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Second Home Purchase Plan

Over the past few years, the poor economy has affected most people in the country a number of different ways. While most affects of the recession have been negative, one advantage of it has been that key interest rates have remained quite low. This has helped keep mortgage rates near historically low levels. Those who purchase a home now, or refinance an existing mortgage today, and take advantage of the low rates could save thousands of dollars per year in excess interest charges.

While mortgage rates are extremely low, those looking to purchase or refinance a mortgage on a second home or vacation home will almost always be charged a premium on their rates. Second home mortgage rates tend to be 0.50% to 1.0% higher than traditional first mortgages. Furthermore, most banks have drastically tightened their second home lending, so being offered the lowest second home mortgage rates is harder than it ever was before. Luckily, there are ways that you can improve your chances of being approved for a loan for a second home.

One of the best ways to increase your chances of being approved for a loan on a second home is to have a very strong source of income. Banks are typically most hesitant of providing a second home loan to someone because they will likely already have a housing payment on their primary residence and taking on a second home loan, and all the other related expenses, could be too much for someone to financially support. To ensure that you are approved for the loan, you will need to prove that you can comfortably support the mortgage payments on both homes.

You could also increase your chances of loan approval and receiving a low interest rate if you are able to show that the second home will provide you with some form of income. If you are purchasing a second home in a popular vacation destination, you may be able to rent the home out when you are not using it. Your mortgage lender may be willing to show some leniency if you are able to prove that the home will provide you with some form of income. Doing this may require you to receive some market data on how much money the home could generate and what other expenses you will incur from owning and maintaining a rental property.