Think owning a second home is only for the rich and famous? Think again. Being a dual homeowner is an achievable goal. And, it can come with a lot of perks. From having your own vacation home to collecting rental income, being a dual homeowner can offer some serious advantages.
However, a second home typically comes with a second mortgage. Being a successful dual homeowner, you need to be financially prepared. If you’re not, you can suddenly find yourself in a world of financial hurt.
Consider the following factors as you try and decide if a second property is right for you.
Do you have enough extra cash?
Like we said, you don’t have to be part of the 1% to own a second home. But, you do need to be able to afford a second mortgage. This means having enough cash for the down payment. And, it means having a large enough monthly income to afford the additional mortgage payment and homeowner’s expenses.
Is your DTI low enough?
A second mortgage is a second payment. It’s more debt. Just like getting approved for your first home, you’ll need to maintain a debt-to-income (DTI) ratio of no more than 42 percent. This ratio includes all your mortgage payments, credit card bills, car loans, and student loans.
Do you want that kind of commitment?
Even if you can afford a second home financially, do you want the commitment? A second home requires maintenance and upkeep. If you plan to rent it out, that requires management to approve renters, collect money, and attend to any issues that arise.
If it’s a vacation home, do you want that to be your primary vacation destination? You may love the idea of a place that’s all yours. However, exploring new destinations may be more of a priority for you. If so, tying up your finances in one location, might not be the best move. The key is to evaluate your goals before diving in.
Talk to Rob to begin exploring if a second home is right for you.