The Pros and Cons of Buying a Second Home in Maine

Picture the following: A colorful cottage in Bar Harbor, a mere stone’s throw away from the scenic grandeur of Acadia National Park. A small log cabin with a wood-burning stove nestled in the heart of the Lakes Region. A spacious apartment with the stylish and modern amenities located amidst the hustle and bustle of downtown Portland. A stately manse in Kennebunkport overlooking the bright blue waters of the Atlantic.

If you’re a fellow Maine-iac, any one of these might sound like the ideal vacation home. And, while it’s fun to imagine the perks that come with owning a vacation home — brisk hikes during peak foliage season; long afternoons spent kayaking; dinner and shopping at the finest restaurants and boutiques; leisurely strolls along pristine shoreline — it’ll take some work to make those dreams a reality. Let’s take a closer look at some of the advantages and disadvantages of owning a second home in “Vacationland,” as well as how a second home mortgage can help you afford it.

3 Reasons to Consider Buying Second Home…

Aside from the obvious benefits of owning a second home in Maine — namely, the freedom to enjoy some quality rest and relaxation — there are some practical advantages:

• Get a return on your investment. A second home, be it a vacation home or an investment property, is a valuable asset. Generally speaking, the longer you retain a property, the more value it accrues. A home purchased for $200,000 could easily double in value over the course of a decade, especially if improvements are made to the existing property. And, depending on the location of your second home, you could stand to turn a decent profit should you ever choose to sell it.
• Your home could pay for itself. If you intend to keep your vacation home for the foreseeable future, you might want to consider renting out your property during the off-season or during peak season should you choose to go on vacation elsewhere. Again, depending on the location of your second home, you could find a significant number of potential renters willing to pay top dollar for a relaxing Maine getaway. Many homeowners with more than one property choose to use the rental income from their second homes to pay for upkeep, for home improvements, or even the mortgage on their first home.
• Your second home could be tax deductible. There are a number of different tax breaks available to homeowners with more than one property. If you intend to use your second property as a second home rather than rent it out, you can write off 100 percent of interest paid up to $1.1 million of debt on your first and second homes combined, according to a report from Intuit. If, however, you choose to rent out your home, consider a shorter-term rental: If you rent out your second home for 14 days or fewer, you aren’t obligated to report that rental income to the IRS. For longer rentals, although you’ll have to report all rental income, you can deduct rental expenses. It’s highly recommended that you consult a tax advisor prior to purchasing a second home.

 Do you have questions about taking out a second mortgage? Contact one of our experienced mortgage brokers today.

…and 3 Things to Consider Before You Do

• You’ll need a larger down payment. Although down payment requirements vary from one lender to another, the vast majority of lenders will require you to pay more down on a second home than they would on a primary residence. Some lenders require only 10 percent down, though it’s more common to find lenders who require a down payment in the 20-25 percent range.
• Second home mortgages can be expensive. If you’re in the market for a vacation home, chances are you’ll have to apply for a second home loan in order to afford it. Although you can usually borrow a larger amount with a second home loan, you also have to pay all the fees typically associated a standard, first home mortgage, including an appraisal fee, an origination fee and closing costs. Speaking of second home mortgages …
• Second home mortgages can come with higher interest rates. Whether you pay higher rates depends entirely on how you intend to use your second home. Interest rates on vacation homes are generally the same as those for primary mortgages. However, lenders consider investment properties to be a riskier investment and will charge higher interest rates accordingly, so be sure to keep that in mind when deciding how to use your second home mortgage.

It’s Time to Talk to an Expert

Depending on the terms of the loan and the lender, a second home mortgage can be a great way to finance the vacation home of your dreams in the state of Maine. Whether you have your heart set on a little place up in the mountains, a seaside getaway, or even an investment property for the future, a qualified mortgage broker has what it takes to help you find the right mortgage product for your unique needs.

With over 150 years of collective experience, the brokers at Blue Water Mortgage Corporation have the financial expertise to help you navigate the second home loan application process and secure the lowest rates possible. Talk to any one of our brokers today to see how you can get started.

Roger Odoardi

Roger is an owner and licensed Loan Officer at Blue Water Mortgage. He graduated from the University of New Hampshire’s Whittemore School of Business and has been a leader in the mortgage industry for over 20 years. Roger has personally originated over 2500 residential loans and is considered to be in the top 1% of NH Loan Officers by leading national lender United Wholesale Mortgage.