Owning a second home can be a dream come true. How many of us have dreamed of having a hideaway from your everyday life? Owning a second home gives you the benefit of complete control of the home plus it can be a great investment. Over time, the home can increase in value as well as providing a steady source of income that is often enough to offset the cost of ownership.
If you are considering buying a house, especially if it is your first time, you will want to follow these basic guidelines to save yourself headaches, confusion, and perhaps a good deal of money:
- Know Your Credit Rating
How much money you can borrow and how much it will cost you will depend heavenly on your credit score. Contact one of the three major credit agencies, Experian, TransUnion or Equifax to get a complete credit report. A print out of this, especially if it is good, will be a useful document to have. If there are mistakes in your credit record each of these agencies have ways for you to dispute or amend that info. You may also use one of the many online services that provide your credit info to you, but often this is a simple score without much detail.
Of the many ways there are to tap into the equity that your home has acquired with time and appreciation, one of the most flexible is to set up a Home Equity Line of Credit, or HELOC, as it is commonly known. Unlike a standard home equity loan that is paid to you in a lump sum and paid back in a fixed amount of time, usually at a fixed interest rate, a HELOC establishes a certain level of credit, secured by a lien on your home, against which you may draw as you need it. It can provide you with a comfortable cushion for unexpected expenses like small renovations, extra college bills or medical expenses.
You’ve found the perfect house. You’ve figured out exactly what you want to do with the kitchen, where the kids’ rooms are going to be and the placement of the living room furniture. But have you spent any time determining the best way to finance your new dream home? If you haven’t, you should. No, it’s not nearly as fun as mentally redecorating, but it is far more important and will have a lasting effect on how much money you have to spend on any future renovation.