Home Sweet Second Home

Looking to invest in a second property? Don't let bad timing or rushed decisions lead you to invest impulsively. Here's what to consider before you buy a vacation home or investment property...

How will you use your second home?

How you intend to use your second property will greatly impact the down payment required. An investment property—a home you intend to rent via long-term lease or short-term vacation—will likely require 20% down.

On the other hand, a second home—the dreamy vacation home—may need a minimum down payment of 10%.

How will you pay for your property?

If you aren’t able to pay in cash, think twice before hitting your retirement savings or paying the crazy high interest of a personal loan to cover your down payment. Instead, consider tapping your home's existing equity.

Using your home equity to purchase a second home is a good idea if you’re financially stable and have a lot of equity in your current home.

Tapping your home equity can be done one of two ways:

1. A home equity loan offers a fixed rate and flexible repayment terms (from five to thirty years). This is a great option if you plan to resell your home for profit or rent it out.
2. A home equity line of credit (HELOC) requires payments based on the amount of cash you use, plus interest.

Most HELOC lenders offer an interest-only payment option (Spring EQ, for instance, offers interest-only payments for the first 10 years). Paying just the interest owed could keep your payments as low as possible while making improvements to your second home.

The upside of tapping your home’s equity

Using your home’s equity to purchase a second home can help you keep your savings intact while enjoying reliable, monthly payments.

Here are some more pluses to using your home equity:

• You’ll leave your cash reserves alone (don’t tap into your savings or retirement)
• You’ll be able to make a larger down payment (or purchase the property in full)
• You’ll get a fixed rate with a home equity loan
• You can repay and reuse your credit line with a HELOC

What to know before you buy

Before you buy a second home with either a home equity loan or HELOC, consider all the factors. Remember: You’re using your primary residence as collateral, so make sure your budget can handle all the payments.

Need a starting point? Visit our Equity Estimator tool. It only takes a moment to get insight on your available equity.

Or, simply connect with us here at Spring EQ. Together, we’ll explore your options and help find a path so you can reach your goals.