Buying a second home
Many of us dream of being able to purchase a second property as a holiday home, an investment, an added source of income or all three. It is vitally important to make sure you can actually afford a second home before you go ahead. Owning a second home can be fabulous, but not if you go broke in the process. There are some things that are important to think about if you are considering this.
You cannot be in debt. This is crucial. If debt, from credit cards, loans and other lines of credit is taking away from your income, you are really not in the position to undertake the huge financial commitment of a second home. Having said that, if you feel you your debts are minimal and easily managed, read on.
Save money for emergencies. You should have at least 3 to 6 months of living expenses tucked away in case of a sudden lack of income or an emergency financial problem. At least if something goes wrong you can continue paying both home mortgages for some time. Have the money ready for a down payment on the second home. This instant equity will protect you in case of a downturn in the market. You will at least be able to sell your property without paying out money at close of sale.
Calculate the payments for a mortgage in your preferred price range. Build up your down payment until you can afford the mortgage. Try looking for a less expensive property in the area where you want to buy. If you can't quite afford the house of your dreams, look for something a bit smaller that still provides the features you really want, such as close proximity to beaches, a particular recreational activity or even the fabulous view.
Think about renting out the property when you are not using it. Work out when is the best time to rent it out based on your own use. Renting out the property for several weeks a year could cover more than one mortgage repayment.
If you can, pay cash. If you have enough cash around to buy a second home, without dipping into the kid’s school fees, then you can afford one. Buying a place abroad may also be something to consider.