If you’re like many of us, you’ve probably wondered what it would be like to have your own vacation home. After all, there’s nothing better than a place that you can visit on your own schedule and offers you the opportunity to generate additional income! If you think owning a second home is out of reach, you may be surprised to find that it’s a reasonable feat after all.
In the current environment of working remotely, virtual schooling and spending a lot more time around the house, having a home away from home is very desirable and many people are taking advantage of this by purchasing a vacation home of their own. Not to mention, with interest rates at record lows, vacation homes have the potential to be more affordable than ever and owning a second home can be a smart financial investment for your future.
With that said, there are certainly some considerations to be made before you make the leap to purchasing a home away from home!
1) Where Do You Want to Buy a Vacation Home?
Not all locations are created equal. Maybe there’s a place you’ve vacationed for years and you would love to have a permanent spot to return to at your leisure, or perhaps there’s a more exotic destination you think would be a fun vacation spot. No matter where you prefer, it’s a good idea to do your research before settling on a location. Keep in mind the seasonality of your preferred spot – hurricanes at the beach, snow in the mountains, etc., and make sure you feel prepared to handle extreme weather.
2) Will You Rent the Home?
Much of the vacation home buying process hinges upon whether or not you intend to rent the home out when you’re not there. If you’re planning to list the home as a vacation rental, location matters. While it’s important to choose a destination you enjoy, you should also consider how easy it will be to rent out the home in that area. Generally speaking, you can count on renting out a home easily in popular tourist areas.
Also, note that how you intend to use the home will impact the mortgage process and your taxes at the end of each year, so do your research before beginning the process to see what makes the most sense.
3) Can You Afford a Second Mortgage?
You’ve been dreaming about owning a vacation home, but are you financially prepared to juggle another mortgage? It’s a good idea to get your finances in top shape before making the leap to vacation homeownership, as you’ll need to show you can comfortably afford the mortgage payment. Note that most lenders require a debt-to-income ratio of 43% or less, and your primary mortgage and other debts will be factored into this percentage. If you plan to rent, you should still make sure you can afford the monthly payments in case there are weeks or months where it isn’t being rented out.
If you currently own a home and have significant equity, you may be able to take advantage of a cash-out refinance, where you obtain a new, larger mortgage and take the difference in cash. Interest rates are currently low, making this an attractive option for many homeowners.
If owning a vacation home is on your radar, it’s a good idea to discuss your options with your C&F Mortgage local industry expert to see where you stand and determine the best path to owning a home away from home. At C&F Mortgage, we’re focused on you every step of the way – get in touch with one of our local industry experts today to see if purchasing a second home is the right step for you!