What to consider before buying a vacation home as a retiree
Retirees look forward to spending time relaxing, traveling, and spending time with friends and family. They often combine these activities to buy a vacation home. But making this type of purchase can be a big step for people who live on a fixed income or are unsure about taking out a mortgage in their later years. If you are considering making these types of purchases now that you have retired, consider the following carefully when making your decision.
1. Can you afford a vacation home?
Your first consideration should be cost. If you are a retiree whose primary residence is liquidated, you are in a better position to make a purchase because you have equity in your current home and you may be able to use it to obtain a home equity loan to help pay for your vacation property. .
Keep in mind that a higher down payment often results in a lower mortgage interest rate and lower monthly payments, so the more you can pay up front for your vacation property, the better.
Another option that can make this option more affordable is to work with a credit union rather than your traditional financial institution. Credit unions often offer members lower mortgage rates, so it’s worth shopping around for a mortgage before committing to the bank that held the mortgage on your primary residence.
However, keep in mind that a vacation home mortgage will not be your only expense. You will also need to be able to afford homeowners insurance, energy and other utility bills, regular maintenance, repairs, property taxes, and potential property management fees, especially if your vacation property is a significant distance from your primary residence.
2. Do you have enough time to commit to a vacation home?
Retirees often retire assuming they will have all the time in the world to do whatever they want. However, they are often even busier in retirement because they travel to visit family, spend time with their grandchildren and help with childcare, take time to get in shape, attend more doctor appointments, and volunteer.
Scheduling time in your home is a must, so you can take care of the property and make it worth your investment. If you already find that you are having a hard time dedicating time to everything you want to do, buying this type of property for retirement may not be for you.
3. Will your vacation home suit your family?
Many retirees tackle the problem of having time to visit a retirement property and their family by purchasing a second home that appeals to their family and serves as a vacation center for everyone. The problem is that the larger the property, the more expensive it is. You’ll need to find a home option that fits your family and your budget, and that often means a home with large bedrooms or a finished basement that can contain inflatable mattresses or removable beds for visitors.
You’ll also want to make sure you have plenty of bathrooms and a kitchen or dining room that’s big enough for everyone. If the costs become too high for you to be the sole owner, consider buying the property with other family members.
You will also need to consider how often and when your family will want to visit your vacation home. If you are the sole owner and renting the house is a way to pay for it, you should make it very clear with your family that there are certain times of the year when they cannot visit because you will rent it by income. The seasonal and holiday demands of property can be difficult to handle, so make sure you are prepared to say no to someone when the time comes.
