Consider tapping into the booming second home market
| Qualifying for a loan on a second home is easer than it was just five year ago and “two houses are better than one” is now the thinking among a growing number of homeowners. These days, one of the hottest segments of the real estate market is for second homes. Several factors have driven this burgeoning second home market, including housing price appreciation and the favorable interest rate environment of the last several years. What’s at the core of the trend, however, are easier financing options and an aging baby boomer population seeking more spending outlets. |
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As recently as five or six years ago, extra hurdles got in the way of hassle-free financing of that second property. Lenders often viewed second homes as a higher risk, meaning buyers had to pay slightly higher interest rates and fees and larger down payments. Today, the guidelines of financing that secondary home nearly mirror those of a primary residence as lenders adapt to changing demographics with the help of sophisticated technology that better assess buyer risk. Such tools enable lenders to offer new home loan programs to address the buyer’s needs. Interestingly enough, five to 10 percent down payment is common in second homes. There are a couple of strategies that have been considered by buyers looking to keep their cash liquid and not tied up in a second-home transaction. Tapping into the available equity from a primary home with a cash out refinance loan, especially if the rate is low enough on a first lien refinance mortgage, is one way to fund a down payment on the second home.
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