Summer Home: Are You Ready to Manage a Second Property?

Many homeowners dream of purchasing a summer home, especially if they live in a harsh climate. Think about how often you will use the home, as owning a second home may not be worth the cost of mortgage, insurance, and upkeep unless you will be using for at least four weeks each year. Carefully analyzing your finances and checking out your options is necessary so that you don’t end up regretting your purchase.

Learn the Requirements

Most lenders have different requirements when you’re purchasing a second home, than they do when you’re financing your primary residence. Guidelines are generally stricter, and you will likely be approved for less money than you were for your first home. One of the requirements is typically a large down payment. Many buyers are able to finance their first home without putting money down, but a down payment of 20 or 30 percent is almost always required to secure financing for a second home. Lenders may also require you to have a certain amount of cash in an account that is set aside to cover the mortgages on both of your homes for a period of time, such as six months. This requirement generally only applies to borrowers who are still paying on the mortgages for their first homes, while they are securing mortgages for their second homes. Borrowers who have paid off their primary residence usually aren’t required to keep a certain amount of money in savings.

Consider Paying Cash

Using cash to pay for your second home in full is a great option if you can afford it. Buyers who are paying with cash often end up paying less for their property, especially if they are purchasing directly from a developer. Paying in full also means you won’t have a monthly mortgage payment, which makes it easier to afford paying taxes, insurance, and other costs that are associated with owning and managing a second home.

Don’t Forget About Other Costs

Looking at the purchase price is important when you’re in the market to buy a home, but other costs should also be considered. Factors such as travel costs, utilities, homeowners association dues, and maintenance costs should be carefully considered. Insurance from the Cowan insurance group is another important consideration, as you will need to carry homeowners insurance policies on both of your residences, and the cost of insurance may be higher or lower than your current policy, and depending on the location of your second home. Home insurance from Ontario might be steeper than a more rural area in the United States.

Buying a second home isn’t a great option for everyone, but careful planning and taking care of the financial aspects of owning your home will make your vacation more relaxing. What could be better than taking a trip to a place that is all yours, with all the comforts of home and only a fraction of the stress?