|This is the only kind of house I can currently purchase (...OK, rent) which is why I've turned to a guest post this week, for those of you thinking of buying not one but TWO houses! Enjoy!|
Buying a second home, whether you want to use it for vacation purposes or rent it out, can be a tricky process. You’ll first have to determine whether you can actually take on another mortgage payment and then decide how to finance it. However, if you familiarize yourself with the ins and outs of buying a second home before you start browsing the local listings, you can start your endeavour with confidence and direction. Here are five tips for buying a second home.
1. Make sure your credit history is clear. The most important thing to keep in mind when searching for a lender for your second mortgage is that they are often more difficult to secure than first mortgages. If you default on your home loan, the company that holds your second mortgage often won’t get the first opportunity to your home. Because of this, you’ll most likely face higher mortgage rates, but having a good credit score can help you get the best deal for a mortgage.
2. Step outside your comfort zone. If you’re thinking of buying a second home, you’re doing this already. But try to talk to a few different lenders who aren’t your primary banking institution. Often times, credit unions have lower rates and mortgage companies offer more comprehensive loan packages. It never hurts to make an inquiry, and in the case of getting a second home, it could actually help you get a good mortgage rate.
3. Read the fine print. The last thing you want to do is sign a contract with hidden fees and penalties, but this could happen if you don’t ask about different case scenarios when it comes to paying off your second home. Once you believe you have found the right lender, make sure to ask about penalties for paying off your home early or changing the terms of your mortgage agreement (such as switching from monthly to bimonthly payments).
4. Time it just right. Staying on top of how mortgage rates are performing could the just the key to finding the home that you want at the rate that you want. Especially with mortgage rates so sensitive to announcements from the U.S. Federal Reserve and official reports from the housing sector, you could save as much as half a percentage point by buying when the time is right.
5. Enjoy the shopping! Now that you’ve done the hard part, you can enjoy your home buying process. With the financial pieces in place, you can start focusing on location, size, and amenities. But don’t forget to stay abreast of mortgage news so that you can make sure that your mortgage agreement continues to work in your favour.