How To Buy A Second Home.

Many people believe that buying a second home will be similar to buying their first one.

While it is true that much of the process stays the same, there are different requirements the buyer should be aware of that may not have applied the first time. Listed below are six tips on how to buy a second home and achieve the dream of dual home-ownership.

1. Clear debt

Lenders do not like when home buyers carry a lot of debt. Too much debt can hurt a first-time home buyer’s chances of purchasing a house. However, it can be even more damaging when it comes to buying a second home. The combination of debt and monthly mortgage repayments can make the home buyer appear to be stretched for cash. To put the odds in their favor, buyers should clear as much of their outstanding debt as possible. This can include drawing down credit cards to a zero balance and paying off student, car, or personal loans.

2. No new loans

Buyers who want to purchase a second home should be advised not to take out any new loans within 6-12 months before applying. Financial lenders tend to view new loans with suspicion. They may conclude that the buyer has taken out the loan to make the down payment on their home. As a result, many lenders will not approve them for a home loan. Other lenders may approve the buyer for a second mortgage but may assign a higher interest rate to cover the risk. For this reason, buyers should refrain from opening any new loans one year before purchasing a second home.

3. Know the property

How a home buyer intends to use their second home will determine the kind of loan and interest rate that they receive. For instance, some buyers want to purchase a second home to rent it out and earn extra income. Lenders will view this as an investment property. Investment properties are more likely to incur a higher interest rate and require a much higher down payment. Using the property as a vacation home is a good way of keeping costs down for the duration of the loan.

4. Save for a bigger down payment

Considering the debt that the home buyer is carrying with their first home, the lender is likely to assign a larger down payment for a second home. This is done to cover the risk on behalf of the lender. Regardless of whether the buyer is current on their first home loan or has a good credit score, they should still be prepared to put down more money than they did with their first home. The buyer may need to be patient by postponing their loan application while they save for the down payment.

5. Handling debt

Buyers who have paid off their first mortgage do not need to worry as much about the debt associated with a second home. They can take equity out of their first house and use it to finance the second house. They also typically have enough disposable income to save for a large down payment. However, buyers who are still paying off their first home will be adding a substantial amount of money to their debt if they buy a second property. To make this work, buyers must calculate what they can afford to pay on a second home before they begin the application process.

6. Double taxes and costs

The next step is to save for the additional expenses that will go into owning a second home. Costs for landscaping, water, garbage removal, and property taxes are a few of the expenses that may double due to owning another property. These costs should be budgeted ahead of the sale to ensure that the buyer can cover the costs of maintaining a second home. Otherwise, the buyer may begin to fall into debt soon after they purchase the property. While debt will affect the buyer’s ability to pay the second home loan, they can also get into trouble paying off their first mortgage if they are not careful.


Learning how to buy a second home can be more challenging than buying a first home. However, this does not mean that it needs to be a burden. Being prepared for the costs and strengthening one’s finances are the keys to obtaining a second home. By following the tips above, home buyers who know what they are getting into can increase the chances of expanding their portfolio as well as their financial security.

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