Mortgage Consultants NJ: What You Need to Know About Buying a Second Home
In the current economic environment many people are having difficult times making ends meet. Furthermore, the housing industry has, in many expert opinions, decimated for various reasons that go beyond the scope of this article. However, there are people like you who have their house in order, both literally and metaphorically. As a result, you are in the market for a second home and need advice. Well, you’ve taken the correct first step – research. The next step is to find reputable mortgage consultants NJ to help “clear the fog,” “un-murk the murky waters,” and give guidance in this volatile mortgage market.
Mortgage Consultants NJ: Are Second Mortgages Hard to Get?
Mortgage lenders are still skittish about giving out large sums of money since they are dealing with so many homeowners who are experiencing difficulties with their primary mortgage. Therefore, lending money to an individual to wants to purchase a second home is potentially risky, at least on the surface, because this domicile is generally not where you are going to permanently live, and therefore could make it easier for you to walk away. In addition, if you personally encounter difficult economic times, the second mortgage will most definitely be an over-extension of your budget. So you can understand, without a bank/lender knowing your personal situation that they are going to be at least slightly hesitant to take you on as a client. Here is where quality mortgage consultants NJ fit in nicely. They can review your current financial portfolio and lead you in the appropriate direction.
Mortgage Consultant NJ: What Are the Mortgage Options for Second Homes?
The mortgage options are very similar to what would be available to person shopping for a primary residence. Therefore, the options of 15, 30, and 40 year fixed rate mortgages, interest-only loans, adjustable-rate loans, balloon mortgages, and even equity loans or lines of credit on your primary residence are all options when you are considering your purchase of your second home, and can be reviewed in detail by mortgage consultants NJ.
However, because of the perceived increased risk, mortgage rates on second homes are generally 0.5% higher than for primary residences. Furthermore, mortgage insurance rates will also be a little higher – which might just prompt you, if possible, to make a larger down payment. For the most part, lenders will insist on at least 10-20% down.
Mortgage Consultants NJ: The Tax Benefits of Purchasing a Second Home
Ultimately, your second home can offer you significant tax advantages. This will vary depending on three categories: 1) how often you use your vacation home, 2) how often you rent it out, and 3) how long it sits empty.
- Category 1: The home is rented out but is often still used by the owner. Specifically, this relates to second homes that are rented for more than 14 days a year and have a personal use of more than 14 days or 10% of the rental days. (FYI: Personal use does include family members and anyone else who pays less than market rental rates). This category is then considered a personal residence, which means you can deduct interest up to $1 million of mortgage debt on two personal residences and up to an additional $100,000 for home equity loans. In addition, property taxes are generally deductible, no matter how many homes you own.
- Category 2: Homes that are used very little by the owner. In this scenario, your second home falls under the tax rules for rental property rather than a personal residence. Therefore, interest, property taxes and operating expenses will all be allocated based on the total number of days the house was used.
- Category 3: Homes that are rented fewer than 15 days but used by the owner for more than 14 days. These homes and then considered personal residences and then you are able to deduct the interest of the property taxes the same as you would for your primary residence – without declaring a penny of the income.