Why Buying Your Second Home Can be More Challenging than Your First

You've been there, done that and have gone through the home buying process once before. You've already dealt with the paperwork like a champ on your first go around, so how could the second time you go through the process be any more challenging?

There are some subtle but important differences between buying your first and second homes.

You already own a home! This means you might already have a significant mortgage outstanding, making getting that second mortgage even more challenging. Remember, when you bought that first home, you didn't have to deal with that mortgage. You were likely waiting for a lease to expire.

You may intend on renting out your existing home and show investment income. You may be asked to show a lease contract before you are able to close on your second home. While this is not really a problem, the fact that you may be required to move out of your home before closing on the second one may be a major inconvenience.

You may be looking to sell your existing home to free up the cash to close on the second home. This will likely require you to sell your place ASAP and ensure that you close in advance of your new purchase. Again, you may have a month where you'll essentially be sleeping on a couch, or a short-term rental. This can cause a lot of pressure and create a situation much more uncomfortable than you ever experienced when you bought your first home.

How can you keep your sanity during this process? Easy, just be aware that this is the reality. Many people go through this process, and the more prepared you are for it, the more relaxed you'll be about it. 

One other solution is to speak with your mortgage broker and see if there is a way to avoid this all together. In most situations the answer will be a clear no, but in other scenarios, you may be able to show a signed contract, whether it be for sale or for lease, and put another 5% down on the property. You may then be able to close on your new purchase before moving out of your existing home.

Another creative technique is to speak to the buyer of your existing home. They may allow you to rent your home from them for another month before closing on your new purchase.