If you’re thinking about buying a second home, you’re far from alone. According to a report by Pacaso, about 55% of Americans who don’t own another property are thinking of getting one.
After all, who wouldn’t want a place they can escape to when the daily grind wears on the soul? Before you start looking at Cleveland, Ohio homes, however, read these tips first:
Be ready for stricter lending requirements
If you purchase a second home, there’s a good probability that you’ll be paying off two mortgages simultaneously—a factor that makes you a greater risk for lenders. As such, mortgage companies will impose stricter creditworthiness standards before granting you a loan. This often includes a higher credit score
requirement, a 20% down payment, and having six months’ worth of mortgage payments in reserve, among other things. Your mortgage interest rate and homeowners insurance premium will likely be higher than your primary residence, too.
Choose your location wisely
Location is always important when buying real estate, but even more so when acquiring a second home. If you’re planning on using it as a vacation home, it has to be far enough away to feel like a getaway, but not so remote as to be a hassle to visit. Likewise, consider the activities and attractions that a given area offers. This is especially important if you plan to rent out your home while you’re not using it.
Prepare for associated costs
Mortgage payments aren’t the only recurring cost of owning a second home. You’ll also have to pay for insurance premiums, maintenance work, security systems, HOA fees, and the like. If you’re interested in waterfront properties, you’ll also have to shoulder miscellaneous expenses such as docking fees if you have a boat. Be sure to factor in all of these costs so you don’t get a case of sticker shock after buying a property.
Have a plan for maintaining the property
More likely than not, you’ll only be using your second home for a few days or weeks at a time. The rest of the time, it will either be vacant or occupied by renters (if you plan to rent it out). Since you won’t be there to supervise its upkeep, you need to have a game plan in place. Will you travel to the property every so often to maintain it yourself? Or will you hire a professional property manager to do it for you?
Know the rules of rental income
A second home costs a small fortune, but you can offset your mortgage payments with rental income. That said, rental income is subject to taxation. Owners who rent their property for 15 or more days out of a year must report their income to the IRS and pay the appropriate taxes. There’s a silver lining, however: you can deduct rental expenses like property management fees, utilities, maintenance costs, and depreciation from your tax bill.
Indeed, a second home can enrich your lifestyle and help your family create unforgettable memories. Just be sure to keep the above-mentioned advice in mind before taking the leap.
Looking for real estate in Cleveland, Ohio? I, Michelle McQuade, can help you find a property that suits your needs and aspirations. Give me a call at 440.247.8900 or send me a message here.