Top 3 Major Expenses When Buying a Second Home

13 Oct

If you are considering a second home, you should be aware of the expenses that come with it. As with your primary home, there are plenty of costs that go well beyond the mortgage payment. While you may have considered (or certainly should have) the cost of homeowners insurance, property taxes and even an HOA fee, there are other expenses you need to think about before signing on the dotted line. 

Here are three expenses that may come into play when purchasing a vacation house:

Life insurance and disability insurance coverage

When purchasing a second home you are more than likely upping your mortgage debt and that should be considered when reviewing your life insurance and disability insurance coverage. If something happens to the primary bread earner in your family, you may need a higher life insurance payout to cover the cost of the mortgages. Upping your coverage levels will lead to a higher premium so make sure you can easily cover this additional expense. 

The same is true for disability insurance which helps cover your bills if you are injured or disabled and unable to work. While this coverage is often offered via your employer, it is usually not enough to cover all of your monthly expenses. This can be especially true if you have two mortgages. 

Consider upping both your life insurance and disability insurance to fully cover your expenses before buying a second home. 

Airbnb comes with expenses

If you are thinking about renting out your second home to help cover the mortgage, it’s important to realize that it is not all profit, renting a home comes with additional expenses. 

Just a few costs you should consider when renting out a vacation home:

  • Airbnb fees: Airbnb and VRBO both charge fees for their services so be sure to take those into account when setting your rates.
  • Upkeep: Keeping your home well maintained is essential to renting it out.
  • Internet: Reliable and speedy internet is a feature that most renters will want so consider this cost as well. 
  • Cable: Even if you don’t watch much TV, your renters might so add in this cost as well.
  • Cleaning: Unless you can easily get to your vacation home to clean it after every rental you may have to hire a cleaning service

You will also need to contact your insurance agent to make sure you are fully covered. Many homeowner policies do not cover short term renters and the damage they may do to your home. This means you may have to purchase a separate policy or rider for your current homeowners policy. 

Maintenance is a factor

Just because it’s a second home doesn’t mean it won’t require maintenance and upkeep on a yearly basis. Financial experts recommend saving between 1 and 4 percent of a home’s value each year in an account reserved for unexpected home repairs. This means that you will need two savings accounts once you close on your vacation house. 

If you have plans to rent out your second home, it is even more important to have an emergency fund set up according to financial experts. If a renter damages your home, you will need to have the money ready to get it back up and running so you can continue renting it out while waiting for Airbnb or your insurance company to step up. 

If you are in the market for shopping for a second home for rent or vacation, please allow us to help you shop the best homeowners insurance rates and coverage options. Or give us a call now at 855-980-6963. We look forward to working with you!

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