Is Now The Time to Buy a Second Home?

Contrary to what most people believe there are three different types of designations for homes when it comes to financing. They are: primary residence, investment property, and second home.

This final category - second home - is what most people overlook. Point in fact second home financing offers the same terms as primary residence financing right now. This presents significant opportunity for people looking to purchase or refinance a second home. Below we'll discuss this in greater detail, and break down the differences between these various designations.

Primary residence financing is self explanatory. It is financing secured against the home that you live in. For this reason the lender assumes little risk, after all the last thing most people do is compromise their living arrangements.

Second homes and investment properties however fall in a different bucket because there is not a constant presence of the homeowner. Investment properties are the second class we have listed. They represent the polar opposite of primary residences because they are rented out by the homeowner or property management company under their direction to a third party. This third party because they have a very small commitment to the property typically do not treat the real estate as well as they would if they were the owner. In addition the owner is leveraged further out, making the possibility of default more probable. What happens if the tenants leave and you can't rent it out? The point is the inherent risk associated with a loan against an investment property means the lenders terms are not going to be as favorable as financing offered on primary residences. Why? Because of the larger risk they are taking. Plain and simple.

So what about second homes? A second home is a home that is not used for investment purposes and that the owner uses for personal use for at least two weeks out of the calender year. Generally speaking second homes are located in destination locations and or are in areas that the homeowner frequents for a legitimate reason, child attending college in the area, a second home in an area that your job takes you to, or simply a vacation location. So how does pricing compare for second homes in relation to investment properties and primary residences?

Considering the reason for higher premiums on investment properties it would seem as though a second home would have similar terms, after all it is always vacant. The borrower can never offset the expenses with income. It seems as though pricing for second homes should be very similar to that of investment properties. Actually second home terms are identical to primary residence terms.

Let me say that again. Second home financing terms are identical right now to primary residence financing terms. We can discuss why this is, or we can simply accept this as an incredible opportunity. California offers some of the best destinations in our Country. From oceanfront vacation properties to mountain resorts offering skiing an other winter recreations over to deserts offering golf and recreational vehicle trails, on to beautiful lakes offering watersports - there is no other State that has can offer what California can.

Couple this with the fact that our real estate market has depreciated to levels we have not seen in decades, and it becomes evident everyone is in a position to take serious advantage of this real estate market through second home financing solutions.

A second home after all appreciates just as fast as a primary residence and destinations like San Diego beaches, Big Bear Lake, and Palm Springs offer people what everyone deems to be the most important aspect of real estate - location, location, location.

I am not advocating these particular areas to buy... these are simply examples and I could go on - Lake Tahoe, Mammoth Mountain, Santa Barbara... the point is CA and CA home prices right now coupled with the terms offered on second homes present everyone an incredible opportunity to buy a second home with very favorable terms.

If you have been considering a vacation home. Now would be the time make it a reality.