If you’ve ever considered purchasing a second home to supplement your quality of life during retirement, keep reading. Here, we’ll explore the pros and cons along with hidden costs associated with that second dream home. Knowing the ins and outs ahead of time can keep you from experiencing a real es

If you’ve ever considered purchasing a second home to supplement your quality of life during retirement, keep reading. Here, we’ll explore the pros and cons along with hidden costs associated with that second dream home. Knowing the ins and outs ahead of time can keep you from experiencing a real estate nightmare.

The Good

Buying a second home has numerous benefits. Perhaps the most important is that your second property can become a meeting place for your family. You will have a place to make memories with your grandchildren without having to worry about checking in or checking out. A second home is also a great option if you need to flee to warmer weather during the worst of winter.

The Bad

The biggest downside of dual homeownership is the added cost. According to MarketWatch, second homes require a larger down payment, especially if it’s being purchased as an investment property. There will also be added home insurance fees. If you’re looking at a home in the mountains, for instance, rates may be higher if there is not a fire station within five miles of the property. On the beach, you’re looking at paying for additional flood insurance. You will also need to pay for upkeep costs and property management if you can’t handle maintenance on your own and need assistance finding and managing renters.

Taxes

There are both pros and cons when it comes to taxes and a second home. Providing the mortgage of both your primary residence and your secondary residence is less than $1.1 million, property taxes and mortgage interest are deductible. However, tax rules get a little bit blurry if you lease your home as a vacation rental for more than two weeks each year. In this case, the IRS says you must report rental income. Depending on the location of the home, you may also be on the hook for transient occupancy taxes, which may also be referred to as a tourist, accommodation, or lodging tax.

The Process

The process of buying a vacation home is not that different than when you bought your primary residence. The main difference will be your focus when it comes to home and neighborhood amenities. When you purchased your first home, you likely considered practical features, such as proximity to schools and work. Your second home should be in an area that you enjoy simply for the sake of enjoyment and relaxation.

Once you have identified your preferred location, contact a local realtor, preferably one with proven experience in your price range. Realtor.com explains that a good agent can help you get more for your money. Talk with your agent about your wants and send them a few listings that you like. A home price much lower than this may be in a less-than-desirable location; on the other and, a higher-priced property may be more than you need since it will not be your primary residence.

Financing on a second home will require impeccable credit. Check your credit report before approaching the bank to ensure there are no surprises. FreeCreditReport.com offers soft hit credit reports, which don’t affect your ability to borrow like hard hits, such as buying a vehicle or opening a new line of credit.

Buying a second home to enjoy year-round is a dream come true for many retirees. It is, however, not a decision to make on the fly. Take the time to understand the process and make sure a vacation property fits your budget. Remember, there are many expenses beyond the mortgage that you must consider in order to be a responsible second homeowner.

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larger down payment, - https://www.marketwatch.com/story/hidden-costs-of-buying-a-vacation-home-2015-02-28
upkeep costs  - https://www.houselogic.com/organize-maintain/home-maintenance-tips/maintain-your-vacation-home/
report rental income. - https://www.irs.gov/taxtopics/tc415
price range.  - https://www.redfin.com/how-much-house-can-i-afford
FreeCreditReport.com  - https://www.freecreditreport.com/homepage2?sc=678446&bcd=ad_c_sem_427_153153778280&k_id=1ee679b3-03df-4a36-a2dd-e35080dd3ab4&k_kw=kwd-24990740&k_mt=e&pc=sem_fcr_google&cc=sem_fcr_google_ad_379284604_25662578044_153153778280_kwd-24990740_e_1t1_1ee679b3-03df-4a36-a2dd-e35080dd3ab4&ref=brandtrm&gclid=Cj0KCQjw77TbBRDtARIsAC4l83nrb4pSnM7-l8dXAsn3GwPQid3emkCLxecqQHo9SWdFKjUvQVtDuewaAo55EALw_wcB
hard hits,  - https://www.creditkarma.com/advice/i/hard-credit-inquiries-and-soft-credit-inquiries/

Image via Pixabay - https://pixabay.com/en/log-cabin-cottage-house-home-1886620/