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In the current real estate market, it's become commonplace for people to own more than one home. In fact millions of people now think nothing of holding two or three homes. Sometimes the second home is a vacation retreat, and sometimes it's an investment, and used as a rental. When the rates are low and the demand is high, some investors take advantage of their position, and get into real estate in lieu of or in addition to stocks and other ways to grow their money. If you've decided to purchase another house, you'll want to know the most profitable way to finance. We'll help you determine that; and it would be wise to consult with your tax accountant as well. There are rules that apply to living in the primary residence and sometimes people prefer to live in the second home and rent out the original. Yes, there are a number of questions, but the answers may be easier than you think. Interest is usually less on the home you use as your primary residence, so tell us which home you'll spend the most time in. The bottom line is that you'll want to go with the least expensive loan option. Should you use your existing equity, or should you borrow the entire amount for the second house? Many buyers think only in terms of building equity where they already have it, but you definitely want to look at the situation from all angles. It often makes more sense to borrow against the primary residence and take advantage of that equity. This type of mortgage is called a cash-out refinance. It's best used when there is quite a bit of equity built up in the home. You borrow more than the current loan, pay off the house, and use the balance as a down payment on the second home. If you're in the most optimum position, you may be able to buy it outright. If your goal is to live in the newer home, but you don't want to be penalized tax-wise, it sometimes works to stay in the original home for a year or so because technically it's the primary residence. At the end of the year, if you don't have to refinance, you can move into the second home and rent out the first. The second home becomes the primary residence and you aren't charged investment property taxes. Before you sign on for something like this, we'll sit down with you and your tax advisor to make sure all your ducks are in a row. We have the knowledge and experience to help you with your multiple home mortgage needs. Our business is to work with you to determine your most profitable course of action.
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