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Mortgage Rates Are Not the Most Important Thing to Consider When Financing a Second Home

Cathleen Paniccia

Senior Vice President, Retail Mortgage Department, Customers Bank

Every real estate purchase has its own unique financial characteristics. It is important that the financial institution you decide to work with also provides distinctive programs to meet those needs.

Most banks provide competitive mortgages for first-time or ‘buying-up’ buyers that feature lower interest rates and smaller down payments. However, those programs are not specific to the needs of a financially strong individual who may be considering other real estate investments.

If you are thinking about a second home – the dream beach house or peaceful mountain getaway – and your first thought is to shop for mortgage interest rates, consider another idea. A second set of utility, energy, lawn care and maintenance bills will outweigh a few dollars more or less in interest payments.

Instead, when considering investing in a second home, other key factors to evaluate are your mortgage lender’s speed and flexibility. Long and Foster, one of the Mid-Atlantic’s largest Realtors, reported last year that the inventory of beach homes in Atlantic and Cape May Counties in New Jersey declined in 2018. Long and Foster’s data for Rehoboth Beach, Delaware show the same trends. When the bottom fell out of the Pocono real estate market, developers canceled plans for new communities so inventory in the mountain region is somewhat limited.

If you see your dream vacation home on the market, you want to be able to say “yes” as quickly as possible. And, sellers are more prone to accept an offer from the prospective purchaser who can say they will be able to have financing in place and close within a few weeks.

The same scenario applies to purchasing a quaint historic property or a country estate. You’re not the only person keeping an eye on that parcel of land. When it goes on the market you must strike quickly and with confidence in your ability to close the deal.

Jumbo mortgages are typically designed for borrowers with higher incomes, good credit and financial reserves. These programs typically feature principal balances of up to $1 million or higher, adjustable interest rates and require no mortgage insurance. Financial documentation requirements for Jumbo mortgages could include bank statements or asset portfolios, making it ideal for people who are self-employed or individuals with non-traditional income documentation.

For individuals and families who need to close quickly or may have special circumstances, it is important to work with a lender who can meet these needs. It is also important to work with a lender who can make decisions quickly and is able to deliver fast approvals.

Spring is here. If you act now, you can enjoy your second home this summer. While you are browsing inventory and thinking about making your dream a reality, meet with your lender. Learn whether your lender has a program that meets your needs. Shop lenders looking for the ones who understand that every real estate investment is unique – and an important life step for you.