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What to Know When Buying a Second Home
Are you dreaming of a vacation with your toes in the sand? Or maybe you prefer a mountain getaway. No matter what your vacation preference are, there are homes available to purchase that can provide you with a place to rest in between your adventures. If you frequent the same places often, you may be considering purchasing property there so that you can enjoy all the comforts of your own home, even on vacation.
Financing a Second Home Purchase
When you purchase a home using a mortgage loan you have to disclose to the financial institution how you intend to use the home. If you are purchasing it to live in as your primary residence, called owner occupied, you generally get more favorable loan terms than if you are purchasing it as an investment, called non-owner occupied. Where does a second home fall?
If you are able to afford the costs of the second home without renting it out, lenders will often offer you the same or similar terms to an owner occupied mortgage. If you have to rent it out to cover the costs, however, it is viewed more like an investment property and you can expect to pay slightly higher interest rates and provide more documentation during the purchase process.
Talk to your lender to see what options they have for your second home purchase.
Covering Your Costs
Renting out your second home when you are not using it can be great way to cover the costs of upkeep. Just make sure to research any city ordinances or restrictions on short-term rentals. You may be restricted on how long you can rent it or have to apply for a special permit. If your home is part of a Homeowner’s Association, they may restrict the options available to you for renting it out as well.