Buying a vacation home is a good way to celebrate working hard for many years and building a happy and healthy financial profile. Young professionals sometimes feel they need to wait until retirement, but that isn’t always the case. A vacation home doesn’t have to be just a recreational getaway—it can be much more than that. A vacation home can provide personal and financial benefits to suit your lifestyle—and financial goals.
A vacation home can extend your personal interests. For example, a home in the countryside will give you much-needed respite from your computer or social media accounts when you’re on vacation. Or, that second home will give you space to explore other interests, such as sustainable living with your own vegetable garden and tiny chicken coop. Or maybe you’re looking for a tropical beachfront to improve your surfing skills over the summer months? Whatever your goals are, your next home can align with your interests and your financial objectives.
VACATION HOME BENEFITS
Some of the advantages to a vacation home include:
Extra income when used for renting
Whether near a beach or a university, or on a peaceful plot of land in the country, a second home can turn into an income-producing rental. When you’re not using your vacation home as a retreat, it can become a way to earn extra income by renting it to vacationers. Due to many flexible renting options—such as long-term leasing, time-sharing or short-term rentals—you can earn extra income during the months and weeks you don’t plan on being at your second home.
Potential tax benefits
Mortgage and home equity interest payments and property taxes may offer the opportunity for tax advantages. You can, for example, potentially deduct property and mortgage taxes from your second home. With the help of a tax advisor, you can make sure that you get all the potential benefits of owning a vacation home.
A second home may be a good long-term asset to hold onto, as homes can increase in value over time. You can also build equity quickly with a second home, especially if you are at a point in your life where paying a bit more on your mortgage principal is possible. In addition, holding on to a second home as an asset can help you fund future endeavors, such as a second degree or your children’s first years in college.
A DIY project or business
Maybe your favorite shows on Netflix and HGTV have helped you realize your desire to renovate and design a new dream home. A second home can, therefore, become a great place to put your home renovation and design ideas into practice, especially if you know you’ll outgrow your first home or if you plan to retire in the second home later on in life. It can also be a great way to try out your skills at managing and selling condos or houses. With more and more of your peers flipping houses for fun and money, you’ll get your own taste of this popular trend.
A financial plan to your vacation home
To buy your vacation home, you’ll need great control over your finances, thorough research and an understanding of your dream property and a sound buying strategy. The keys to a strong application for a loan for your second home include:
- Understanding your credit needs and borrowing ability
- Familiarizing yourself with your credit history
- Researching your abilities to borrow or use your first home’s equity as collateral
- Establishing a budget and strong credit pattern, months before you make a purchase
- Improving your income or decreasing expenses
- Finding and utilizing all down payment sources
- A clear understanding of how you’ll make monthly payments
- A complete picture of the houses and properties you’d like to place a bid on
The opportunity to buy a vacation home can come sooner than you expect, especially if you’re working with experts that can tailor a plan to your specific needs. By starting your application today, Plaza Loans can help you establish a strong financial profile that will aim to secure the best available rates and options for your next home.
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