Adjusting Your Budget
Okay, you’ve found that second home you’ve been dreaming about for years. There’s only one little problem – you’re not sure you an afford it. While a second home can be a great investment, it won’t do you much good if you can make the payments, or it risks putting you over the edge financially. In this article, I’ll lay out some steps you can take to make that second home a reality.
If you’ve found that perfect house, but it simply costs more than your budget can take right now, there are a few ways you can adjust your budget to accommodate the extra expense. You can add to the size of your down payment, you can reduce your monthly expenses, or you can bring a second buyer in to help with the payments. Lets look at these three options in greater detail.
Increasing the size of your down payment. A increased down payment gets you one of two things: either the ability to buy more house, or the luxury of having a lowered monthly payment. Some ways of adding to your down payment include adding to your savings, adjusting your weekly spending habits, or getting the extra money in the form of a gift or a deferred loan from a family member.
The second option is reducing your current expenses. Everyone has a set of fixed monthly expenses, and other expenses that are more flexible (such as entertainment, clothing, dining out, etc). If you can find a way to reduce your monthly outflow of cash, you’ll have more to spend on that second home. Another option is eliminating your credit card debt, paying off a car or student loan, or even refinancing the mortgage on your existing home if you can get a better interest rate.
And finally, you might consider bringing in a second buyer. One of the easiest ways to increase your home buying power is to split the purchase of a second home with a friend, relative or business associate. This strategy works especially well for homes bought as investment properties, or vacation homes where time in the home can be split by the two parties (or even rented out part of the time if it’s in a resort location). This type of joint purchase can easily get you double the house or more (depending on how the purchase is split) than buying a home on your own.
So there you have it. Three ways you can increase your buying power toward the second home you’ve been dreaming of, without breaking the bank (or your budget) in the process.
