The loan approval process for a mortgage on a second home is similar to what you experienced with the mortgage on your first home, with a bit more scrutiny this time around. Lenders will want to be sure you can handle two mortgages plus the costs of running two properties, including taxes, insurance, and upkeep. Mortgage options differ, depending on whether you intend the house for your sole use or if you plan to rent it out for at least part of the year. Below are tips on how to save for buying a second home.
Set Up an Automated Savings Plan
Once you start automatic transfers, which typically occurs on your payday, you don’t have to give it another thought. This can be helpful if you tend to second-guess your saving decisions, such as whether you actually need to save 5% or 10% of your income this month. This way you can avoid doubting yourself and keep the savings flowing. Automating the process lets your savings grow unattended. If you schedule the transfer around the time that your earnings arrive, the money for savings never really mixes with your spending funds. Over time, you may get used to living on that smaller amount too, making it easier to let your savings build.
Bank Those Windfalls
You can make the process of saving money for a down payment on a house easier, and shorten the process, by banking periodic windfalls. These can include income-tax refunds, gifts received, bonuses or large commission checks, or even the sale of personal assets. By depositing these funds into your down payment savings account, you fast-forward the process of saving money to buy your future home. Regularly depositing a few thousand dollars per year in windfalls can chop a couple of years off of your savings timeframe.
If you have a detailed checklist of exactly what you want in your perfect house, know now that there simply is no such thing as a perfect house. Learn to be flexible and be flexible with location. Don’t compromise on major requirements, but understand that it’s unlikely you’re going to find that carbon copy home of the one you’ve imagined. Banff homes for sale may be a cheaper option than buying in Vancouver, which will ultimately save you money!
Cut the Luxuries
If you’re saving for a house, you’ll naturally be wary of making any big purchases on fancy vacations or expensive clothes. But watch the little stuff too. A fancy cocktail in a bar can cost $16 these days. Even if you keep it down to two drinks a week, that’s $1,664 that you could be putting into your house fund over a year. Budget your cash strictly, and put the savings in your home account.