can i afford a lake house
Lifestyle,  Real Estate

Can I Afford a Lake House? Hidden Costs of Owning a Vacation Home

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Lakehouses are a dream for many people, but the reality of owning a vacation home can be quite different from what you imagine. 

So, the question you came here to find out: Can I Afford to Buy a Lake House is a complicated one.

Before you take the plunge and buy a lake house, it’s important to consider the costs of ownership, maintenance, and other hidden expenses. 

In this article, we’ll take a closer look at the true cost of owning a lake house, as well as other factors to consider before making a purchase.

Cost of Ownership

The cost of buying a lake house can vary greatly depending on the location, size, and age of the property. On average, lake houses can range from $200,000 to several million dollars. 

In addition to the purchase price, there are several other costs to consider, including:

Property taxes: The amount you’ll pay in property taxes will depend on the value of the property and the local tax rate.

Insurance: Like any other property, a lake house will require insurance to protect against damage, theft, and other risks. 

Homeowner’s insurance is usually higher for lake homes because of their increased exposure to the elements. The cost of insurance can vary, so be sure to shop around for the best policy.

Maintenance: Lake houses require regular maintenance, such as cleaning and upkeep of the property, as well as regular repairs and renovations. 

This will include the furnace, the HVAC system, and, depending on the location, a septic system. This can add up quickly and should be factored into your budget.

dock maintenance

Dock and Boat: You are living on the lake to enjoy the water. You will probably have some type of boat, and that alone is a big expense. The cost of purchasing, depending on the type, the fuel, and the maintenance can be costly. 

You will need a dock for the boat, and if the property does not have a dock, that will be an added expense that can be thousands of dollars.

Hidden Costs

In addition to the obvious costs of ownership, there are some hidden costs to consider when buying a lake house. Some of these include:

Utilities: Depending on the location of the property, utilities such as electricity, water, and gas can be more expensive than in a city or suburban area. 

Internet service, if that is a must for you, can be a difficult proposition. Make sure you check before purchasing to see what type of service is available. A great solution is StarLink, but check to make sure it’s available in the area. 

Transportation: If you plan to visit your lake house frequently, you’ll need to factor in the cost of transportation, including gas and maintenance for your vehicle.

Furnishings and decor: To make your lake house feel like a true vacation home, you may need to purchase new furniture, decor, and other items. If the lake house comes unfurnished, that means couches, chairs, tables, beds, and dressers. 

If the lake house does not come with appliances, or if the appliances need upgrading, this can run into thousands. All of these items can add up quickly, so be sure to budget accordingly.

You Will Need Two Of Everything

It can quickly become a nuisance taking items back and forth between your primary residence and your lake house, so when you own a second home, you need two of everything.

Supplying a lake house with all of the needed everyday items like dishes, towels, and bedding will add up in a hurry. You will also need additional tools at the lake house just as you need at your primary residence.

Company Is Welcome But Costly

Depending on how social you are, the cost of having a lake house can be more expensive from the standpoint of hosting guests. This cost may seem insignificant to the cost of purchasing a lake house, but it can add up very quickly. 

Friends and relatives are going to want to come and stay…who wouldn’t? And that means those flocks of friends need to be fed. Food, snacks, and beverages can be a significant expense for the owner.

Other Factors to Consider Before Buying a Lake House

In addition to the costs of ownership, there are a number of other factors to consider before buying a lake house. Some of these include:

Market conditions: The real estate market can fluctuate, and the value of your lake house may decline in the future. Before making a purchase, be sure to research the current market conditions and consider the long-term value of the property.

Resale value: If you plan to sell your lake house in the future, it’s important to consider the resale value. Be sure to research the local real estate market and consider the demand for lake houses in the area.

Quality of life: Owning a lake house can be a wonderful experience, but it can also be isolating, especially if you’re used to living in a bustling city or suburban area. 

Before making a purchase, be sure to consider the quality of life in the area and whether it’s a good fit for you and your family.

can i afford to buy a lake house?

Figuring Out If You Can Afford A Lake Home

Financially, it can be a challenge to figure out if you can afford a lake house. Your heart may be set on it, and the excitement can be energizing. 

But it is important to look at the cold, hard numbers. Consult with a financial advisor or your banker before taking the plunge. 

Here are some factors that will need careful consideration:

Down Payments Impact Affordability

As a rule of thumb, a down payment of 20% or more is typical for any home, including a lke house. Make sure, if you need to borrow to make this purchase, that you know exactly what your lender will require as a down payment.

Your Debt To Income Ratio

Determine what your debt-to-income ratio is. This is the percentage of your gross monthly income that goes to pay your monthly debt payments. 

These debts would be your current house payment, car payments, etc. You can figure this out by taking your total monthly debt payments and dividing it by your gross monthly income. 

Most financial experts will recommend that you keep your debt-to-income ratio at a rate of 30% or less. Lenders will have their criteria on these limits, so find that out too.

Primary Residence Equity

Another option is to borrow against the value of your primary residence if you have a significant amount of equity in that home. You can take a home equity line of credit or a second mortgage. 

This is something to look into with your current mortgage holder to see if it will work for you. 

Final Thoughts

Owning a lake house can be a dream come true, but it’s important to consider the true cost of ownership, including maintenance, hidden costs, and other factors. 

By researching the local real estate market, budgeting carefully, and considering the quality of life in the area, you can make an informed decision about whether a lake house is the right choice for you.