In 2015, Americans purchased over 2 million second homes. These included both investment properties and vacation homes. You may be thinking about purchasing a second home in Delaware or somewhere out of state, and if so, you are clearly not alone.
Nevertheless, the prospect of purchasing a second property involves some unique considerations. Your success depends on your ability to weigh the risks, assess your finances and make careful plans. According to the Washington Post, there are several specific aspects to think about before buying a second home.
1. Requirements for borrowing
You will likely need to obtain another mortgage to purchase your second property. However, in the eyes of lenders, the purchase of a second home is riskier than that of a first. Therefore, not only will you have to demonstrate your ability to carry two mortgage payments at the same time, you will probably have to meet even higher credit score requirements than you did to purchase your first home.
2. Costs of owning a home
Obviously these include the mortgage, but they also include upkeep on the second property. If you rent the property out for someone else to live in, maintenance becomes your responsibility. You will also need to have savings in place so that you can afford to continue mortgage payments if a tenant decides to move out unexpectedly and it takes time to find a new one.
3. Use of the property
Some people intend to keep the second property for their own use, while others wish to rent it out. Some have a plan that involves renting it out in the short term and then eventually making it their full-time residence upon retirement. It is important that you have a goal in mind and then work out a reasonable plan by which to achieve it. The cost that you can afford depends on your intended use for the home.
The information in this article is not intended as legal advice but provided for educational purposes only.