Considerations When Buying a Second Property
There are important considerations when buying a second property. This is a major investment that you will make and you have to ensure that you are doing it right and that you are making the right decisions. With the drop in the real estate market, you will find it appealing to buy a second property at a lower cost. However, do not instantly jump on this opportunity. First you need to consider a lot of things prior to buying another property with your hard earned money.
Buying a second property can put additional burden on your finances. If you believe your financial circumstances are stable then this is not an issue. Do not just grab the opportunity of purchasing a second property that is offered to you at a bargain price. It is important to consider the stability of your cash flow first. Calculate your living expenses plus debts and see if you can afford paying for another mortgage.
If you think it is plausible to borrow money when buying a second property for future investment, you should secure a rental estimate from the real estate agent of the property you are doing business with. This is essential especially most lenders require an official rental estimate about the property you plan to purchase at the stage of approving your application for a loan.
Lenders will not usually consider the full amount of the rental estimate will only calculate between 50 and 75 percent of the amount in consideration. This is also based on other factors such as the location and the kind of property you intend to purchase. Therefore, it is valuable that when buying a second property you should choose one that is ideally located with a promising rental fee that can help support in paying for the mortgages.
Before you consider placing your current property as a security for your loan to pay for the deposit of the second property, you should think twice in doing so as you may be risking both your current and second property from foreclosure if you are unable to meet your payment dues. Thus, planning for a safety buffer by saving for the deposit is perhaps the best way you can do in order to secure your purchase for the second property.
Another option you have in securing funds for buying a second property is to look for the appropriate loan type that will give you a low interest rate to pay for. Financial advisers usually recommend that if you have a limited cash flow you can opt for a fixed interest rate for a few years. This will help you take advantage of determining how much to pay for the mortgage against the rent in order to minimize the risk for non-payment of the amortization.
Buying a second property can put additional burden on your finances. If you believe your financial circumstances are stable then this is not an issue. Do not just grab the opportunity of purchasing a second property that is offered to you at a bargain price. It is important to consider the stability of your cash flow first. Calculate your living expenses plus debts and see if you can afford paying for another mortgage.
If you think it is plausible to borrow money when buying a second property for future investment, you should secure a rental estimate from the real estate agent of the property you are doing business with. This is essential especially most lenders require an official rental estimate about the property you plan to purchase at the stage of approving your application for a loan.
Lenders will not usually consider the full amount of the rental estimate will only calculate between 50 and 75 percent of the amount in consideration. This is also based on other factors such as the location and the kind of property you intend to purchase. Therefore, it is valuable that when buying a second property you should choose one that is ideally located with a promising rental fee that can help support in paying for the mortgages.
Before you consider placing your current property as a security for your loan to pay for the deposit of the second property, you should think twice in doing so as you may be risking both your current and second property from foreclosure if you are unable to meet your payment dues. Thus, planning for a safety buffer by saving for the deposit is perhaps the best way you can do in order to secure your purchase for the second property.
Another option you have in securing funds for buying a second property is to look for the appropriate loan type that will give you a low interest rate to pay for. Financial advisers usually recommend that if you have a limited cash flow you can opt for a fixed interest rate for a few years. This will help you take advantage of determining how much to pay for the mortgage against the rent in order to minimize the risk for non-payment of the amortization.
Source...