Three Crucial Questions to Answer Prior to Committing to a Vacation Home
Tuesday, June 3, 2014
Every year more Canadians buy vacation homes. They think of it as a way to have more frequent and affordable vacations. After all, if one does not have to pay airplane tickets and hotel rooms, holidays away from home become so much more feasible. Before committing to a specific vacation home, ask yourself the following three questions:
- Can I really afford this? Most lenders require that prospective owners pay between five and 20 per cent of the purchase price before providing a loan. Moreover, even if you qualify for a mortgage, you will have to add the monthly payments to your already impressive list of monthly expenditures, and it is not only the mortgage you will have to pay. You will need to add insurance, maintenance and utility bills to your monthly budget. It is always an option to rent out your vacation home during the periods when you are unlikely to want to go, but this approach has disadvantages. Tenants may break or steal things, which you would have to repair or replace. Dealing with other people's mess will also add a lot of stress to your own vacations. Moreover, rental income is taxed, and you might find that the rent does not cover the other expenses.
- Is this really a place my family would want to visit frequently? If you buy a house beside a golf course to indulge your love of golf, there must be enough entertainment for your spouse and children in relatively close driving distance. Further, it must be entertainment that remains feasible and stimulating even after having done it a hundred times over a five-year period. Souvenir shopping and restaurant dining almost certainly do not suffice. If there are water and nature trails nearby, you probably have it covered, but only if it is within about three hours' driving from your permanent home.
- Can this house be maintained and safeguarded with relatively little effort? A house on the beach might be amazing in most ways, but it does require more frequent cleaning, painting and other upkeep. Even worse, the closer a house is to water, the higher the likelihood that it can be flooded when the water level rises. Large homes with large planted gardens and swimming pools are expensive and time-consuming to maintain. Rustic wooden cabins must be painted frequently and are vulnerable to strong wind and flooding.
Choose carefully, and your vacation home can give you months of pleasure for many years.