Top 5 Things To Consider Before Purchasing a Vacation Home
Posted by : Admin
Is there a vacation spot you’ve enjoyed for years? Are you tempted to purchase property there, so you can enjoy it whenever you like? If so, you’re not alone. Many homeowners buy a second, vacation home in their favorite city or town.
However, there are things to think about before you take the plunge into second-homeownership. Here are 5 aspects of buying a vacation property to weigh before making your decision.
Your Full Financial Picture
By almost anyone’s standards, a vacation home is a luxury. That means you should look at your finances and determine if you can afford it.
Take stock of your income and your debts. If you’re carrying a significant amount of credit card debt, for example, it may be better to use your money to pay those down before you purchase another home.
Also, review your savings. You’ll most likely need a tidy sum for the down payment and closing costs. Plus, you may need to make updates to the property and furnish it. Be realistic about whether you have enough money to handle that without it straining your budget.
Finally, pull your credit report. If you’ve managed your finances wisely, paid your bills on time, and stayed out of heavy debt, your score will most likely be high. Good credit scores are pivotal in securing favorable loan terms. If, however, you’ve made some missteps with your credit, devote some time to rebuilding your credit scores before you buy a second home.
Long-Term Benefits
Take the joy of lounging on the beach or unwinding in the mountains next month and weigh the long-range benefits of owning a vacation home. What are your financial goals in 10, 15 and 20 years, and does the purchase fit in with those?
Vacation homes can offer an income stream if you rent them out. Would you be interested in doing that? Would you want to live there full-time someday? Or, would you keep it for a few years and then sell it for a profit?
Look at what the vacation home would do for you, apart from giving you a respite from your day-to-day life (although that may end up being enough of a benefit in and of itself).
You May Get Some Tax Breaks
Consider what owning a vacation home would do for you at tax time. You may be able to take the mortgage interest and property taxes off your income taxes and save quite a bit of money. If you decide to rent the home out for part of the year, you may be able to snag additional tax breaks.
While the tax savings from a second home won’t be as much as what you pay for the property and its upkeep, it can help offset those costs and make them less burdensome.
It Takes More Than Just the Mortgage Payment
Deciding your budget can handle another mortgage payment is great, but it’s not the only thing to consider. An additional property will be more costly than just the mortgage. Plan for homeowner’s association fees, electricity, water, cable and internet. You also need to factor upkeep and potential repair work into the mix, because something will eventually break. These expenses should be able to fit into your budget well before you purchase a vacation property.
The Market Should Weigh Into Your Decision
It’s always a good idea to look at the real estate market before making any type of purchase. Not that it should dissuade you from buying, necessarily. You simply need to get the full picture.
A hot market may mean you’ll need to make a higher offer and deal with stiffer competition. A buyer’s market gives you more breathing room with negotiations and better chances to snag a deal.
In addition to the current market, consider future housing prices. If the property’s in a high-demand area, you run little risk of being able to sell it if you need to.
Buying a vacation home can be a smart financial choice. It can give your family a peaceful respite to enjoy each other and make memories. However, it’s also a big financial commitment. By considering your full financial picture, long-term goals, and the real estate market, you’ll be well-equipped to make a wise decision.
