Buying a second home can be an exciting adventure.
Before setting out on this adventure, though, it's important to plan carefully.
With good planning, buying a second home or a vacation home can be a great asset for you and your family. Here's what you should consider before packing your first moving box.
How much will you use the property?
Homeowners generally use a second home for a much smaller portion of the year than they use a primary home.
Before buying a second home, be sure to consider how much you will actually use the property and whether or not you should have monthly costs associated with it.
A beach house with an amazing view might seem like a dream come true, but if it sits vacant for 10 months out of the year it might not be such a good investment after all. On the other hand, a second home that your family will visit monthly, or at least frequently throughout the year, can indeed be an excellent investment in your family's future.
Will your vacation home be available to rent?
What about renting a second home out when you are not there?
Be sure to review your mortgage paperwork carefully before deciding to do this. Lenders often distinguish between second homes used for vacation properties and those used for rentals, and the interest rate and down payment are likely to be different if you intend to rent out the property.
What is more, the mortgage documents might stipulate that the property may not be used as a rental. In some instances, a second home must be a certain distance from your primary home. Ignoring these stipulations could result in a lawsuit or foreclosure.
What about monthly fees?
Take into account whether or not there are any extra monthly fees to consider, in addition to the mortgage, taxes, and insurance.
Many homes are located within neighborhoods or communities that have accompanying homeowner's association (HOA) fees, and these can vary from several hundred dollars per year to several hundred dollars per month.
Condominium units usually have HOA fees as well as separate condo fees that cover grounds and exterior maintenance. In some communities, these fees can range upward of $1,000 a month.
Taken together, these extra fees can sometimes exceed the monthly mortgage cost, and unlike a mortgage, HOA fees and condo fees can never be paid off.
What are the maintenance costs?
A second home brings with it another set of basic maintenance costs that buyers need to keep in mind.
Go beyond the obvious, though, to consider the potential costs of the property. Consider the home's age, and find out how soon it will require expensive repairs such as an air conditioner, a roof, or new siding or painting.
Before buying a second home, calculate any updates or improvements you would like to make to the property, such as changing appliances or renovating an entire kitchen or bathroom.
Knowing this in advance can help you plan your expenditures more closely and avoid unnecessary or unexpected costs in the future.