What Not To Overlook When Buying A Vacation Home
Purchasing a vacation home is exciting. Having a place to call home in a city or country that you love to visit affords you the best of both worlds. When shopping for a vacation home, make certain that you don't get sidetracked by the excitement of the experience. It's important to remember that purchasing a second home isn't always the same as purchasing your first one, so you want to be prepared. Here are three important factors you don't want to overlook.
Mortgage
Often time, you will be required to make a larger down payment on your vacation property if you already own a home in another location. Additionally, the mortgage rate for a property that is not considered your primary home is often higher. The reason for this is the risk.
First, the mortgage company wants to be certain that you can actually afford the cost of the second property. The mortgage company also views the non-primary home as a risk because in the event you get into a financial strain, you might be more likely to pay your primary home's mortgage and not pay the mortgage on the vacation home. All of these factors lead to greater costs.
Tax
Understanding the tax implications that come along with purchasing a vacation home can also be challenging. If you are purchasing a home outside the country, this can be an especially difficult subject to tackle. For example, in the US, the tax rate for a home is based on the value of your property.
However, in places like Ecuador, your age plays a role, and whether or not the home is located in a rural or metropolitan area also plays a role. Make certain you understand these laws to know exactly what you're getting into.
Insurance
Similar to the mortgage company, the fact that the home is not primarily occupied makes some insurance companies also view a vacation home as high risk. For example, in the event of a water leak in your primary home, you would more than likely discover the water leak and have it repaired before it turned into a major issue.
However, in your vacation home, if the leak happens when you're away, it could be a considerable length of time before the problem is discovered and resolved. Consequently, the level and cost of damage would be greater. For this reason, the insurance rate on your second home might be higher.
Working with a real estate professional who is familiar with the area can help tremendously with this process. The agent will ensure that you understand the requirements so that you're protected and that your family enjoys your new home.