Buying a Second Home? What the Latest Tax Reform Means for You
The latest tax reform impacts all Americans, but in particular, homeowners. Just see our latest blog for full details on how it influences your current mortgage—as well as your annual income taxes and deductions.
But what about second homes and vacation properties?
If these are on your radar for 2018, you’re probably wondering how recent tax changes will trickle down to your upcoming purchase. Here’s the gist of what you’ll need to know:
You may not be able to deduct your entire mortgage interest balance.
Under the new tax law, you can deduct your mortgage interest on up to $750,000 of debt. So if your primary home has a mortgage balance of $500,000, you could only deduct the interest on up to $250,000 of your second home or vacation property. Take a look at your current mortgage balance to get a feel for what you may be able to deduct on a new property.
You might not be able to deduct all your property taxes either.
The new law limits property tax deductions to $10,000, so depending on what taxes are like on your second property, you may or may not be able to deduct the full balance from your taxable income. To get the full picture of what you’ll owe on your new property, check with the county appraisal district.
You’ll likely have lots of inventory to choose from.
As the new tax changes will likely discourage some buyers away from the second home and luxury real estate market, that means less competition and more properties to choose from.
Prices may be lower than normal on luxury properties.
With competition low and luxury homes staying on the market longer, sellers are going to be willing to negotiate more on pricing than they would previously. That could mean lower prices and more money saved.
Buying a Second Home in 2018
Consider refinancing your current home loan before seeking a second property. Refinances are grandfathered in under the old mortgage interest cap of $1 million, so it could give you more wiggle room when adding a second mortgage debt to your name. This could mean more deductions and a lower tax burden both now and in the long run.
Want to refinance your current property before buying a second home? Ready to start looking for that dream vacation property? Contact Embrace Home Loans today to see what mortgage rates and products you qualify for.