Can You Afford a Second Home?

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afford a second home

Most of us have thought about having a holiday home by the sea or in a remote village in the mountains, where we can simply retreat and make the most out of our time away from home. However, it might not be as affordable as you think. You will need to work out your finances and ensure that you can keep the property for longer than a few months. Find a few tips below.

Mortgage Rates

The first thing you will have to check is the mortgage rates of the property. You will have to take into consideration your existing commitments, and the risk the lender is taking. You might be only offered a fraction of what you need, or get a higher rate than what you can afford. You should talk to financial advisors before you start daydreaming about your second home. Not to mention that house prices change, so you might end up with negative equity.

Cleaning and Management

If you own a second home, you will need to take care of it, even when you are not there. In case your plan is to let it out while you are at your main residence, you will have to get a company to hand over the keys, manage the property, and do the cleaning. This might simply wipe away your profits. You have to research the market to ensure that you are not wasting money on something you can only use for a few weeks a year and a property that doesn’t cover its own cost.

Travel Costs

If you happen to be looking for a property overseas, it might be costly to travel there for the weekend. That is why you will have to check whether it is possible to get cheap tickets or discount travel to your destination. If you are paying high prices for getting there, you might as well book a package holiday and see a new part of the world every time you go on vacation. You should also consider how long it takes you to get there. After all, if you have a week holiday and you spend two days traveling, it might not be worth investing in a second home after all.

Insurance

When you don’t occupy the house for a long period of time, your normal insurance might be void. If you want to get a cover for a holiday home, you will need to contact specialist insurance companies. You don’t just want to insure the property for theft and burglaries, but also natural disasters, which is one of the most common exclusions of policies. Find out what the risk of a floor or a hurricane is in the region before you commit to buy a second home.

Buying a second home might make your holidays cheaper for years to come. However, you will need to ensure that you are not spending more than the value you are getting out of your holiday home long term.

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