If you’ve been dreaming of a home away from home, you’re definitely not alone. According to the most recent study compiled by the National Association of Home Builders, an average of 15 percent of new home sales were second homes—and believe it or not, Wisconsin is one of the top states for second-home sales.
But with interest rates higher than they were last year, is now even a good time to buy a second home?
Absolutely! You need to consider the full financial impact overall which still favors a home purchase as a strong investment. Here’s three things to consider when making your decision if a second home is right for you:
First, even though interest rates may be higher, they are expected to drop which means you’ll have the option of refinancing to a lower rate if you’re planning on holding on to the home for a while. In the meantime, you’ll still be growing your wealth over time. A home is an investment and it’s likely that your equity will continually increase due to the national lack of homes available along with the numbers of buyers out there still willing to pay at or above list price. Additional equity gains over time will help cover some of the higher interest expenses incurred right now.
Second, it’s important to make sure your credit score is as solid as possible so that you can get the best interest rate available to you. As with any loan, banks will consider what your credit score is to determine you interest rate, which will help save you money.
Lastly, since you typically need a 20 percent down payment for a second home, is it possible to put a larger amount down on your purchase? The more money you put down on your second home purchase, the less money you’ll have to finance at a higher rate.
Consider your full financial implication and whether or not a second home is right for you at this time. Maybe waiting a year or two might make more sense depending on your financial situation. Regardless, it can’t hurt to talk to a trusted REALTOR about what you’re considering to help you consider when the right time will be to start looking for your second home.