If you are looking to buy a second home, then you will want to read about how to get the best deal on your mortgage…
I get emails all the time from someone looking to buy a second home in Upstate South Carolina. And who can blame them considering the great climate, friendly people and low taxes? Maybe you are looking for a small cabin in the mountains or a lake property? Or maybe you need to buy a home that is closer to family?
Of course, I also deal with people looking for a money making investment property. It really does not matter why you are looking at real estate in Upstate South Carolina, there is no doubt that is can be a fantastic investment. However, the Ugly But Honest truth is that getting a mortgage on your second home can be a harder than getting a mortgage on your primary residence.
Tough But NOT Impossible
You need to understand that there are tougher standards for second homes. The reason for this is because when you are buying a second home it is possible that your finances will be stretched thinner. While this might not be true for everyone, it is what the banks think. And since they are the ones with the money, you have to understand how they see things.
Because the banks or mortgage companies think this is a riskier mortgage, it could cost you more money. A second home mortgage can be more difficult to close and it is very possible that it will have a higher interest rate.
Here are three tips to help you to get the best mortgage on your second home:
Money in the Bank
As crazy as it sounds, the banks are more willing to lend to people that do NOT need to get a mortgage! The banks like to see that you have a large amount of cold hard cash in the bank. They think this means that you will keep making the payments even if something bad happens. Like losing your job or maybe a medical emergency.
Pay Off That Debt
While some people preach about using OPM (other people’s money), the truth is that too much debt can be a bad thing when buying a second home. The banks could be scared to give you a mortgage on a second home if you have a lot of debt. This is why having a low debt to income ratio is important when getting financing for a second home.
Using Your Primary Residence
There are some people that like to use their largest asset as collateral when buying a second home. You better gosh darn make sure this is a good idea for you. I would hate to see you lose both of your homes!
But if you always make your payments on time and have plenty of equity built up, you might be able to use this to make your second home purchase. I have to mention that you should always speak to your tax adviser & your financial adviser before making any BIG decisions. One reason why is that there is a IRS regulation that requires your second home be financed under it’s own home loan within 90 days of closing so you can reduce the taxes.
Buying a second home in Upstate South Carolina could be a great way for you to build wealth or have a wonderful location for all your vacations. Just please remember that these tips are just the beginning. Again I strongly suggest talking to your preferred mortgage lender as well as all of your other financial advisers BEFORE you buy.