Tips for Buying a Second Home
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MONEY MATTERS
ith high prices and low monthly homeowners association fee on top inventory challenging housing of your mortgage. markets across the country, Take advantage of the lower interest rates you might think it’s not a The sticker price of residential properties good time to buy a second home. But low might seem high right now, but if you interest rates give buyers more buying power bought a second home at a lower price than they might think, and I see a great deal but higher interest rate, your monthly of enthusiasm from second-home buyers payment, amortized over 30 years, could despite some of the headwinds. be substantially higher. Today’s low interest If you have the desire and means to buy rates aren’t going to last forever, and they a second home, there are a few factors to make houses more affordable over the long keep in mind as you begin your search. I’ll term. walk you through some of the most common Know that buying land and building from topics I discuss with my clients. scratch may bring uncertainties Have a clear purpose for the property The COVID-19 pandemic has created David Ballard If you’re buying a home to use as an major supply chain problems across a wide income property, you’ll usually have to come variety of industries, including construction. up with a higher down payment and show that you have In addition to logistical delays, the price of lumber and more substantial reserves. In addition, some lenders other building materials has skyrocketed, making it require proof of your ability to make at least six months difficult for home builders to set cost estimates. They of payments; however, if you plan to rent out your don’t know how long it will take them to get all the second home occasionally but without formal operation materials they’ll need, and they don’t know how much by a property management company, these types of supplies will cost six months from now. So, make sure requirements may not come into play. your budget has some flex in it to account for this Know the tax implications of buying a second home uncertainty. Tax law can change from year to year, but currently, Consider whether drawing from a home equity line of interest paid on loans of $750,000 or less can be credit could help deducted from your taxes, so keep that in mind when If you qualify, you might be able to draw from a line you begin your property search. of credit; however, in some situations, it might make Consider the hidden costs of buying a second home sense to pay cash for the property if your line of credit is Even if you can afford the mortgage payment, taking big enough. Talk with a home loan specialist to discuss on the costs of a second home means you’ll be paying your options. for water, power, cable and internet service, as well as insurance, maintenance and upkeep. I see significant ~ David Ballard is a Birmingham-based Valley Bank interest in condos as second homes, but if that’s your residential lending consultant. preferred product, keep in mind you’ll likely be paying a Lake Martin Living 29
