When deciding on a second home, consider the cost of the home purchase and the ongoing and ancillary expenses, such as upkeep and travel to and from the home.
NEW YORK — Owning a vacation home can be an enticing prospect. When you shift from tourist to homeowner in a location you love, it’s easier to visit whenever you wish, and the home provides a getaway to create happy memories with family and friends.
But owning a second home is a big responsibility that requires careful planning. Here’s what to evaluate as you decide whether it’s the right choice for you:
Consider your time: According to a 2024 study from Lending Tree, an online loan marketplace, most owners of vacation homes plan to use their home as many as seven times a year. Tally up an estimate of how much time you anticipate spending at your vacation home, and consider how many stays would make the purchase worthwhile for you. You may want to rent it out while you’re not there to help cover the costs of owning it.
If you’ve been to the area where you’re thinking of buying a home only for short periods as a vacationer, visit it during the times of the year you expect to be there as a homeowner. You may find that some of the dining options, entertainment venues or other amenities you enjoy are not available during off-peak times or that it’s more crowded than you prefer during the most popular seasons.
Gauge the expenses: When it comes to determining your financial readiness, account for not just the home purchase but also the ongoing and ancillary expenses.
“Oftentimes when we talk to clients, they’re thinking primarily about the mortgage and not necessarily all those ancillary fees,” says Matt Vernon, head of consumer lending for Bank of America.
Consider the cost of travel between your primary residence and the second home, and try to get an idea of how much you may spend on maintenance. Vacation homes — especially those in coastal areas — tend to require a fair amount of upkeep. So, it’s wise to maintain a dedicated emergency fund for unexpected repairs. A common guideline is to set aside an amount equal to 1% to 2% of your property’s value. And prepare for some of the initial costs, such as for movers and expenses to furnish and decorate the home.
Evaluate insurance needs: Whether you use your vacation home regularly or sparingly, you’ll need to have a homeowners insurance policy for it. Coverage is often more costly than for a primary home because vacation homes tend to sit empty for longer periods, putting them at higher risk for claims. Also, you may pay more if your second home is far from emergency services or otherwise difficult for first responders to access.
It’s important to be aware of climate risk as natural disasters grow more intense. You can get a sense of the risk in areas where you’re thinking of buying a vacation home with the Federal Emergency Management Agency’s Natural Risk Index (hazards.fema.gov/nri). If your home is in an area with a high risk of flooding and you have a federally backed mortgage, you’re required to have flood insurance. The average cost of a flood insurance policy through the National Flood Insurance Program is about $1,000 a year. However, the cost can vary widely.
Plus, in many coastal states, homeowners insurance policies include separate deductibles for hurricane damage or any damage resulting from wind or hail. Typically, these deductibles are a percentage of the home’s insured value— often about 1% to 5%, although they may run as high as 10%.
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