It’s spring, and though travel has been curtailed for the last year, it’s now time to start thinking about where you’ll go and what you’ll do. Buying a vacation home sounds like a great opportunity, but is it going to be everything you expect? As with other major financial decisions, it’s best to consider the pros and cons before buying a second home. Learn more about what you should expect if you decide to purchase a vacation home, so you can make sure it’s the right decision for you. Our team at Fellowship Home Loans is ready to help you find out if a vacation home is for you and help find the right loan to make it possible.
You Can Make Money on the Home
A second home gives you the chance to make money if you decide to rent it when you’re not there. Since you will only live in the home part-time, it’s possible to rent it and bring in extra cash. It’s easier to do this if the home is in a desirable tourist location, as you’ll likely rent to short-term tenants, like those in town on business or looking for a home to rent on vacation.
Taxes Can Be Complicated
While it may be possible to make money on the property, it is important to pay attention to the taxes. Some tax breaks may not be applicable if the home is used as a rental, where they might be if it’s a second home. There are also other tax breaks to look into, such as for the mortgage interest, to see if this can help reduce your taxes at the end of the fiscal year.
You’ll Have Another Place to Call Home
When you own a vacation home, you always have a second place to call home. This can be a fantastic place for hosting events, having loved ones visit, or somewhere to go when you want to get away from it all. If you have children, this can also be a way for them to meet new friends and have a ton of new experiences that they wouldn’t otherwise have.
Vacation Homes Can be Expensive
It is important to remember that vacation homes can be costly. Lenders will often require higher interest rates for a second home and may require a higher down payment. On top of this, there will be expenses for property taxes, homeowner insurance, and utilities. If the home will be used part-time as a rental, it may be possible to subsidize some of these costs through the rent charged, but there may also be other expenses such as added insurance.
You Could Prep for Your Retirement
It is possible to use a vacation home to prepare for retirement. You may sell the home once you decide to retire and use those funds for your retirement. Or, it may be possible to sell your primary home and move to the vacation home, whatever you prefer. If you do decide to retire in the vacation home, you’ll already be familiar with the area and your neighbors.
Maintenance is Your Responsibility
Whether it’s empty when you’re away or you have tenants, there will be maintenance that needs to be done occasionally. Since you own the home, maintenance will be your responsibility. It’s important to have a plan in place for funding any maintenance and for how you’ll handle emergency maintenance issues when you aren’t at the home.
You’ll Always Have Somewhere to Go
When you own a vacation home, you don’t have to wonder where you’ll go on vacation. You’ll always have a place to go and somewhere to stay. If you visit frequently, it’s possible to keep personal belongings at the vacation home, so you don’t even have to worry about packing when you decide to go on vacation.
Real Estate Doesn’t Often Sell Fast
One thing to keep in mind is that real estate can be difficult to sell quickly. If you’ll need access to the equity in the home and will need to sell it in the future, it may take a while for you to get the funds from it. It’s also not a good idea to purchase the home unless you plan on living there for at least five years, as you may not get as much money for the house when it sells.
With spring coming up, now may be the perfect time to start thinking about buying a vacation home. However, it is important to consider this carefully and to know what you’re getting into. This way, you can make sure it’s the right decision and then start the hunt to find the perfect vacation home to enjoy any time you want to get away.