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Tips When Buying A Second Home
Are you thinking of buying a second home? Maybe you’re in the market for a luxurious golf getaway, a home on the coast of North Carolina or even a second home that simply puts you closer to work or family (hopefully in the Chapel Hill area!).
No matter what you’re looking for, it is important to plan your finances and goals accordingly.
Here are a few tips for a smart investment:
Pay Off Your Debt
Lenders will check to see if borrowers have a low debt-to-income ratio. It’s important to make sure you do not have large amounts of credit card debt before you apply for a second mortgage. Lenders will be checking your finances even closer for your second home, since they know you are already stretching your money paying for a mortgage on your primary residence.
Build Up Your finances
Along with paying off your debt, it’s important to show lenders that you are building up your savings in case of an emergency or loss of income. Banks and lenders want to know that you will have other resources to pay for your mortgage should something happen to your primary income.
Know What Resources You Can Use
Did you know you may use your primary residence as a resource? If you have excellent credit, are always making your payments on-time, and are on your way to having your primary residence paid-off, you may be able to borrow against the equity of your primary residence.
Consider making the purchase with multiple buyers
If buying a second home is out of your budget, consider making the purchase as a fractional owner. Instead of using all your resources, bring together your friends, family or business partner and combine your resources to make the purchase.
Try Renting a Home
If you’re looking for a way to help pay for a second mortgage, consider renting on of your homes to supplement your monthly mortgage payment.
If you do plan on using your second home as a rental property, remember it will be considered an investment property; and buyers can expect to pay an interest rate that is higher than your primary residence.
If you are planning to rent out your second home, you can look into tax benefits. If you only plan to rent your place out for 14 or fewer days during the year, there is no need to report your earnings to Uncle Sam, you can pocket the cash tax-free — Even if you charging $12,000 a week, the IRS doesn’t need to hear about it.
If you are renting for more than 14 days out of the year, you will have to report all rental income. But don’t worry, you’ll also get to deduct all of your rental expenses.
Additional questions? Contact the Domicile Realty team at 919.883.5500 or via the contact form.
A native of New Jersey, Kristine attended Rowan University with a major in Early Childhood Education. After teaching kindergarten for one year, she discovered her passion for real estate and subsequen....
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