Peter Lynch, one of the top investment advisors of all time once said, “The best investment you can make is in a single-family home.” But what about a second home, aka a cabin, is that a good investment as well?
Owning a cabin as a second home comes with a long con list of additional home maintenance. It’s a second roof to repair, yard to mow, deck to stain, leak in the kitchen sink to fix, etc… Add to that a new boat, which will run fine for the first year and then need repairs already by year two. Now you need a dock. Buy a canoe only to realize that you would look better in a kayak…buy a kayak, life jackets, paddles, etc. Buy a riding lawn mower. You’ll need fishing rods and soon realize that hauling the bikes back and forth is a drag and you’ll invest in new bikes.
Financing your second home typically requires a larger down payment than what is required for your primary residence. Conventional financing requires a minimum of 10% down whereas your primary residence can be purchased for as little as 3% in some cases. FHA and VA financing are only allowed on primary residences. The interest rate received on a home, regardless of being a primary or secondary residence, is based on your credit score. In qualifying for a mortgage, your lender will pull a credit report and analyze the monthly debt to ensure you meet Debt to Income Ratio requirements. All debts on the credit report, including your primary mortgage payment, will be considered in addition to the estimated mortgage payment for the new property. Some buyers will tap into the equity of the primary residence for either the down payment or even purchase with cash. This can be accomplished with a Home Equity Line of Credit or a cash-out refinance.
Finances and maintenance aside, a second home remains an idealized place to get away from it all, a place to cherish and make lifelong memories. Brilliant sunsets, pontoon cruises, bike rides, fishing tales, cross-country skiing, snowshoeing, campfire stories, s’mores, telling stories under the stars and numerous other potentially perfect life-long memories are made at cabins.
Bottom line, a second home is a long-term commitment. For many buyers, the payoff is well worth it. You simply have to decide for yourself if the added expenses and responsibilities are worth it to you. If you’re interested in owning a cabin or would like more information on what it takes to buy a second home, give our office a call. We’re happy to help in whatever way we can.