If you’ve made it this far, you’ve likely decided that a second property fits your goals – whether that’s extra income, long-term appreciation, or a future retirement retreat. Now it’s time to turn that idea into action.
In the second part of our series, we’ll walk you through how to fund, purchase, and make the most of your second property investment, while maintaining flexibility and minimizing risk.
How to Fund a Second Property
Most buyers start by exploring familiar routes like cash savings, a traditional mortgage, or a home equity loan. Each can work, and naturally, each comes with trade-offs.
- Cash Savings: Offers simplicity and no debt, but can drain liquidity and reduce your flexibility to respond to other financial needs.
- Traditional Mortgage: Allows you to spread out costs, but second-home mortgages can typically require higher credit scores, larger down payments (often 20% or more), and higher interest rates.
- Home Equity Loan or HELOC: Lets you borrow against your current home’s equity, but monthly payments and interest costs can be significant, especially when rates are high.
Alternative Funding Paths
In recent years, more homeowners have looked beyond traditional loans to unlock home equity without taking on heavy monthly payments.
Products like Unison’s Equity Sharing Agreement and Equity Sharing Home Loan enable qualified homeowners to access hundreds of thousands of dollars in home equity, with far lower monthly costs than standard loans.
The Equity Sharing Home Loan, for instance, features interest-only payments for 10 years, which result in monthly payments that are typically around half the cost of a traditional second mortgage. In exchange, Unison shares in a portion of your home’s future appreciation, a structure that can free up significant funds now for a down payment or second-property renovation, while keeping payment pressure low.
The Equity Sharing Agreement, on the other hand, is a longer-term agreement that involves zero monthly payments and zero interest. Instead, Unison shares in a portion of your home’s future appreciation, which is paid back along with the funds borrowed when the home is sold or after 30 years.
These shared-appreciation models aren’t the right fit for everyone, but for homeowners seeking flexibility and liquidity, they can be a compelling alternative to the traditional burdens of borrowing.
The Purchase Process for a Second Property
Buying a second property isn’t exactly the same as buying your first. Lenders view it as a higher-risk purchase, so expect stricter qualification standards, larger down payments, and tighter underwriting.
A few best practices:
- Work with local professionals. A real estate agent who knows the area’s rental rules and zoning laws can help you avoid surprises.
- Plan for location-specific costs. Property taxes, insurance rates, and HOA fees vary widely, especially in vacation or coastal markets.
- Budget for management. If you won’t live nearby, consider hiring a property manager or short-term rental service. Their fees can eat into profits, but their expertise can protect your investment in the long run.
Tips for Managing and Maximizing Returns
How you manage your second property depends on your goals, but efficiency and foresight almost always pay off.
For income properties:
- Set rental prices based on market research, not emotion.
- Prioritize maintenance to protect long-term value.
- Keep occupancy steady with good marketing and tenant communication.
For lifestyle properties:
- Track costs like utilities, cleaning, and repairs to avoid budget surprises.
- Review insurance coverage for second-home use, as standard homeowner policies may not apply.
- Schedule annual check-ins to ensure the property continues to align with your lifestyle plans.
Tax strategy tip:
Rental properties MAY qualify for deductions on mortgage interest, property taxes, maintenance, and depreciation. Keep detailed records and be sure to consult a tax professional to optimize your filing.
Making the Most of Your Equity
Equity can be a powerful tool for financing and flexibility. If structured wisely, it allows you to leverage the wealth you’ve already built without overextending monthly obligations.
That’s where home-equity-based solutions – such as those offered by Unison – can stand out. By converting a portion of your equity into cash, you can fund a down payment, complete renovations, or expand your portfolio while keeping payments manageable and preserving long-term upside potential.
This balance between liquidity and flexibility can make the difference between simply owning a second property, or turning it into a well-performing asset.
When to Reassess or Refinance
Over time, your goals or circumstances may change – and your second property strategy should evolve with them.
If the property no longer meets your needs, or if market conditions shift, consider refinancing, selling, or repurposing it. You might also use the equity you’ve built to fund improvements, expand your portfolio, or reduce other high-interest debt.
The key is to stay proactive. Periodic reviews can ensure your investment continues to serve your financial and personal objectives.
Final Thoughts
Owning a second property can open new doors for income, lifestyle, and long-term wealth. But it’s not just about acquiring more real estate. It’s about putting your resources to work for your goals.
By taking the time to plan carefully, explore flexible financing options, and approach ownership strategically, you can turn your second property into a lasting and rewarding part of your financial picture.
To learn more about how Unison’s equity-sharing solutions can help you access your home’s value with low monthly payments and greater flexibility, visit Unison.com today.
Disclaimer: This content is provided for general informational and educational purposes only and is not intended to serve as financial, investment, legal, tax, or lending advice. The information presented may not apply to your specific situation, and actual outcomes can vary based on individual circumstances, market conditions, and applicable laws. Home equity sharing agreements and loans involve risks, including the potential loss of future home appreciation or other financial implications. Terms, availability, and eligibility for any products mentioned may differ by state, lender, or other factors. We strongly recommend consulting with a qualified financial advisor, attorney, or licensed professional before making any decisions or entering into agreements. Unison Mortgage Corp. is a licensed lender (NMLS ID 2574289); this article may include promotional content related to its services.