News alert: Tax laws for second-home owners have changed, which could affect whether you can actually afford the investment and what you can deduct on your taxes.
So, whether you’re buying a second home for profit or pleasure, here’s what to consider before making an offer:
Interest rates: The rules for buying a second home are a bit more complex than when you purchased your first, so expect to pay a higher interest rate. However, if you’re planning to use the house as a second home, you may be eligible to write off the paid interest on your taxes up to a certain amount.
Payment plan: Before you start seriously looking, figure out how much you can comfortably afford to pay each month; this will help you narrow your home search and determine if you should go with a 15- or 30-year mortgage payment plan for the second home. Our online mortgage calculators and home loan experts can help you with the math.
Down payment: Expect to put down more than you did for your primary residence—so ensure you have 20 percent saved as a down payment before buying a second home.
Tax considerations: As tax laws change, consult a trusted tax advisor to help you determine what you can expect to deduct or must list as income on your taxes. For example, if you’re planning to rent the second home, you’ll have to list all rental income but you can deduct all rental expenses.
Additional expenses: Maintenance, appliances, utilities, property taxes, homeowner fees and cleaning costs—just to name a few—will be based on the second home’s location and purpose. Make sure to do your research.