The Pros and Cons of Owning Two Homes

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Have you been thinking about buying a second home? Before you do you need to read on to learn about the pros and cons of owning two homes. Sure, it’s nice to have a second place or vacation home but it’s not all wine and roses as they say. Before you dive into a second mortgage and a second home read on to learn some of the issues you might be facing as well as some of the perks.

The Pros and Cons of Owning Two Homes

Chances are if you’re considering buying a second home it’s a vacation home. You picture yourself sitting on a dock or next to a pool sunning yourself while drinking a glass of iced tea or maybe something stronger.

It’s a pretty picture and it can be a reality but owning a second home is also a lot of work.

You might be surprised at some of the expenses and some of the pitfalls that come with having a home that you’re not at all the time.

The pros are easy. We’ll talk about those in a minute but first, let’s dive into some concerns you should be aware of before signing on the dotted line of a second mortgage.

The Disadvantages of Owning a Second Home

There are several disadvantages to owning a second home.

Let’s take a look at the top disadvantages…

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1. The Cost of Your Mortgage

Typically You’ll pay a higher interest rate for a mortgage on a second home.

Lenders are less comfortable approving a mortgage on a second residence.

Because of this, your interest rates are going to be higher and your down payment is going to be larger.

You can expect to pay 20 to 30% down at closing.

So you’re going to have to have a substantial down payment or you won’t be approved.

You should expect higher mortgage payments as well. 

Closing costs will be higher as well.

You also need to have a really good credit score and credit history.

The bank or your lender is going to want to see that you have the ability to not only pay the mortgage on your primary residence but that you’re going to be able to pay for a second home without causing yourself a cash crunch.

If you have a lot of debt then chances are you won’t be approved either.

2. The Cost of Your New Home

If you’re buying a vacation home then chances are the place you want to buy your new home is a place that people like to go to Vacation.

That only makes sense. 

That means the housing market is going to be hot and home prices are going to be high.

You can expect to pay more and a premium for the second home than you did for your first home.

This will also increase your monthly payments as well because you’ll be paying a higher price for your second home.

There’s a good chance your property taxes will be higher on this new home as well. This is especially true if you are purchasing a single-family home in a coveted vacation area.

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3. Squatters

One thing you may not have thought about when you decided to buy a second home is squatters.

If you don’t know what a squatter is, it’s someone who moves into your house without your permission and lives there.

They may even break into your home.

Honestly, it doesn’t really matter.

Once they’re in your home it can be very and I mean very difficult to get rid of them.

You think that you would just call the police and that is all it would take.

But that’s not the case.

Oftentimes, these people will change the locks and even make up fake documents to make it look like you have rented the house to them.

When this happens the police are not going to remove them.

You’ll actually have to go to court to have them evicted.

You might not think this will happen to you but it’s happening all over the country.

Even in my small rural town of 9,000 people, there’s a woman who is dealing with this issue.

Apparently, her father passed away and left her his house.

A man who knew her father broke into the house. He actually broke a window to get into the house, and then moved his family into the home.

He changed the locks immediately and she couldn’t get into the house.

She called the police of course but they wouldn’t do anything about it.

In the meantime, he’s completely trashed the home and has a rather vicious dog guarding it.

He has threatened her if she tries to come to the property to get him to leave.

The police and attorney told her the only way to get rid of them is to go to court.

Evictions can take a very long time and in the meantime, her property is being destroyed.

This is pretty scary but it happens more often than you would think.

I’ve heard of people just going on vacation coming home and having someone in their home.

But typically it happens if the home is vacant for any period of time

I have a feeling that these people go from town to town and home to home looking for places that they can get into and take advantage of.

It’s just something to consider and certainly one of the biggest issues of having a second home that you don’t plan to spend a great deal of time in.

4. Maintenance on Your Second Home

If you already own a home then you know how high maintenance costs can be.

You’ll be on the hook for all the maintenance costs for your second home just as you are for your first home.

If this is an investment property or even if you’re just doing occasional rentals for additional rental income your tenants will want you to fix any issue immediately.

That can mean paying plumbers for weekend work or fixing the faulty heater in the middle of the night.

Rental properties always seem to have issues at the worst possible time that are going to cost you the most money.

