Things to Consider Before Buying a Vacation Home

Vacation homes can be a great investment, whether you plan to use them to rent out, for after retirement, or simply to stay in on vacations. Buying a second home is a big decision, and it’s imperative you take the time to consider the various financial and lifestyle implications associated with this big purchase. Here are a few questions you should be asking yourself when contemplating buying a vacation property.

Can I Afford It?

Whether or not you can afford a vacation home should be your top concern before seriously pursuing the idea. Think about the state of your finances. Are you saving enough for retirement and any emergencies? Do you have enough for a down payment? Can you still meet your other important long-term financial goals? What is your debt-to-income ratio? A debt-to-income ratio is calculated by adding up all your monthly bills and dividing them by your monthly pre-tax income. The lower your debt-to-income ratio, the more income you have to save and spend on other things and the more likely a lender is to let you borrow money. When you look at all your outstanding debts—the rent or mortgage for your primary residence, student loans, any alimony or child support, other recurring payments—do you have enough to live on if you add in a new vacation home mortgage? If your debt-to-income ratio is on the higher side, it’s probably not the best time to buy another home.

Beyond the mortgage, it’s important to take into account the other expenses you would incur. Even if you’re only staying in the home part-time, you’ll still have things like utilities, possible HOA dues, insurance premiums, maintenance fees, taxes, and other bills and expenses to take care of all year long. Can you afford to pay these bills for a vacation home on top of your primary residence?

Is This the Right Location?

When it comes to a vacation home, you could pick just about anywhere in the country or even the world to buy. Make sure wherever you pick is somewhere you really like and either see yourself visiting often or believe will have lots of demand for renters. Consider visiting and renting in your desired location a few times in order to better gauge whether it’s the right place to put down roots more permanently. You should also think about localized taxes and ordinances that may be different than what you’re used to at your primary residence.

Why Do I Want to Buy a Vacation Home?

Sure, we’d all like to have a vacation home, but it’s important to ask yourself why exactly you want one. Is it somewhere you’ll visit regularly? Will you be saving money by owning instead of renting when vacationing? Are you buying it as an investment property to rent out? Is this where you’d like to retire someday? Will you get enough use out of it now or in the future to make it a worthwhile purchase? Having another home may seem ideal in theory, but it’s not always the most practical decision depending on your lifestyle and needs. It’s important to weigh the pros and cons of vacation homeownership before making a decision.

Is This the Best Time to Buy?

Avoid buying a home during peak tourist season, be it winter for a mountain property or summer for something by the water. Current owners are likely looking to recoup their investment during the busy season and are less likely to put homes on the market. Wait for the final weeks of peak tourism or later. For properties with summer as their high season, the time between Labor Day and Thanksgiving is perfect to search for your dream property as you take ownership early enough to get an idea of what future summers might be like and still make repairs and do maintenance work before winter sets in. For winter vacation homes, aim to search in the spring (but don’t wait too long to start looking, as some particularly remote properties may get boarded up for the summer months).

If you’re thinking about buying a vacation home, reach out to one of our experienced loan officers today to explore your financing options!

Preparing Your Home for a Storm

Between volatile summer storms and hurricane season, mother nature can wreak havoc on your home. It’s important to know how to prepare should severe weather strike.

Perform Outdoor Maintenance

Maintaining the area around your home is one of the best preventative measures you can take before encountering severe weather. Clear long or dead tree limbs, especially those close to your house or power lines. Make sure the trimmings are properly disposed of so they don’t end up in the street amid high winds. Your gutters need to be cleaned and have downspouts facing away from your home so water can drain properly. If you know a strong storm is coming ahead of time, you may want to install temporary protection on critical areas of your home such as windows, doors, and roofing. Check to see that your fences are secured properly and either anchor outdoor furniture or bring it inside. Regularly maintaining your yard will save you time and stress should a hurricane or other serious weather system chart a course towards you.

Create a Storm Emergency Kit

Natural disasters can strike without warning; having an emergency kit stocked and stored can make all the difference in an emergency. At a minimum, your kit should include things like 3 days’ worth of water (at least 3 gallons for a gallon a day), non-perishable food, a first aid kit, a flashlight, a radio, and batteries. Consider your family and any unique needs you have. If you have children, you may want to include books and games to keep them occupied. Once you’ve created it, keep your kit somewhere secure and easily accessible. Periodically check any electronics in your kit to ensure they still work, and make replacements as needed. Consult the Department of Homeland Security’s guide to creating an emergency kit for more information and suggested provisions (including updates from the CDC in light of the COVID-19 pandemic) and to create a family emergency plan.

Check Out Your Homeowner’s Insurance Policy

Familiarize yourself with your homeowner’s insurance policy. Make sure you know what is and isn’t covered and upgrade your coverage if necessary. Many standard plans don’t cover damage caused by flooding or earthquakes, so you may need to purchase additional coverage if you live in an area particularly susceptible to them. Understanding your insurance policy prepares you for handling claims should your home incur any damage as the result of a storm. You can even include important insurance documents in your emergency kit.

