Vacation homes are meant to be a place where homeowners can leave their worries behind and focus on relaxation. Unfortunately, many homeowners are finding that their new vacation home is costing more than the peace they desire. Thus, instead of trying to balance this stress after buying, anticipate the burden and weigh the options.
Here are a few ways to anticipate the burden of a vacation home before signing on the dotted line.
When considering whether to embark on any major financial decision, affordability is always a key factor in that process. However, the question of affordability does not stop with the funds available to a family currently. Especially if the home is being financed, the affordability of the future is also important. Barely scraping by, simply to keep a second home is no way to live.
Additionally, it is significantly more difficult to get approved for a second home loan than it is for a primary residence. If a family cannot outright purchase a home, they will likely have to take out a conventional loan. For families who can afford both the higher down payment and loan payment, that is great. However, this needs to be considered when deciding if a vacation home is right for you.
Ability to Rent
Paying for an empty house is difficult. For most of the time, it feels as though the owner is paying for ghosts to love comfortably. After all, the point of a vacation home is to go there on vacation. For most people, that is only a few times out of the year. Thus, people often try to rent their vacation homes out when they are not using them.
This could be a profitable endeavor. Yet, this option is prone to difficulties that some homeowners do not anticipate. First, there is the problem of whether a home can be rented. Some Homeowners Associations do not allow homes to be rented. Others are bound by stipulations that might make renting your vacation house out too much of a hassle.
The other problem, though, is that as a landlord, you are responsible for everything. The thought of a house sitting there, out of commission for most of the year is difficult. Yet, when people are using the appliances and other home aspects, expenses creep up. Even normal wear and tear of a home is intensified by people living there.
Taxes, Taxes, Taxes!
The adage goes, the only two sure things in life are death and taxes. That is certainly true for people who intend to buy a vacation home. Not only are there varying home taxes on a property, renting out that home increases the taxes.
If the home is rented out more than 14 days out of the year, it is considered a rental property. Therefore, any rental income is fair game for rental taxes.
Additionally, a new cap on mortgage interest deduction is making the situation even more harrowing. Prior to the change, homeowners had a million-dollar cap on the amount of interest deduction they could claim. Now, that amount is reduced to $750,000.
Every driver has shopped around for the best auto insurance and received auto insurance quotes online at some point. However, when thinking of buying a vacation home, it is important to implement the same practice for homeowners’ insurance. With a new home, that means that the addition to the policy will likely be substantial. Therefore, it is something that a family needs to consider before falling in love with their vacation home.
In summation, it is important to follow dreams and live life the way you want. Each person and family are different. People have vastly different agendas, goals, and achievements they wish to accomplish. Wanting a vacation home is a reasonable goal. Yet, make sure that before you get yourself into a potentially overly-stressful situation that you consider the implications.