Retirees look forward to spending time relaxing, traveling, and spending time with friends and family. Often, they combine these activities into purchasing a vacation home. But, making this sort of purchase can be a huge step for people who are living on a fixed income or who aren't sure about taking on a mortgage in their later years. If you're thinking about making this type of purchasing now that you have retired, carefully consider the following when making your decision.
1. Can You Afford a Vacation Home?
Your first consideration must be the cost. If you are a retiree whose primary residence is paid off, you are in a better position to make a purchase because you have equity in your current home and may be able to use it to get a home equity loan to help pay for your vacation property .
Keep in mind that a larger down payment often results in a lower mortgage interest rate and lower monthly payments, so the more you can afford upfront for your vacation property, the better.
Another option that may make this option more affordable is working with a credit union rather than your traditional financial institution. Credit unions often offer members lower mortgage interest rates, so it's worth shopping around for a mortgage before you commit to the bank that held your primary residence mortgage.
Keep in mind, however, that the mortgage for a vacation home will not be your only expense. You'll also need to be able to afford homeowners insurance, energy and other utility bills, regular maintenance, repairs, property taxes, and potential property management fees, particularly 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 often find themselves even busier in retirement because they travel to visit family, spend time with grandchildren and help with babysitting, devote time to getting in shape, attend more doctor appointments, and volunteer.
Scheduling time at 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 have difficulty making time for all that you want to do, purchasing this type of retirement property may not be for you.
3. Will Your Vacation Home Accommodate Your Family?
Many retirees address the issue of having time to visit a retirement property and family by purchasing a second residence that appeals to their family and serves as a vacation hub for everyone. The trouble is, the larger the property, the more expensive it is. You'll need to find a home option that can accommodate your family and your budget, and that often means a home with large bedrooms or a finished basement that can hold inflatable mattresses or pull-out couches for visitors.
You'll also want to be sure you have plenty of bathrooms and a large enough kitchen or dining area for everyone. If the costs become too high for you to be the sole owner, consider buying the property with other family members.
You'll also need to consider how often and when your family will want to visit your vacation residence. If you are the sole owner and renting the home is one way for you to afford it, you'll need to be very clear with your family that there are certain times of the year they cannot visit because you'll be renting the home for income. Seasonal and holiday demands for the property can be a lot to handle, so you'll need to be sure you are prepared to say no to someone when the time comes.