Turn Your Second Home Fantasy into Reality

(ARA) – Many Americans dream of running off to their own personal retreat. Whether it’s a rustic cabin on a lake in the north woods or a beautiful beach house beside the ocean, everyone has a vision of an ideal second home. In fact, according to the National Association of Realtors, four out of 10 existing home sales in 2005 were second homes. But before you sign on the dotted line for your fantasy retreat, there are some important factors to consider. "There are many benefits to owning a second home," said Jim Ferriter, executive vice president at GMAC Mortgage. ”Certainly there are the investment and tax advantages to consider, but the number one factor that any homeowner should consider is the memories that a vacation home can provide." If you’re thinking of purchasing your “dream” second home, Ferriter recommends considering the following questions: What Type Of Home Will Best Fit My Lifestyle? If you’re someone who enjoys the excitement of vacationing in new places every year, will you be content going to the same place over and over? Be sure to consider any changes over the next several years that could influence the size and location of where you choose to buy a second home. For example, a cozy mountain cottage can be perfect for a young couple, but can become too small or remote once that couple starts a family. "If you're purchasing a second home that is not close to your current home, it would be very helpful to connect with locally based real estate and mortgage professionals," added Ferriter. "It's also important to do your own homework. I recommend vacationing in a location a number of times to help you get to know it, and to use that time to identify an experienced real estate agent." Other points homeowners should consider are development plans for a specific area, and how a second home plays into retirement plans. Consider subscribing to the local newspaper to monitor local news, including city council proceedings. As for retirement, Ferriter said, "it’s never too soon to think about how a home built on a vacation property may work as a primary residence when you retire." Am I Financially Ready To Purchase and Maintain a Second Home? Owning a second home may come with additional costs. For example, if your second home is located some distance from your current home, you may need to pay someone to maintain the property. Other costs may include increased insurance premiums and annual association dues. A loan professional can assist you in obtaining pre-approval financing for a second home so you understand exactly how much home you can afford to buy, which in turn can help you understand other costs, such as maintenance. GMAC Mortgage offers a program called HomeCommand that allows homeowners to obtain not only pre-approval, but a 126-day interest rate cap, which gives homeowners a clear understanding of their buying power. The company's loan officers also can provide a free, internet-based home locater service that allows homeowners to search for a second home in many parts of the United States. How Can I Make The Most Of My Investment? Leveraging the equity you’ve built up in your primary residence to invest in a second home may be a smart financial strategy. “Home values in several markets are higher than what they were a few years ago, and many homeowners have experienced rapid equity growth," Ferriter says. The company offers several home equity products for financing a second home. Go to www.gmacmortgage.com and use the Home Equity Calculator to discover how much equity you may be able to leverage from your current home. Another option for second home owners is to use their home as a source of rental income to help offset the costs of ownership. There may also be tax breaks if you rent out the property. (Also, remember that mortgage interest and property taxes on a second home loan may also be tax deductible.) Once you’re ready to turn your second home dreams into reality, you’ll find the mortgage process very similar to when you bought your first home. As with purchasing your first home, it's important to work with a real estate agent and mortgage officer to help you navigate the process. Courtesy of ARA Content