Looking to Buy a Second Home?

July 12, 2022
A couple looks over the water. Sandy Spring Bank.

As remote and hybrid work environments have become the norm, more homeowners are harnessing that flexibility and thinking about purchasing a second home. In fact, 70 percent of respondents in a 2021 national survey said they were interested in a second home or already owned one. That’s up from about 60 percent in 2020 according to RCLCO, a real estate advisory firm. If you’re in the market for a vacation home or investment property, Sandy Spring Bank has some great tips and programs to help make the experience less stressful, seamless, and, more importantly – affordable.

Distinguishing between a second home and an investment property is important when seeking financing for the home. 

What’s considered a vacation or second home?

For your purchase to qualify as a vacation or second home, it must: 

  • Be lived in by the owner for some portion of the year.
  • Be a one-unit home that can be utilized throughout the year, functioning as a second home.
  • Belong only to the buyer.
  • Not be located too close to your primary residence.
  • Not be rented out (short-term rentals are allowed) or run by a management firm.

What’s considered an investment property?

Earning some money on a second home doesn’t automatically mean it’s an investment property. An investment property is bought for the sole purpose of generating rental income or flipping and selling for profit. Investment properties can also be multi-unit, allowing you to earn income from multiple tenants. 

How can your first home help you finance your second home?

With Sandy Spring Bank’s mortgage options and equity in your existing home, you have affordable options available to purchase that second property:

  • Cash-Out Refinance: You can utilize a cash-out refinance option that would allow borrowing more money but with a lower rate. Essentially, you replace your mortgage with a larger new mortgage and use your home equity to give you access to cash.
  • Home Equity Loan and Home Equity Line of Credit (HELOC): With a home equity loan, you can utilize the equity in your primary residence to borrow money in a lump sum. With a HELOC, you can receive the funds as a credit line to use over a specific time period. These options generally allow you a higher loan-to-value ratio than the cash-out refinance option.

Did you know?

You can buy out of state and still finance with Sandy Spring Bank

You can purchase a home in another state along the East Coast without the hassle of using another lender. We offer services in popular second-home locations such as Florida, North Carolina, South Carolina, Maryland’s Eastern Shore, and more.

Sandy Spring Bank offers low down payment loans

Our low down payment financing options allow you the flexibility of financing a higher percentage of the sales price with either a no-private-mortgage-insurance option or a low-cost-mortgage-insurance option.

Adjustable-Rate Mortgages (ARMs) are more popular with rising interest rates

An ABC News article states that ARMs made up 13 percent of all home loans by dollar volume in March 2022, their highest since January 2020, according to CoreLogic. With the cost of homes rising and interest rates continuing to go up, homeowners are looking for ways to lower their mortgage payments but still purchase a second home. ARMs can be a great way to take advantage of lower interest rates in the future. 

As with any purchase, do your research and seek advice on the use of a second property and whether it’s worth the investment, particularly in today’s housing market. The mortgage team at Sandy Spring Bank is here to walk you through each step and work closely with you to determine the best program for your needs and lifestyle. For more information on Sandy Spring Bank’s award-winning mortgage team and banking products and services, contact us here to have a mortgage banker follow up with you, or visit our site.  

This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material. Websites not belonging to this organization are provided for information only. No endorsement is implied.