Everyone dreams of a perfect home to stay and relax. There is a growing trend to own a second house and consider it as a vacation home. Whether it is your first home or your vacation home, you need to carefully plan out strategies so that your investment is fruitful and accomplishes your goal.
It is likely to give the same importance or give even more thoughts before buying a second home. Here are a few of the strategies listed out to ease your decision.
Affordability & Usability:
The affordability and usability go hand-in-hand. You should think of whether you can afford to have a vacation home by forgoing other essential options or choose the finance options if funds are insufficient.
The second home loan schemes have various strings attached to it though the lending rates might be similar to the primary home. Sammamish Mortgage located in Bellevue, WA have been in the market of mortgage loans for the past 25 years and providing indispensable services for affordability and usability for your dream vacation home.
You will have to determine your holding cost vs actual investment done in your second residence. You need to ask yourself regarding the usage of the second residence –
- Whether it will be used purely for frequent vacation trips?
- Whether you are thinking of renting the property partially?
- Whether you are considering this as a tool for future investment returns?
The above shall give you an exact idea of holding cost vs. tentative returns you are expecting from the property bought.
Since you will be using your second residence as a dream vacation home, the following location points should be considered.
- It should be well-planned and fit your style.
- It should not affect the property’s future lifestyle.
- It should appreciate your property’s value.
The home mortgage interest deduction benefit does not apply to your second residence. If you are renting your property, it will be added to your additional source of income, which means adding your taxable limit. Hence, you should be ready to shell out extra expenses besides regular maintenance and ancillary expenses.
Since the mortgage attracts interest, the down-payment and mortgage period should be understood properly. The initial down-payment may vary from 10% to 20% depending upon the loan types and source of funds. The tenure can vary between 15-30 years. The longer period attracts more interest, but your monthly budget is reduced. These are the minute financial calculation that can be understood with the help of professional financial consultants.
Generally, the second house is taken for an additional purpose – it can be partly to save tax, partly investment for the future in combination with enjoying the lifestyle. If you have opted for a mortgage which is generally used to buy a second house, the credit score of more than 700 and debt-income ratio below 45% will help you to avail better finances.
Before everything is finalized, it is better to cross-check the property and its legal documents, locality, builder’s reputation and related to avoid devaluing your earnings.
From the above, you can conclude that you should not jump arbitrally, be cautious in every step you take and follow the strategies that are practical and beneficial for your long term life.