Thinking of buying a second home? You could use it as a vacation home or as an investment property. Everything to consider before making the purchase is discussed below.
Whether you’re buying an investment property or a vacation home, make sure it’s in the right location. An unpopular location would mean lackluster vacations and the house’s property value going down.
A location that’s too far would be inconvenient to get to as well. This would demotivate you from visiting.
Go through local listings. You would see that the best place to own properties would be right in the smack of tourist destinations. Know that a home in a rapidly developing area would skyrocket in value.
Where will you buy the property? Some countries make you pay a sum to the government when buying a home. The sum you’ll have to pay depends on the house’s value, as well as the province of the country. Find a land transfer tax tool online. You’ll have a good idea of how much you should owe.
You would also have to make property taxes every year. If the home you bought is pricey, the taxes would be high. Thankfully, you won’t have to pay taxes on rental income if you don’t rent the home for more than 15 days a year.
Can You Afford It?
Although you may have a large salary, you may not make enough to take out a second mortgage. Your first mortgage would be eating a chunk of your income, which lenders would see as a risk.
Just like with your first home, you’ll need to make a down payment on the second one. At most, it would be 20% of the asking price. Your loan application would get rejected if you don’t make the deposit.
With mortgage refinancing done properly, you could use the equity from the first property to purchase the second one. However, there are several cons to this. It’s all about doing your research.
Will the second home be a vacation home? If so, who would look after it when you’re gone? You would not only need someone to look after the property, but someone would have to do regular maintenance too. A lot of maintenance would be needed if the house is in an area with adverse weather conditions.
Rent the house once it’s yours. It would be a source of additional income. You would also have someone to take care of the premises.
There are many aspects to consider when purchasing a second home. One of the most important would be whether you’ll be able to take care of it or not. The house may be in a region with adverse weather conditions. This means that regular maintenance would be needed.
Of course, the taxes you have to pay should also be considered. How expensive the house is, as well as the province you’re buying in would affect the land transfer tax you would have to pay.