Maintenance costs can quickly eat up rental income and you can be in the red before you know it. 

So if you’re buying a second home so you can get away occasionally the last thing you want is to have large maintenance fees because you’ve rented it out for a week to someone else and you need something fixed immediately.

5. You Feel Guilty

One other issue about vacation homes is that you may feel guilty if you’re not spending all your free time there.

You’re spending a great deal of money for this house so when you’re not there it can feel like you’re just throwing cash out into the street.

You need to ask yourself is a place you want to spend most weekends for the next five or 10 or 15 years?

If you don’t and you like to travel to new places all the time then a second home might not be a good fit for you.

Instead, you might want to save your money so you have more positive cash flow. Then you can have the cash to go on a vacation wherever you’d like.

And in the tough times, you’ll have extra cash to take care of expenses that you might not have expected.

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6. The Tax Implications of Owning Two Homes

The property tax you pay on your original home is typically less than you’ll pay on a second home.

You get a tax deduction for owning one home.

You don’t get that same deduction for a second home or vacation home.

The higher tax rate will cause your monthly mortgage payments to be higher as well if your property taxes are folded into your mortgage payment as they typically are.

Honestly, everything about a second home is more expensive than your first home.

That Includes mortgage rates, tax rates, closing costs, and interest rates.

Now that I’ve painted a pretty ugly picture of owning a second home, let’s talk about the benefits of having a second home or vacation home.

Benefits of Having Two Homes

There are a number of benefits that come with having a second home.

Here are a few of the top ones…

1. You Know What to Expect

Have you ever been really excited about going on a vacation and then you get there and boy oh boy the hotel or resort or house you’re renting is not what you expected.

Maybe there’s construction going on in the hotel or it doesn’t look anything like the pictures or even the neighborhood isn’t very good and it’s much further from the beach than you were expecting.

That can happen when you’re going on vacation to a new place you’ve never been to before.

If you have your own vacation home you know exactly what to expect.

You know where it’s going to be, what it’s going to look like, and what’s going to be inside of it.

You’ll probably have a good idea about the neighborhoods and you’ll certainly know how close it is to the beach or the mountains or wherever you happen to buy one.

No, you won’t get the excitement of discovering a new place but you will have the security of knowing you will enjoy your vacation and that where you’re saying is a place you want to stay.

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3. Your Home is an Asset

Well, your home might not be a liquid asset it is an asset all the same.

Unlike when you spend money on a vacation to go stay in a hotel you can actually have a return on your investment. A financial return that is.

Certainly, any vacation can provide value to your life with new experiences, new cultures, and new people, however, if you own your vacation home it could appreciate in value.

That means if you decide to sell it one day you might make more money than what you paid for it.

That’s clearly an advantage.

Of course, this does not apply to timeshare properties.

You are going to want to stay as far away from those as you can.

A single-family home that you own does have an opportunity to gain value over the years.

3. It’s More Convenient

If you’re planning to travel and stay in a hotel then you’re going to have to plan in advance.

It’s difficult to find a place that you want to stay at the last minute.

Hotels or resorts can be full a month ahead of time.

That gives you no room for spontaneity.

If you own your own vacation home, however, you can decide at the very last minute to go.

As long as you’re not renting it out and it will always be available for you no matter how last minute you decide to hop in the car and go.

Also, you can leave your gear there and any other stuff that you don’t want to have to carry back and forth.

That means everything is sitting there ready and waiting for you to arrive. 

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Is Owning Two Houses Worth It?

Is owning two houses worth it? In the end, only you can answer that.

It will depend on your personal situation and your financial situation.

You’ll also want to consider how much you travel and how often you feel you will go to this vacation home.

If you travel a lot and you will go there every week or so, it might be worth it.

If on the other hand, you decide you’d rather travel the world instead of going to the same place all the time then buying a vacation home isn’t a very good idea. 

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To Sum it All Up:

There are some major downsides to owning a second home including squatters moving into your home, higher tax rates, higher mortgage rates, and so on. Even so, it’s kind of nice to have a weekend place where you can go and relax and get away from your daily life and stress. Give it a great deal of consideration before you make your choice and you should be happy with whatever you decide. 

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