If you are in a position to buy a vacation home you are likely in better financial shape than many other people! However, just because you have the ability to afford a vacation home (or a second home) doesn’t mean you still can’t save a little bit of money in the process. Here are a few tips and tricks to consider when you are buying a vacation home and want to save a little bit of money along the way.
1. Be a desirable borrower. With your primary home you have to jump through many hoops in order to qualify for a down payment, mortgage, and loans. When you are purchasing your second home this process becomes even more strenuous as you have to be a very good investment in order for a lender to even consider giving you money. The lender will be able to assess your financial viability and let you know if you are a healthy investment or not.
2. Save cash. Use this cash to make a down payment on your house, however much that may be. If you are buying a second home thinking far ahead is essential for saving money down the road. Making important decisions under pressure will likely cause you to spend more money, which isn’t always the best course of action. The more money you can save up in advance the less you will have to borrow and ultimately pay back.
3. Take care of existing debt. If you have student loans, car payments, medical bills, or existing house payments make sure you are on top of those things before you even think about purchasing a vacation home. Lenders will be less likely to lend money to you if you aren’t making your other payments on time or haven’t shown a decrease in existing debt in the recent months. Budgeting your existing debt and expenses before you buy a vacation home will help you get a clear picture of how much you can afford to spend on a vacation home and keep you from making irrational buying choices in the moment.
4. Prepare. Preparing for owning a second home will keep you from being caught by surprise by the misadventures this new property might bring into your life. Setting aside money in the first place for this new vacation property will allow you to balance this home and your primary home without exerting your finances too much in either direction. Buy insurance on your vacation home to protect from natural disasters and other damage that might occur, especially if you aren’t in the home during a few months of the year.
5. Finally, don’t borrow too much money. Paying back money you don’t use with interest will definitely not save you money in the long run. Know what you can afford to borrow, factor in interest rates and other costs, and know the market. Saving money isn’t always the easiest thing to do, but it is possible!