Imagine being able to pack up for an impromptu vacation anytime you wanted. Can you almost smell the sea salt and hear the seagulls? That dream can become a reality when you stick to the right savings plan.
Can I Even Afford a Vacation Home?
Yes, if you make a firm commitment. Many people who plan carefully can afford a vacation home. Just follow our tips on how to save money for a second home.
Cut back on your expenses. Some obvious extras you can eliminate immediately, such as buying takeout coffee and bottled water. Next, look at your utility bills to find ways to lower your energy costs, such as unplugging appliances when you aren’t using them. Other savings strategies include:
Stick to your budget. If you don’t already have one, create a budget. If you have a family, include expenses for your partner and children (i.e., your spouse’s student loan payments and daycare bills). Here are a few ways to stay on track:
- Use tools such as digital banking to track your spending, which allows you to see every last Starbucks purchase so that you can identify and slash those extras.
- Curb spontaneous purchases with a cash budgeting system by using envelopes to divvy up each month’s expenses in cash.
- Set a lower budget for groceries and save money by planting a home garden which will also improve your health!
Also, give yourself the occasional planned treat, like a night at the movies or a new pair of jeans to avoid budget burnout.
Find a side job to make extra money. You could earn thousands of dollars to put toward your vacation home goal by working just five to 10 additional hours a week. Think creatively! Become a driver for a rideshare service, babysit for neighborhood children, start an errand service or provide businesses freelance graphic design services.
Save whatever you can. You can save something almost every day if you know where to look. Sock away bonuses and tax returns, use credit cards offering cashback and put the money in the bank, refinance your home and pull out money to go toward your vacation home mortgage, or set up automatic checking account transfers to your savings each week.
How Much of a Second Home Can I Afford?
Use our mortgage loan calculator to help determine how much you should be saving for a vacation home. In addition, consider these items:
- Equity from your current home (get tips on increasing your home’s value)
- Credit history (ways to improve it here)
- Down payment amount (savings tips here)
- Debt-to-income ratio (calculate here)
Factor Additional Costs into Your Savings
As you near your goal for buying a vacation home, remember to budget for additional expenses, such as document fees and closing costs. Then the fun part begins—finding that perfect vacation home! Still need advice on how to afford a vacation home? Get in touch to learn about your mortgage options.