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Tips for Planning an Outdoor Movie Night at Home

With the ongoing pandemic, we have to be more creative than ever when it comes to finding ways to stay entertained in and around our homes. Outdoor movie nights are a great way to take advantage of warm summer evenings while still social distancing. Here are some tips for how you can make this happen in your own backyard!

Use a Projector

When it comes to the logistics of showing a movie outside, projectors are your best bet. This allows you to connect to a computer or phone to use any number of streaming platforms which greatly expands your movie options compared to using DVDs with a TV. Use a portable movie screen or take a DIY approach and hang a sheet yourself. If you’re going the DIY route, you can even create your own smartphone projector using a shoebox and magnifying glass!

Decorate

Set the mood and create some ambiance with decorations. You can hang string lights or lanterns for a pop of light. A citronella candle will not only provide subtle lighting but help ward off mosquitoes and other pests. Also, consider a themed movie night and decorate accordingly. If you’re having guests, you can get even more elaborate with the decorations by rolling out a red carpet or offering invitations in the form of tickets. You can make your movie night as minimalist or extravagant as you want.

Get Comfy

The ideal seating solution will depend on your unique space. For some, lawn chairs will work best. Take advantage of any patio furniture you may already have. You may want to spread out blankets and lawn cushions for a relaxed and cozy setup. Creating DIY cardboard cars is a fun activity for kids and makes them feel like they’re attending a drive in movie in your own backyard.

Don’t Forget the Popcorn

No movie night is complete without snacks. No matter your audience, you can’t go wrong with some sweet and salty treats and soft drinks. You can offer a signature drink for adults and a non-alcoholic version for kids. Stick with popcorn in its classic form or try something different like these popcorn chocolate chip cookies.

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5 Tips for Building Equity in Your Home

Equity can be defined as the difference between the current market value of a property and the principal balance of all outstanding loans. This is calculated by subtracting your mortgage balance from the market value of your home. Building home equity is important because it can be converted into cash if need be through a home equity loan or a line of credit or cash. In order to increase your home’s equity, you must increase your home’s value, lower your mortgage debt, or both. Here are 5 methods for doing just that.

Make a Big Down Payment

Down payments provide instant equity, and the bigger the down payment, the more equity you have to start with. As an added bonus, if you’re able to put down at least 20%, you can avoid having to pay private mortgage insurance, also known as PMI. However, it’s important to assess your finances and financial goals when determining the ideal amount of money to put down for you and your situation.

Pay More on Your Mortgage

Your mortgage payments are made to cover both principal and interest. Most mortgages are on an amortization schedule where you make payments of equal installments over a specified period of time until your loan is paid off. Generally, a larger portion of your payment goes towards interest in the beginning and more goes towards principal over time. If you can afford to, consider paying more than you have to. In doing so, you decrease your outstanding loan balance faster, thereby increasing your equity. You’ll want to make sure the extra money you pay goes to cover the principal, not interest. There are a few ways to pay extra money on your mortgage, including adding a fixed sum to your payments each month, switching to a biweekly mortgage schedule, scheduling extra payments at regular intervals, and using extra money such as tax refunds and tax gifts.

Refinance to a Shorter-Term Loan

Choosing or refinancing to a shorter loan term can help boost your equity. Typically, with 15-year mortgages, you not only get a lower interest rate but a larger portion of your payments go towards principal rather than interest. This increases the amount of equity you build each month compared to that of a 30-year mortgage. It’s important to note that payments are also higher with a shorter-term loan, so you should consider whether there’s room in your budget for larger payments.

Improve the Property

Remodeling and home improvement projects can boost your equity. According to Remodeling Magazine, the average payback on the most common upgrades is $0.64 for each dollar spent, or a 64% return on investment. Smaller projects, such as garage door replacements, do a particularly good job of increasing your equity, especially when you pay with cash rather than through a loan. Unless you’re remodeling with the intent of selling, it’s important to think about how much the improvement will enhance your living experience within the home. You should consult with a real estate agent or other home professional to determine which renovations will net you the highest return.

Wait for Your Home’s Value to Rise

If you’re not in a rush to build equity, one thing you can do is simply be patient and wait. The housing market fluctuates and therefore so does your home’s value. Local market conditions will naturally impact the value of your home; when home prices increase and demand goes up in your area, your home value will rise with it. Conversely, if the market slows, your value may go down and you may lose some equity with it. These market changes are largely out of your control, but they’re worth keeping in mind. If you’re curious, you can consult an appraiser or use an online estimating tool to get an idea of your home’s current value at any given time.

If you are considering purchasing or refinancing, please contact one of our experienced loan officers today to get you started!

 

 

Source: https://www.bankrate.com/home-equity/how-to-build-equity-in-your-home/

https://www.nerdwallet.com/blog/mortgages/6-ways-to-build-your-home-equity/

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