Second homes are property holdings in which the owner occupies the property for a limited amount of time each year. It is not unusual for the second home to serve as a weekend getaway or as a place to spend vacation time during the summer months. There are a number of benefits connected with owning a second home, including tax advantages and the opportunity to create an investment for later years.
Purchasing a second residence often follows the same general pattern as with a primary residence. The investor arranges financing, often a mortgage with a local lending institution. In some cases, financing a second home may be accomplished by working with a mortgage company to create package deal where the property owner places the mortgage for the primary residence and the second residence with the same lender. In exchange, the lender may offer the homeowner a more competitive rate of interest on the loans for both properties.
It is important to note that while a second home is often considered a vacation home, it is normally not used as rental property. The goal with a rental home is to place tenants into the house on a more or less permanent basis; the owner has no real plans to live in the home. However, that does not mean that the owner cannot generate some income by renting the second home for short periods of time, such as for a weekend or a week here and there throughout the year. Depending on applicable tax laws, this type of activity will not impact the status of the property as a second home. However, it is a good idea to check with a tax expert to determine if this is the case in your country.
Many people choose to maintain a second home as a tax deduction. In many nations, homeowners receive significant tax breaks related to the amount of mortgage payment made annually on the property. Depending on the overall structure of the owner’s finances, these deductions may be enough to prevent the owner from being classified in a higher tax bracket and owing additional taxes as a result.
Along with the tax advantages, a second home makes a good investment for the future. Assuming the value of the investment property appreciates over time, the owner is likely to sell the second home later in life for a substantial profit. The money realized from the investment can help to make the retirement years very comfortable and alleviate any worries about having to get by on a limited income.
While there are a number of financial advantages connected with owning a second home, there are also other benefits. A second residence located in the country, on a lake, or at the beach can be the ideal place to escape to when the pressures of everyday life become overwhelming. The opportunity to get away from daily stress and re-energize in a friendly and safe environment can make it easier to get back into the daily grind after a weekend or a few days and be able to approach necessary tasks with a positive attitude.