Not So Fast…Just Because You Can Afford To Buy a Second Home, Doesn’t Mean You Should. Here’s What You Should Know About Buying Secondary Homes
August 29, 2016
Not only the 1% of the world buy second houses. It is common to assume that a person has a lot of money when they own a second home. While in some cases this is true, for example, if the person owns an Island, or a 3,000 square foot apartment in New York. But there are also people that buy real estate with the intent to re-sell them at a higher cost, or rent them out. Or, some do it because they can’t sell their house but want to buy another while they wait. It isn’t always because they are extremely wealthy and own a massive vacation home.
If you are considering buying another home, it isn’t going to be easy. For two reasons. One, you are going to need a big chunk of change. Second, you’re still going to need to borrow a loan from the bank. This is going to be a lot harder to do since you already own one home that isn’t fully paid off. However, people buy second and third homes everyday, so it’s not hopeless. But you will have to give them reasoning for why you are buying another house, and show them that you have money for both houses along with money left over to take care of them.
If you look from the banks perspective, it makes sense that they are hesitant to give someone money for two houses. It’s a big risk for them. Honestly, even just one mortgage is a big risk that the bank is taking. You’re going to have to prove to them that you have the means to buy this other home. Also, you’re going to be putting more than the 20% down you did on your first home, as banks make you put more down on a second home.
You also have to be sure you aren’t in too much debt. If you have a current mortgage, a car payment, student loans, and medical bills, you probably shouldn’t even bother trying. Unless you are making a lot of money, and are able to pay all of that and have plenty of money left over each month.
Just because the bank will approve you for a second mortgage doesn’t mean you should buy the house. Maintaining two homes is a lot of work. It is not easy. If you plan to rent it, you might have to sit on it for a while. There are many landlords out there who can’t rent their apartments, even if they are nice.
It’s all about timing, and unfortunately, there’s no way of knowing when and if a property will rent. So don’t rely on a tenant to help you pay your mortgage. Likewise, if you plan to sell after you fix it up, don’t expect a buyer to come knocking on your door 72 hours later. Buying a second home is a big deal, and be sure to fully think it through before you sign on the dotted line!