Only five minutes from downtown Denver, Cherry Creek is an affluent Colorado neighborhood offering one of the country’s most vibrant and diverse shopping and dining scenes, contending with the grand cities of Chicago and San Francisco. It’s a premier destination for tourists and locals who love to shop its massive selection of international and national luxury brands.
There are a number of benefits to buying a second home in Cherry Creek, including renting it out to visitors or simply having a personal space to enjoy what the city has to offer. Buying a second home, however, can prove harder for homeowners, but there are plenty of tips to ease the process.
Lock in a mortgage rate
As the Federal Reserve increases the cost of mortgage rates, banks raise their own prices and rates in turn. These rates fluctuate daily, meaning you should find and lock in your preferred mortgage rates well in advance. Consult at least three different mortgage lenders to compare their rates and find the best one for you.
Take advantage of homeowner tax breaks
If you plan on using your home for personal use only, you may be entitled to tax breaks and deductions on property taxes and interest for already being a homeowner. If you plan on renting out your second home as a vacation rental, however, or plan on using it as some other form of investment property, you may still qualify for other types of tax breaks. Homeowners with property investments may receive deductions for maintenance and depreciation, up to a total of $25,000 in total losses. Check with a qualified professional before making any decisions on this matter.
Look for furnished properties
When browsing Cherry Creek luxury homes, consider keeping an eye out for partially or fully furnished properties. A move-in ready home saves you time and money, especially if its features and systems are new and fully upgraded. You won’t have to worry about paying money out of your pocket to furnish the place with new appliances and furniture — assuming the home’s furnishings aren’t old and in need of replacement anyway.
Granted, furnished properties cost more than unfurnished ones, but the investment saves you valuable time. This is especially important if you use your second home as investment property immediately.
Granted, furnished properties cost more than unfurnished ones, but the investment saves you valuable time. This is especially important if you use your second home as investment property immediately.
Consider using your first home to fund the second
If you have owned your first home for a considerable amount of time, chances are you’ve earned plenty of equity on the property if its market value has held steadfast. Home equity is a great way to finance a second home through a couple of options.
Cash-out refinance
A cash-out refinance is when you apply for a new, larger mortgage, thereby replacing your current mortgage in order to access your home equity. A cash-out refinance allows you to borrow more money than a secondary mortgage loan, up to 80-85% of your primary home’s value, but keep in mind that closing costs can lower the amount of money you receive.
Home equity loan
Also known as an equity loan or second mortgage, a home equity loan lets homeowners borrow money against the equity of their primary home. The amount is based on the difference between the home’s current value and the remaining mortgage balance.
There are two types of home equity loans: fixed-rate loans and home equity lines of credit, which are also called HELOCs. While a fixed-rate loan provides a lump-sum payment with a fixed interest rate, a HELOC operates much like a credit card. You can use it as needed while making payments, but once the draw period ends, you enter a repayment period in which you must pay off the credit within 10 to 20 years.
There are two types of home equity loans: fixed-rate loans and home equity lines of credit, which are also called HELOCs. While a fixed-rate loan provides a lump-sum payment with a fixed interest rate, a HELOC operates much like a credit card. You can use it as needed while making payments, but once the draw period ends, you enter a repayment period in which you must pay off the credit within 10 to 20 years.
Determine the purpose for buying a second home
What is your main goal for buying a second home? There are a couple of benefits that a second home may provide, but it ultimately depends on what you intend with it.
Vacation home
A vacation home is solely intended for personal use. Many people prefer to enjoy the comfort of their own homes while on vacation, sparing them from the hassle of booking a hotel and dealing with noisy, disruptive neighbors. If you love Cherry Creek’s lifestyle and plan to visit often, a vacation home may be perfect for you.
Investment property
Many other homeowners buy a second home as an investment property. Vacation rentals have become widely popular thanks to start-ups like Airbnb, providing an additional source of income for homeowners and their properties. If you only plan on living in your Cherry Creek home for a few months out of the year, consider renting it for at least two weeks at a time. The profit you earn may be used toward paying off your second mortgage or other expenses for maintaining a second home.
Factor in the additional costs
There are a handful of costs you should factor into your budget and financial plan before you begin browsing properties.
- Insurance — you will need second home insurance to cover your second home. Keep in mind that if you only live there for a limited time and/or rent the property out, your insurance rates may be higher to make up for unpredictable damages and perils.
- Maintenance — as with your primary home, your second one will need regular maintenance, especially if you rent it out. Account for routine maintenance and cleaning costs in your monthly budget.
- Utilities — of course, you can never forget home utilities. You’ll have to pay for monthly water, heating, electricity, and other services for two properties instead of just one.
- Taxes — property taxes are another cost to factor into your financial plan. Depending on the location of your home, your second set of taxes may be higher than your first.
Recruit a reliable Realtor
Lastly, hiring a Realtor with experience in the Cherry Creek region is a must. Real estate agents are trained to know the inner and outer workings of the housing market, including how to get you the best deal on a second home. An elite Realtor is a worthwhile asset to consider as you venture into buying a Cherry Creek home.
Buying a second home is a major undertaking that requires a significant amount of research and aid in the interest of your finances. You need an elite Realtor who specializes in buying Cherry Creek luxury homes. Fortunately, Alex Rice is one such Realtor, with a total of over $70 million in Colorado real estate sold. He will provide invaluable assistance in helping you browse Cherry Creek homes for sale until you find the perfect fit for you. Connect with him today!
Buying a second home is a major undertaking that requires a significant amount of research and aid in the interest of your finances. You need an elite Realtor who specializes in buying Cherry Creek luxury homes. Fortunately, Alex Rice is one such Realtor, with a total of over $70 million in Colorado real estate sold. He will provide invaluable assistance in helping you browse Cherry Creek homes for sale until you find the perfect fit for you. Connect with him today!
