Smart consumer tips and strategies from Eyewitness News Online

A Second Home

Summer is nearly here. Wouldn't it be nice to be heading to a second home for some fun in the sun? Well, gone are the days when buying a vacation home was only for the rich and famous. Mortgages of today can make it easier for everyone. But, is buying a second home a good idea for you?

Investment Opportunity

For many, a second home can serve as an investment. Richard Leaf, a Mortgage Loan Officer with Concept One Mortgage, says he's seeing a trend in the number of second home loans crossing his desk: "In the old days, we would get one or two second homes a year. Now, we may get ten times that, 15 times that." Why? One advantage of a second home is a tax break, like a mortgage-interest tax deduction. Or, if you rent the property, you'll not only collect extra income, but you may also be able to deduct depreciation.

The Downside

But, keep in mind, owning a second home comes with a lot of expenses. You'll have two electric bills, extra phone lines, and one more lawn to mow, you get the point.

Also, is it really better to have your hard-earned money wrapped up in a piece of real estate instead of in traditional investments? Well that depends. Financial advisors say you should do the math. In the last 25 years, home prices have increased on average less than six percent a year. At the same time, corporate shares grew more than ten percent annually. However, for shorter periods, experts say home values may outperform stocks. But, as you know, there's no guarantee, says Richard Leaf: "It's just something that people shouldn't do lightly, until they understand all the liabilities that go along with it."

Lastly, if you ever find yourself in a bind and need money quickly, homes can be difficult to liquidate. So, you may want to make sure you have other investments to tap into.

Bright Idea

Are you looking to buy a second home? How expensive of a house can you afford? Click here to find out.

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