| Question about buying a 2nd home |
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deuceswild
New Member
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Location: Arizona
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| Question about buying a 2nd home |
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Will a Bank be willing to give me a mortgage for a 2nd home even if I am under water on the first home (bought during the boom, now worth 50%)? I can easily afford the montly payments and would plan to put 20% down but I'm wondering if the bank would see this as too risky given I could just walk away from everything if say I could not work or something catastrophic happened.
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Wed Feb 03, 2010 9:48 pm |
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Raptor
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Location: Missouri
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That depends. Do you have a well establish local bank. Small banks are more willing to listen in person about your individual needs. Additionally they are more open to ideas to secure the loans. One example is you could post both houses as collateral. If you walk from one, they get both. This will show that you do not intend to walk away and will make good on your word. When I was doing the landlord thing, this is how I made the local bank feel good. If I defaulted on one loan, they could roll up everything. You'll just have to ask banks and find one that is willing to take the risk, but be ready to toss out ideas that will lower their risk.
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Thu Feb 04, 2010 6:18 am |
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coaster
Senior Advisor
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Location: Wisconsin
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Banks are really tight right now. I'm refinancing and I've got a credit score over 800 and I'm surprised that given my score and assets they're still really picky about checking all the proper boxes to cover their risks.
~Tim~
Eye Candy : Why Whimsy
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Thu Feb 04, 2010 3:30 pm |
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oldguy
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Location: arizona
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quote:
give me a mortgage for a 2nd home
You didn't ask - but second homes are notoriously poor investments. Just as rental houses build equity and produce income & tax breaks, a second home consumes more than it appreciates - it is expensive to pay interest/taxes/insurance on a place that sits idle 90% of the year.
If it is intended to ba a vacation home, you can rent a very nice hotel for $2500/yr (2 weeks) - and avoid the $10,000/yr or $20,000/yr that a house will cost.
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Thu Feb 04, 2010 4:14 pm |
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deuceswild
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Location: Arizona
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I was actually thinking of renting it out for 10 months and using it for the other 2. I think this would generate a positive cash flow plus build equity.
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Wed Feb 10, 2010 9:40 pm |
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oldguy
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Location: arizona
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quote:
renting it out for 10 months and using it for the other 2. I think this would generate a positive cash flow plus build equity.
Not likely. And the IRS has some really hard rules to work with when mixing income/personal use. Depreciation, depreciation recapture, apportioning repair deductions at 10/12, etc.
You would do better to keep the house as a rental for 12 months and stay in a hotel when on vacation. Your rental income would offset much of the hotel costs.
And it is tough to keep a place rented for 10 months and empty for 2 - tenants don't turn on/off that easily. There are places that specialize in this - Myrtle Beach (due to a unique real estate market) has brokers who can schedule/rent your place out by the week or month - but it is pretty tough on the house and appliances. And a lot of the in/out fees, cleaning fees, etc, cuts into your rental income.
Or, if you buy in a college town, the house will often go vacant in the summer - you can assign it to personal use at that time. But again, you will spend part of your vacation doing house repairs and upgrades.
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Wed Feb 10, 2010 10:46 pm |
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kingion10
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Well, this depends. But if the bank consider it risky, there is a reason, don't you think? I mean, you can never know what will happen and you will need the money...
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Thu Jun 17, 2010 6:08 pm |
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