For many people, buying a second home or property can be a very appealing idea, and around 10% of the UK population have second homes. As a home buyer, you braved the real estate buying circus when you bought your first home, and you have a great place to show for it. If you scored a sweet deal on a mortgage for your primary residence, don't expect lenders to give you the same offer twice. The first step to getting started is to review your existing mortgage. Also, consider talking to a financial advisor about how a second home could fit into your overall financial picture. Furthermore, you will likely have a higher interest rate on the loan if it’s for an investment property instead of a principal residence. More Canadians than ever are purchasing second homes – you could say that second home ownership has gone mainstream. Read our stress-free guide to getting a mortgage, An Eye-Opening Timeline of Tarek El Moussa's Own Homes, From His First to Where He Lives Today, Make Your Kitchen Magical With These 5 Trending Designs From Instagram, Locked Down at Home: The Most Popular Home of 2020 Has Its Own Jail, Have You Served? Buying in an unfamiliar area? Before setting out to buy a second home, you probably have reservations that are stopping you from making an immediate decision, such as whether it's too extravagant.When interest rates are low, if you can afford a high-end car payment, you can probably afford a second home, providing you don't go overboard and look for your second home in a reasonably priced area. Income requirements are also stiffer. But it's a costly dream. There are also furnishing costs and possibly ongoing fees for landscaping and cleaning. Underwriting Is Tougher. If you are planning to let out your current home and move into your second home you will need to talk to your mortgage lender. Here are several things you need to keep in mind: Rental income isn’t guaranteed. Have a question? You want to buy a second home. Finally, conventional lenders often call for a credit score of 620 or greater to make the cut. Rental Properties. Dharmesh Jain, chairman and managing director of Nirmal Lifestyle , points out that the advantage of buying a home for self-use, is that the home buyer can move into or occupy the property at his/her discretion. So you obviously want to do what you can to make it as affordable as possible. Here are some possible uses for a second home: If you think you might want to move into the house permanently, or even keep it as a vacation home, you might consider first renting a home in the same area for a short time. Don't Neglect These 6 Maintenance Tasks—or Else, Debunked! Even one wrong move could be disastrous for your overall financial health. Ask our Investing expert. Image Source: iStock/Simon Dannhauer. Take a look over our. For instance: You might be planning on using your new home as a vacation rental when you're out of the area. Lazenby recommends consulting with a tax professional about tax implications, especially if you're planning on renting out the house. If you rent out the vacation property for more than 14 days in a year, you must report the rental income on Schedule E of your individual tax return, and you can deduct the rental portion of expenses such as mortgage interest and property taxes. Buying a second home while renting out a house with a mortgage is entirely doable, but there are some small hurdles you’ll have to overcome. Make sure to review your budget with a second mortgage payment in mind, and make adjustments if necessary after you know what interest rate you will receive. A vacation home offers more flexibility to buy based on your potential property tax burden—for instance, if you're looking to buy in an area of high real estate taxes, consider widening your real estate search to another county, which can save you thousands of dollars. Here are some differences and advice to keep in mind. Buying a vacation home outside your area can be tricky, as residential … It can be quite a conundrum for people with capital to invest who are dithering between the stock market or … You may be able to share ownership of a second home with another borrower and still make your dream of owning a second home come true. 5 Reasons You’ll Want a Veteran-Friendly Real Estate Agent, The 7 Best Home Transformations We Saw This Year—See the Before and After Photos. As in any real estate transaction, location is the first, second and third most important consideration. An author, teacher & investing expert with nearly two decades experience as an investment portfolio manager and chief financial officer for a real estate holding company. 8 Myths About Renting You Should Stop Believing Immediately, 6 Ways Home Buyers Mess Up Getting a Mortgage, 6 Reasons You Should Never Buy or Sell a Home Without an Agent, Difference Between Agent, Broker & REALTOR, Real Estate Agents Reveal the Toughest Home Buyers They’ve Ever Met, The 5 Maintenance Skills All Homeowners Should Know, Click for complete coronavirus coverage from realtor.com, Why I Bought My Second Home Before My First Home: Money, Freedom, Fireflies. Some lenders do not allow you to rent out your home so you may have to remortgage onto a buy-to-let mortgage. Buying a second home and renting out the first. Hire a local real estate agent. How Much Do I Need to Save for Retirement? ©1995-2020 National Association of REALTORS® and Move, Inc. 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