Second Home Loans

Whether its to vacation in a favorite spot, find somewhere cool to spend summer, or generate investment on another property—there are many reasons to get a second home. Before you decide whether to buy a second home, it is important to weigh your options carefully. You will need to consider if you can afford another mortgage and pay for the upkeep on another home. Below is more information on what to consider and some useful tax considerations. Stonebriar Mortgage helps Dallas, TX and California homeowners learn about options for second home loans in this week’s blog.

Can You Afford a Second Home Loan?

Real estate is a great investment. Even if you are buying a second home to use as a vacation or retirement property, chances are you will not be there year-round. You may be able to generate income off renting the property or owning a timeshare. Below are some factors to consider when deciding if you can afford a second home:

  • Down payment—do you have enough saved for a down payment that will get you good financing on the property?
  • Closing costs—what will the closing costs be? Can you earn them back in rental income or afford them in your budget?
  • Monthly mortgage payment—what will the monthly payments be combined on your current and second home? What about the maintenance costs and taxes?
  • Property Insurance—don’t forget to include any homeowners or mortgage insurance you will need to buy. Some companies charge more for insurance on a second home.
  • Utilities and landscaping—even if you are not there year-round, you will need to pay for utilities and landscaping. How do you manage these things remotely?

Considering the Purpose of Your Second Home

When considering the above costs and whether you can afford them, ask yourself if this is going to be a vacation or investment property. Perhaps it is a mixture of both. The purpose of your second home will impact your taxes. If you spend more than 14 days a year at the home, or rent it for 10% of the time, it is considered a vacation home. In this case, certain items may not be deductible on your taxes, such as utilities and taxes.

If you are using the second home to generate income from rent, then you may be able to deduct items like utilities, management fees, real estate taxes, and more. If the home is a mixture of an investment and vacation property, then get ready to keep detailed records on how you use the home. Your records will be used by your accountant to determine what may be deductible.

Stonebriar Mortgage enjoys helping clients find their second home in Dallas, Texas and California, feel free to reach out with any questions you have about the process.

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