Mortgage loan for second home, discover how it works
Are you thinking of acquiring a second residence? A place to go to get away from the hustle and bustle? Then you must keep in mind that if you have not saved enough money to pay for this new property you will have to request a mortgage for a second home.
A product whose conditions may be somewhat different from those established for the mortgage loan intended to acquire the usual home. In this article we will tell you all its peculiarities.
Particularities of the mortgage for second home
Actually this product works exactly like a mortgage loan to acquire the usual home, but you will find some limitations.
The most important is that the maximum financing that the bank will give you will not exceed 60-75% of the appraised value or the purchase value of the house that interests you. So you will have to have saved a good amount of money to buy your second residence.
Another aspect that varies is the repayment term , which is shorter . With luck you can get a term of 25 years. This implies that as you have to return the money in less time the fees will be higher.
Many entities differentiate loans according to their purpose, so they may apply higher interest if it is a mortgage for a second residence .
In short, you will find yourself with tougher requirements than to access a mortgage for habitual housing.
Types of second home mortgages
Fixed or variable mortgage? This is the eternal question. It depends a lot on your economic situation and market conditions.
With the fixed mortgage you make sure that you are going to pay exactly the same installment during the entire repayment term, while with a variable mortgage you can benefit from the current low interest rates, although if the rates start to rise so will your share.
However, keep in mind that your decision does not bind you forever . Nothing prevents you from making a subrogation in the future and changing your mortgage from fixed to variable or vice versa.
Can the mortgage conditions of a second home be negotiated?
It does not matter if it is a mortgage for habitual residence or for a second residence, there is always room for negotiation. Moreover, the more you know about the subject of mortgages the better you can negotiate.
Your bargaining power will also depend on other factors such as if you are already a client of the entity, whether or not you have the mortgage of your usual residence paid, if you have other outstanding loans, your age, etc.
What aspects should I analyze before hiring my second mortgage?
We’ve seen it before, some banks charge you more interest if the mortgage is for a second residence. Keep this in mind when doing your calculations.
The black beast of the banks. Find out very well about them and what you can do to minimize them, since you can save several hundred dollars a year.
Many banks offer you to reduce the interest rate or commissions if you hire other products such as credit cards, home insurance, life insurance, etc. You will save money, but keep in mind that these products also have a cost, so consider whether it is really worth it.
Maximum repayment term
The shorter the term to return the money the more you will pay each month, keep this in mind, especially if you have other loans open.
Maximum financing percentage
Forget about 100% financing or even 80% to buy a second residence. To make an investment of this type you need to have money saved.
Tips before hiring the mortgage
The best thing we can advise you is that you inform yourself well about the different mortgage loan options that banks offer you and that you estimate the final cost of housing.
Do not hesitate to negotiate with the bank and examine whether there is also some way to get more economic return to that new house. For example, renting it during the months you don’t use it.
Information is always power. But we know that it is not always easy to find out about all the options that exist in the market. Therefore, our recommendation is that you put yourself in the hands of an expert who can guide and advise you throughout the entire process of buying your second residence. With your help you can also establish a savings plan that helps you maintain a healthy and healthy economy that allows you to access this new expense.