The median second home sales price isn’t showing any signs of weakening either. At $192,000, vacation property prices are up 28 percent from 2014.
Whether you’re trying to buy a second home as an investment, a special getaway, or a place to retire, buying a vacation spot can be an exciting concept.
DECIDE WHETHER OR NOT BUYING A SECOND HOME IS RIGHT FOR YOU
Buying a second home shouldn’t be an impulse buy. It’s important to weigh both the pros and the cons.
A key factor before buying any type of home is to consider any and all possible expenses that come with purchasing a home.
Homebuyers will want to make sure they calculate the necessary costs for insuring their new vacation getaway. Some of the most desirable home-away-from-homes are also at a higher risk for hurricanes, floods or forest fires.
Buyers will want to get a few insurance quotes on their new dream getaway to make sure insurance costs are within their budget.
Maintenance costs should also play into your second home budget. Two percent of the home’s value per year is a good rule of thumb for maintenance expenses.
Another consideration when buying a second home is that, in addition to the down payment, second homes may require cash reserves. In simple terms, reserves are the funds you have left over after purchasing a home.
When figuring the costs, it can be a good idea to overinflate the numbers. If you’re counting on worst case scenario numbers, you’ll be less likely to come across a surprise.
WHEN TO BUY A SECOND HOME
According to some experts, the ideal time to purchase a second home is in the offseason.
As the hot seller’s market is cooling down, many sellers may be more willing to negotiate. Particularly for homes on the water, sellers are often willing to take a little less than they otherwise would in the spring or summer months.
Fall can be a great time for buyers to really negotiate. Home sellers may fear that by not selling now, they may have to wait until next spring to sell.
Further, vacation homeowners will sometimes try to squeeze another month or two of rental income before putting their home on the market.
Another reason to buy in the offseason is that it gives buyers time to make any necessary repairs so that the home is ready for the summer months.
BUYING A VACATION HOME MAY BE WITHIN YOUR REACH
For some, owning a vacation home may sound like something reserved for the rich and famous, but that’s not necessarily true.
Some homeowners make owning a vacation home more affordable is by supplementing their monthly mortgage expense by renting out their home.
A common myth is that you’ll need a large down payment to buy a vacation home. For qualified borrowers however, most lenders will require just 10% down.
For buyers who are struggling to come up with the necessary 10 percent down payment, the good news is that the entire down payment can come in the form of a Gift.
Another common misconception is that the interest rate will be higher for your vacation home. Interest rates for a second home are actually the same as they are for your primary residence.
With current mortgage rates for a 30-year fixed mortgage holding at or below 3.5% for fourteen consecutive weeks, buying a second home could be more affordable now than ever before.
Mortgage rates continue to defy the odds at all-time lows, but who knows for how long. With low rates and a cooling seller’s market, now could be the best time to buy that vacation home.