What is the difference between buying a house as a second home or as an investment property? Which one is better from mortagage rate and insurance stand point?
Are there any advantages of one over the other?
I heard that mortgage rates and home owners insurance is less on 2nd home. Can a house bought as a second home rented out after the purchase?
2006-11-10 01:08:48 · 5 answers · asked by ADIL M 2 in Business & Finance ➔ Renting & Real Estate
In the lender's eyes, an investment property is much riskier to provide financing for than a second home. However, you cannot just call it whatever you want to try to save a buck.
As "Mazziatplay" stated, it has to make sense. A second home would typically be in a vacation area, for instance. If it is less than a few hours away, why would you need a second home there? These are the type of questions that the lender will ask.
There is a reason for the three types of classification of your residence. If you're untruthful on your application, it is fraudulent, no if's, and's, or but's...
2006-11-10 03:35:06 · answer #1 · answered by Justin 3 · 0⤊ 0⤋
The down payment requirements may vary greatly between a second home purchase and a rental as may the closing costs. Investors consider the purchase of investment property a higher risk than that of a second home and price the loan accordingly.
To qualify as a second home purchase, it has to make sense. For instance, buying a home in another part of town and calling it a second home doesn't make sense. Buying a home in the mountains or at the coast when you live in the city does.
Telling your lender that it is a second home purchase and then using the property as a rental is loan fraud.
2006-11-10 02:41:49 · answer #2 · answered by Anonymous · 0⤊ 0⤋
If you purchase the home as a second home, then NO you cannot rent it out. That is a provision of the loan. That is the difference in the methods. The second home is for your own use and th investment property is generally for rental or commercial use.
2006-11-10 01:31:44 · answer #3 · answered by Phoenix, Wise Guru 7 · 0⤊ 0⤋
Second home rates are as good as primary residence rates. Investment property rates are higher. The property must qualify as a second home... this is not for you to decide, but for the Lender to decide which guidelines it meets. Typically it's a second home if it's in a resort area and 300+ miles from your primary residence.
2006-11-10 04:21:29 · answer #4 · answered by Anonymous · 0⤊ 0⤋
i imagine that the priority you're operating into is the terminology that you're utilizing. A loan is a private loan used to purchase sources, secured adverse to the sources that is figuring out to purchase. What you want to do is come around the fairness on your position to purchase a diverse sources. once a monetary employer is familiar with that, they're maximum likely going to grant you a house fairness mortgage price, not a loan price. once you wrap your head around the concept that what you're doing, in essence, is disposing of a private loan to pay for the residence sources, the IRS guidelines on deducting the interest must be more convenient to make sure out. In different words, how might want to they manage it in case you borrowed that funds from investors? also, you're conscious that in case you try this, and for some reason can not pay the mortgage decrease back, you're risking the monetary employer taking your position, not the residence sources? confident, you may want to likely come out of it with funds, because that is purely 0.5 the fairness of your position, yet it really is not a good number of convenience once you should flow.
2016-11-29 00:04:31 · answer #5 · answered by ? 4 · 0⤊ 0⤋