compared to a first-home mortgage, and be aware that lenders will want to know that you can meet all your financial obligations with room to spare. Check out our mortgage options, including fixed- and adjustable- rate loans with 15- or 30-year terms.

Down payment
Again, this may not be the same as when you applied for a mortgage on your primary home. A down payment of 20% or more may be required, especially if you need a jumbo loan.

Many second-home owners forget to take maintenance costs into consideration — out of sight is sometimes out of mind. As a rule, 2% of the value of the property should be factored in for upkeep and repairs.Footnote1

In some cases, insurance may be higher on second homes — some of the most sought-after areas are more prone to natural disasters and therefore demand higher premiums. Be sure to check out insurance before you buy. It may be a deciding factor.

Tax benefits
If you're looking for a vacation home that's strictly for family and friends, the interest may be tax-deductible (consult your tax advisor). But that potential benefit may not apply if you rent it out for more than 14 days a year.Footnote2 Instead, you may be able to deduct expenses related to upkeep, like maintenance and repairs.

This Better Money Habits® article provides additional insights into financing a second home. Or you can contact me to explore what mortgage options may be available to you.


At the end of the day, though, a second home may be just the thing to reward all your hard work. So long as you choose your property wisely and take all the factors into account, there's no reason you shouldn't make the most of everything a second home has to offer.

Contact me if you'd like to discuss your financing options on a second home.

1"Top 10 Things to Know About Buying a Second Home," hgtv.com

2Consult your tax advisor about your particular situation.

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