Purchasing a vacation home is something of a lifelong dream for many people. It can be very satisfying to have your primary residence where you live most of your life and a second home that you can travel to if you feel a need to get away. There are some financial considerations to be aware of before you purchase one however. The last thing you want to do is get in over your head because you didn’t take everything into account.
Getting a Loan
You might think that since you got a loan for your primary home you’ll be good to go when it comes to getting a loan for a secondary residence. And it’s possible that you might be right. But there are some things you should be aware of. Getting a loan for a secondary residence will likely require a bigger down payment and will probably come with a higher interest rate. You also can’t use certain loans to pay for a secondary residence. And if you’re still paying off the mortgage on your primary residence you’ll need to make sure your income is enough to cover the cost of both mortgages.
There are also financial considerations to be aware of that may be location specific. Some areas are more prone to flooding, fire, or other disasters, which can impact both repair and insurance costs. Uninhabited homes require more repairs because you often don’t see damage when it begins. This also means that repairs are more likely to be more expensive, since the damage will probably have progressed more. General homeowners insurance may not cover what you need it to, either. If you’re in an area prone to hurricanes, for example, you may need additional insurance to cover flood or other hurricane damage.
Vacation homes can easily rack up ongoing expenses that creep up on a homeowner, especially if it’s a home you don’t spend much time in. You still have to pay for utilities, insurance, and property taxes, for example. Make sure you understand what those costs are going to look like and budget accordingly. You’ll also need to budget for regular maintenance and repair to make sure your house is staying in good shape. It would be a huge letdown to purchase a vacation home only to find it in shambles when you visit. No one wants to spend their vacation fixing up their second home instead of enjoying it.
Vacation homes can be a lot of fun. They do come with some extra financial considerations you should be aware of though. There are ongoing expenses, just like your primary residence. Location-specific expenses need to be planned for as well. And it’s important to know what you’re getting into when you go to get a loan to pay for a secondary residence. As long as you do your research and plan carefully though, you’ll be in great shape to enjoy your vacation home for years to come.
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