How to Afford a Vacation Home

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So you’ve been looking at the vacation homes listed on some sites like HGTV and dreaming about how amazing it would be to own your very own. Well, you’re not alone, but before we get too far ahead of ourselves and buy that five-bedroom property that’s currently calling out your name, let’s take a step back and look at how to afford a vacation home in the first place.

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How to Afford a Vacation Home

What a nice thought – having your very own place to go when you want to get away from your daily life. 

It’s a dream come true, but that dream comes at a price.

So, let’s find out how to afford a second home when you’re not super-rich.

1. Use a Home Equity Loan

One option is to use a home equity loan on your primary residence.

These are low-interest loans that allow you to borrow against the value of your current house and can be used for just about anything you like.

If you have a good deal of equity in your current home, and you have the means to pay off a home equity loan, then this is a petty easy way to get that vacation property that you’ve been thinking about.

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2. Get a Friend to Go In With You

Taking on a partner while buying a vacation home can be mutually beneficial because it allows both parties to split the cost with someone they trust and know well.

If you and your partner work well together, this is a good way to make sure you both get the vacation home of your dreams.

If you have a really close friend or two that you currently vacation with, then going in together on a property isn’t a bad idea.

You can go together or at different times.

Just be sure to get everything in writing, so there is no misunderstanding down the road.

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3. Save Your Money

It’s no secret that real estate prices have been on a consistent climb for many years now.

Even so, the sooner you start saving for one the sooner it will become a reality.

Cut unnecessary expenses now and save all you can, and before you know it you will have enough for a good downpayment.

The more you can put down, the easier it gets to pay for that second home.

4. Buy a Fixer-Upper

While these homes might not look as nice as new construction, you’re going to save a lot of money when making the purchase.

As long as you don’t mind doing some work yourself, you might be able to get more house for your money if you look at houses that need a little fixing up.

Just be sure it doesn’t need major repairs such as a new heating system or plumbing.

Otherwise, the repairs will offset any monetary advantage of buying it in the first place.

You’ll also want to make sure that you have the skills to do the repairs yourself.

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5. Rent Your Vacation Home Out When You’re Not Using It

If you plan on staying at your vacation home just a few weeks out of the year, it might be wise to consider renting it out.

There are plenty of sites like Airbnb that specialize in placing vacationers in homes owned by other people, which makes doing this a lot easier.

If you want to do this, just make sure you have a sturdy lease agreement drawn up before renting out so others don’t take advantage of you.

My sister’s sister-in-law has a house on the beach. She and her family go there about 4 to 6 weeks out of the year.

The rest of the time they use it as rental income. This helps pay the property taxes and mortgage payments.

She doesn’t use a property manager and instead uses an online rental service. 

So, yes they get to use it whenever they want and enjoy it, but it is also an investment property.

This is one of the best ways to make getting a second home truly affordable.

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6. Hire a Reliable Property Management Company

If you decide you want to go a bit more old school, so you don’t have to deal with rentals yourself, then consider hiring a property management company. 

You can also ask a real estate agent if they offer these services.

These companies exist in most areas for standard properties and should be easy to find for vacation homes as well.

They usually charge an annual fee that covers all of the expenses, so they can be very cost-effective if you take advantage of them.

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7. Look for a Property in a Cost-Effective Location

While I’m not saying that most vacation homes aren’t expensive, there are certainly places out there where they aren’t as expensive as others.

If you look in places with lower home prices, such as rural areas and areas that aren’t as popular with tourists, you can also save money.

So, if you’re lucky enough to enjoy an area that isn’t super touristy, then you can save a lot of money as property prices won’t be nearly as high as high traffic towns.

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8. Get a Conventional Loan

If all else fails, get a conventional loan.

Just know that the interest rate will be higher than your primary residence.

The property taxes will be higher on this second home as well.

If you go this route, you will want to save up as much as you can for the downpayment to lower your monthly mortgage payments down the road.

You will also need to be sure your credit score is as high as possible and your debt to income ratio is as low as possible.

That way you will be easily approved and get a lower interest rate which will save you thousands of dollars over the term of your loan.

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To Sum it All Up:

A vacation home is a dream come true. It’s going to cost you, there’s no getting around that, but if you’re willing to rent it out, go in with a friend, or even buy a fixer-upper, you can reduce the cost and make it much more affordable.

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