Secondary residence: how is it funded?

Investing in a second home with inflation is always possible

As we know, mortgage rates have risen steadily since the beginning of the year. Trend confirmed again for this June:

Over 7 years the average rate is 1.15%.

Over the 10 and 15 years, the average rates were 1.20% and 1.40%.

Over a 20-year period, the ratio is 1.55%.

Over 25 years, the rate increases from 1.65% to 1.70%.

While the maximum debt ratio that should not be exceeded is now 35%, banks are being cautious about granting new loans to individuals. Thus, obtaining approval from a banking institution to finance the purchase of a second home can be complicated at the present time. Concretely, playing the competition by ordering too many simulations will not necessarily be in your favour. In fact, subscribing to a new loan from a bank other than yours is not necessarily very useful anymore. So it is best to play a credit union card.

Go to credit consolidation

If staying below the maximum debt ratio while financing a second home might seem complicated, it’s still possible. It is then advised to go to credit consolidation, for example via Partners Finances. The principle is simple. This is a combination of a primary home loan and a secondary home loan. Then the loan period is extended. For their part, monthly payments become less significant, which makes it possible to return below the 35% mark and thereby obtain the approval of the bank or lender. Another positive point for the borrower, which is credit consolidation facilitates management. So he knows his budget accurately and can easily anticipate repayment. In addition, you must know and apply some tricks that facilitate obtaining a loan to finance a second home.

Tips to get financing more easily

The first is the settlement of credits which are secondary. It can also be a consumer loan used to finance a car, as a loan to support your children’s studies or work in your main residence. Although these monthly payments aren’t very important, they can still prevent getting new credit that can be used to finance a second home. Therefore it tends to limit the ability to borrow. It is therefore recommended that you clean your accounts, even if it means making early repayment of certain loans before placing a new application with the aim of investing in a second home. But this type of approach can be complicated, it is possible to use an intermediary. This professional is responsible for finding a useful credit consolidation solution and will be able to advise you on the balances to be settled as a priority.

Seasonal rent as an argument with the bank

Another point that will work in your favor if you want to invest in a second home, put it up for seasonal rental. Since the buyer does not constantly reside in this type of accommodation, it is often unoccupied for a large part of the year. So if you are looking to buy in a tourist area, you can also put your investment to good use. By renting it, you will be guaranteed additional income that will allow you to pay off your loan, in addition to certain fees such as water or electricity. So you will have less money to take out of your pocket, which is an asset to show with the bank. By highlighting this information in your file, you will put all chances on your side and be more likely to get a positive response from your bank.

to conclude

Of course, investing in a second home is a project not to be taken lightly. Thus, the property you are targeting should align with your profile and budget. There is no point in targeting a luxury villa on the Mediterranean coast if you cannot afford it. Also consider the work that can be done before you can invest in the building or start renting. These are additional costs that may affect whether or not you get a new mortgage. And, of course, nothing prevents you from competing and comparing several offers, even if it seems worthwhile to stay in your banking institution for the time being.

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