When is the Right Time? Tips for Purchasing a Vacation Home

The thought of owning a second home down the shore, in the mountains or at another favorite hideaway can be a goal and dream for many consumers.

While rising costs for homes and elevated interest rates have made it more difficult for many aspiring homebuyers to find the right house in their desired location, there are steps you can take to help weigh your options and make an informed purchasing decision.

Here are tips to help you evaluate your finances and land your dream vacation home.

Assess Your Finances

Carefully reviewing your finances is a key step in any mortgage process. But determining your buying power for your primary residence vs. for a second home can be a bit more difficult.

Think of things outside a standard mortgage payment and utility bills, such as the impact of the location. Whether you’re purchasing a shore house or a mountain getaway, you’ll likely need to factor in increased maintenance costs. This can include additional maintenance due to environmental factors, such as landscaping and snow removal.

With the purchase of an additional home, your property taxes and insurance will also see an increase, particularly for beach homes that may require flood insurance. Mortgages on a second home also typically have higher interest rates, different financing terms and may require a larger downpayment, so it is a good idea to work closely with your financial advisor, accountant and lender to determine what you can afford.

Timing Can Be Everything

While trying to time your purchase with a drop in interest rates can cause you to miss out on your purchasing opportunity, timing does come into play in other ways, particularly when it comes to vacation homes.

If you’re looking to purchase a plot of land and build your dream vacation home, you will need to factor in any restrictions the town may have on the timing for building homes, as many vacation destinations only allow construction during the offseason. You will also want to have a timeline in place for when the house will be completed and ready for use and/or rental.

For those purchasing an existing home, the end of vacation season can present an opportunity to buy from homeowners who were holding onto their house until after the busy season. The sooner you’re able to make your purchase, the sooner you can put your own style in the house and prepare it for the next vacation season.

Have a Post-Purchase Plan

It’s also important to have a plan for how you will use the property after your purchase. Will you be the sole occupants? Sharing with family? Planning to use it as a rental property to offset the expense?

These are just some of the logistics you will want to work out in advance so you can make the most informed decision for your purchase.

If you plan to rent the property during some of the busy season as a revenue stream, you’ll also need to consider any restrictions the town may have on rentals, how you’ll maintain the property or if you will pay a property management company to handle upkeep and turnover. You’ll also need to analyze the rental market in your area to determine pricing and if renting the property makes the most sense for your situation.

Whether it is a beach house, an investment property or something in between, purchasing a second home can be an exciting time. By working with the right team, such as your financial advisor, lender and real estate agent, you can make informed decisions toward landing a second home to fill with future memories.