First and foremost, you should always breakdown and consider your goals when looking into buying a second home. Maybe you want an additional home to visit on the weekends, holidays or in the summer. Or possibly you’d like to have the home for retirement to or pass on to your children. There can be additional perks to owning a second home aside from enjoyment. There is a potential for tax write-offs, depending on how you use it. All in all, a second home for vacations is vastly different from an investment property to generate income. That difference can affect your finances, including the taxes you owe on the property and the type of insurance needed
First things first: Consider whether you have the down payment you need and if you can afford to take on a second home mortgage. Do you have a stable income and a cash reserve? Keep in mind the additional expenses of owning a second home such as property taxes, insurance, maintenance, repairs, furnishings and property-management fees. The tax implications of a second home largely depend on the type of property you buy and how you use it. Consult a tax professional for guidance on how a second home purchase could affect your taxes, since you may be eligible for mortgage interest deductions..
If you make a large down payment you may be able to get a lower interest rate on your loan since you borrow a smaller percentage of the property’s value. Although, it must be noted that loans available for vacation homes are typically more conservative than those for primary residences. With that being said, you may need a down payment of 20 percent or more.
Overall, a loan officer can help you better understand the costs of purchasing a second home and the available loan options.