Baby boomers and second homes

If you don't believe there's strength in numbers, you haven't noticed the baby boomer generation. They account for a huge chunk of the population, and marketers heavily analyze their purchasing decisions. One area under the financial microscope is how boomers are paying for their second homes.

Unfortunately for lenders, many boomers pay cash for their properties and avoid taking out an additional home mortgage. But many take out a second mortgage on their primary residence in order to come up with cash to pay for their second homes.

Sitting on a gold mine

As boomers push into retirement, many enjoy the fact that they've paid off, or are close to paying off, their home mortgage loans. Unfortunately, all the equity in their homes can't be turned into cash in their pockets until they sell those homes. By tapping into their current home equity and acquiring a second mortgage, boomers can access otherwise untouchable funds-a capability particularly useful for those who don't have overflowing cash reserves.

Tax breaks with another mortgage

For boomers who have enough money to buy a second home without a loan, they may want to reconsider, and take out a home mortgage instead. At this point in their lives, tax breaks are a boomer's best friend. By taking out a mortgage, boomers can claim the tax-deductible mortgage interest and reduce their overall taxable incomes.

When it comes to purchasing a second home, studies have shown that a majority of baby boomers tend to avoid mortgages. But for this demographic-particularly boomers with plenty of disposable cash-being debt-averse might not be the wisest decision. When the cash flow opportunities and tax deductions are taken into account, financing a second home with a new mortgage or a second mortgage loan seems more like a boom than a bust.