Having a vacation or second home is a pretty sweet deal, especially when you can call it your own home away from home. But what about the hassles you have to go through to finance that second home? The last thing you want is foreclosure on the second home of your dreams, so this is where you need to tread very carefully and budget your spending wisely. If you're not ready to add quite a hefty mortgage on to your current budget right now, it may not be the right time for you to finance a second home. We offer more tips on financing multiple mortgages below, read on to find out.
Financial planning experts may tell you, it might just be easier for you to pay for your second home in one time, in cash. Why you ask? Because although there are some loans out there for second home buyers, the truth is, you are going to be putting a lot more money down out of your own pocket. Bigger down payments, higher interest rates, and other standards of home financing will be increased a lot more.
In addition to these financing pitfalls, the market for vacation homes have their own unique quirks that are more limiting for buyers. For one, investment buys come with a hefty percentage of money down up front. Fewer and fewer people are able to afford this kind of lifestyle, especially with financing their first home taking such a huge portion of their spending allowances already.
First, look for loans that are insured officially by the Federal Housing Administration, since these loans tend to require the lowest percentage for down payments, and are not available to vacation home buyers. This means that as much as twenty percent of deals meet the requirements. All other loans that do not go through will have higher payments, but all this depends of government ceilings and maximums, which all vary according to country. In the United States, down payments tend to fall from around 25 percent to 30 percent. In some states, loans are further categorized into types, for example, jumbo loans often reach limits of around 800,000 dollars, one of the nation's highest ceilings for second home loans, which is offered in Suffolk County, Long Island.
When you're negotiating terms, make sure that the loan approval processes have all the numbers aligned up with your interest, as exact terms may shift during this process. Rates can go up or down, and it's up to you to require full documentation of any changes. Don't let anything slip through the cracks.
Depending on the location of your vacation home, challenges may arise. Vacation homes may be pricier, interests may be higher, banks may not be so comfortable loaning out money; whatever the scenario, now that location controls all these aspects.