Buying a second home gives you the opportunity to re-imagine your lifestyle and explore new hobbies and activities. But are you ready to make the move? Here are some signs that you’re ready to buy a second home, according to Lake Chelan Realtors.
You’re consistently hitting your retirement and savings goals
If you’ve been hitting your financial targets consistently over the last few years, and are ready for retirement, then you might be ready to buy a second home. This means having plenty of cash reserves in addition to sizeable assets and investments. You have an emergency fund and you’re financially secure. You have little to no debt, or any debt you currently have is manageable.
If you still have reservations, discuss it with your financial planner. They can crunch the numbers and give you a more objective view of your finances. They will help you assess whether you’re on track for savings and retirement, or if you need to save more money ahead of a second home purchase.
You can afford the upkeep and maintenance
When buying a second home, upkeep will be one of your main considerations regardless of property type or location. This includes regular maintenance, cleaning, repairs, and upgrades. Repairs are especially important – if you’re not living on the property 365 days a year, it might be harder to detect and address issues in the early stages of damage.
There’s also the matter of homeowners association (HOA) fees, which must be paid even when the property is not occupied full-time.
Security is another concern – who will keep an eye on the property and keep intruders away when you’re gone for most of the year?
That’s why you’ll need to have cash reserves to keep up with maintenance and security. Financial planners typically advise their clients to have 1% to 4% of the home’s value in savings to cover on-going maintenance costs and emergency repairs.
You don’t need to rent it out to keep up with payments
Many buyers plan to rent out their second home when they’re not living in it in hopes that the property will pay for itself. However, some Realtors caution against it. Ideally, you should be able to afford a second home without having to generate income from it.
Although it’s common practice to rent out second homes, your ability to make payments shouldn’t be dependent on rental income, which is never guaranteed – not even during peak season. This will make sure that you will never fall behind on payments, especially when the property stays unoccupied for long periods.
You meet the mortgage requirements for a second home
Borrower requirements for second home mortgages tend to be stricter than loan requirements for primary homes. Borrowers need to produce with a 10% down payment at minimum. You have a higher chance of getting approved for a second home mortgage if you have a credit score of about 680 or higher and debt-to-income ratio of about 45%. If your credit score hovers between 640 and 679, you will typically be asked to make a larger down payment of 25% or more.
If you’re ready to buy a second home in Lake Chelan and the surrounding areas, Coldwell Banker Lake Chelan Properties is ready to assist you. Message them here or contact the team at 509.682.7777 or info(at)CBChelan(dotted)com for more information.