Real Estate Matters
By Elisa Jo Eagan
For many American’s dream of Homeownership doesn’t stop at just one Home. Rather, it encompasses a second home as well. According to National Association of Realtors statistics, the percentage of homes that currently are used as a second or a vacation home has risen to 6.3 percent and even higher in the midst of a pandemic. In part, this trend has been caused by the availability of new work from home policies, making more frequent and long-lasting vacations a possibility for many families.
Here are some things to consider before you decide whether to buy in your favorite getaway location or whether to spend that money on a long-term rental there instead.
1. How frequently will you be able to use the property? If the property is too far away or inconvenient to access, then you may find that it is logistically difficult to set aside time to travel there, meaning that you will use it far less than you expect.
2. How will a second Home cut into your other travel? If your idea of vacation bliss is fairly consistent, a second home may be a good option. If you like variety however, you may find that a vacation home becomes a bit ho-hum after a few years.
3. Will a second home work for your family long-term? If your children are fairly young, will they still want to go to this vacation home in five years or ten years?
4. How will you manage the property? Is there reliable property management in the area or will you find yourself constantly traveling to the home to take care of it?
5. Can you withstand the financial impact of a second home? Make sure that you are on a sound financial footing before you take on the expense of an additional home.
6. Is the second Home part of a long-term plan? Will you eventually retire there or allow one of your children to live there? This may make a difference in terms of practicality.
7. Have you explored home prices, appreciation and amenities in the area to ensure that this property and neighborhood is the right fit for you?
Financing a second Home may be as simple as financing your first Home. You may obtain a conventional mortgage just as you would for a primary residence. However, be aware that most lenders generally see a second home as a riskier proposition than a primary residence. You will probably pay a little higher interest rates, need a larger down payment and the credit and income requirements may be more stringent.
If you don’t want to take out a brand new mortgage, you may want to consider the following strategies:
Today’s record high equity levels and record low interest rates may make a home equity loan a good option for financing your vacation home. If you would prefer to keep your current home loan, you can apply to open a home equity line of credit to fund your vacation home in full or to fund the down payment for it’s purchase.
If you are thinking about how to pay for that second home, you may decide to rent it out for part of the year in order to offset some of its cost. If you have applied for a new mortgage, however, this may turn your second home into an investment property, creating significant changes to the financing and to the tax structure.
One alternative is to purchase your second home as a joint venture with family members or friends. If you decide to go this route, you will want to ensure that you have everything spelled out in a legally binding written agreement in place covering the ground rules for the shared use of the home, as well as contingencies in the case of death, divorce, or desire on the part of either party to opt out of the home’s use and financing.
With proper research and choosing the right property for you and your family’s needs, hopefully your second vacation home will reap many years of enjoyment and financial rewards for you and your loved ones.
Elisa Jo Eagan ABR, CRS, GRI Military Specialist
Realtor-Broker Associate
BALSLEY LOSCO REALTY
1630 New Road
Northfield, New Jersey 08225
EJCE@aol.com
www.AtlanticCapeHomes.com
Full Time Awarded Professional Realtor Since 1985.
