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July 29, 2020
A vacation home can be for more than just the summer. With an active housing market, and rates still hovering around historic lows, now may be the perfect time to consider investing in a vacation home.
This decision comes with a big personal and financial commitment—given the research and preparation required, and the likelihood of paying off two mortgages at the same time. Nonetheless, buying a vacation home can be especially appealing and favorable when you throw in these personal and financial benefits.
Owning a second home presents the opportunity of renting it out when you’re away. And, if your second home is a great property in a desirable town, turning it into a rental property will also give you a second source of income. In some cases, you can deduct the expenses of renting your vacation home. Keep in mind, some local ordinances and homeowners associations (HOA) may have conditions, such as how much or how little a property can be used for renting.(As always, consult a tax professional regarding the deductibility of interest and charges.)
You can read more stipulations for renting out a vacation home here.
The housing market and home values fluctuate. Therefore, the decision to purchase a vacation home shouldn’t be made with assumption that the property’s value will provide a huge payoff in the future. However, if the town where you buy your home is vibrant, that may increase the likelihood of your property appreciating over time.
It’s critical to do a lot of research on housing factors like price trends, new-home construction, access to highways, restaurants, and other amenities to make sure you’re making a smart investment.
For most homeowners, the home is their biggest tax break—and this can be true for a vacation home, too. If you use this property as a true second home and not as a rental property, then your mortgage interest and property taxes may be tax deductible. (Again, remember about consulting that tax professional!)
The opportunity to build even more memories and have roots in another community shouldn’t be overlooked. This home can be a special place to host loved ones, create new traditions, or give you peaceful haven when you want to get away. Your children will benefit from new experiences and friends, too—and as the family evolves, your vacation home can serve as an heirloom and be passed down to future generations.
Making a vacation home purchase with the intention of retiring in it and selling your current house can be a huge money saver for you. How? You’ll be reducing your mortgage debt before it even becomes your primary residence. And once you retire, the profit from your sold home can go toward the current mortgage balance of your vacation home.
This will also make your transition easier, given that you’re already familiar with the location, community, and most of all, the home.
Whether your house is near the beach, on a lake, or in the country, there’s a good chance this property will become your family’s go-to vacation for any season. And why not? You’ll pocket what you would have spent for accommodations elsewhere. Plus, have we mentioned it’s all yours? You decide how long you want your visits to be, who will join, and what belongings you want to keep there.
When it comes down to it, owning a second home is not for everyone. From your rationale and financial well-being to the local market and trends, there’s plenty to consider before making a decision.
But if having the keys to your own vacation home is something you’re committed to, get in touch with NewRez today.
For more information on homebuying and mortgages, visit our articles section.