Buying a second home could be an exciting next step in your life.
And there are a number of reasons why another property might be in your future, including:
- You are wanting a rental income property, to generate recurring, alternate income streams.
- You are wanting a seasonal or vacation home for you and your family to enjoy part time.
- You are hoping to create an asset you can pass onto your own children.
- You are hoping to “flip” a home for a profit after making strategic renovations.
- As you can see, your homebuying journey is unique to you.
Where to start
Purchasing a second home when you already own a property can be a substantial investment on top of the assets and liabilities you already hold. Buyers should certainly consider whether they have the finances to even make an offer on a second home, and consult with a financial planner to assist with budgeting, forecasting and savings strategies.
On the whole, should you be in the financial position to take out a second mortgage, you will likely need to start diverting savings from one end of your portfolio to another. This might mean devoting portions of your emergency fund to a new savings account, redirecting your direct deposit to go toward a new house and cutting back on discretionary expenses in the interim — in many cases, all of the above.
You also need to consider how soon you intend to buy and how you wish to use the property. Both will impact how much savings you need on hand and whether you will realize any return on investment.
Explore the infographic below for savings tips from Comerica Bank.
