Should You Own a Second Home in Connecticut?
Connecticut has beaches, mountains, national forests, and lots of history, which makes it a top tourist destination. So if you’re thinking about buying a vacation home for your family, Connecticut is definitely worth considering. The state may also appeal to real estate investors because of its rapidly increasing property values. This past year alone, home prices have increased by 18% to 20%.
Whether you’re in the market for a beach house or a rental property, here’s why you should consider investing in a second home in Connecticut.
Why You Should Invest in a Second Home in Connecticut
Rapidly Increasing Property Values
The pandemic has caused many New Yorkers to flee the city for more space. Because they can work from home, they’ve been able to expand their home search to neighboring states like New Jersey and Connecticut.
This has caused property values in these areas to skyrocket. Home prices throughout Connecticut increased by 18% to 20% in 2020.
As more companies embrace remote work, this trend of city dwellers moving to the suburbs is likely to continue. So now may be a good time to invest in a second home in Connecticut to capture all of that appreciation.
Many Connecticut beach towns like New London and East Lyme have also become popular vacation spots. If you buy a home there and rent it out, you could make a tidy profit.
Interest Rates Are Low
Another reason to consider buying a second home in Connecticut is record-low interest rates. Right now the average 30-year mortgage rate is just 3.07%. If you can afford a shorter 15-year mortgage, you could get a rate as low as 2.41%.
This will substantially decrease the amount of interest you have to pay on your second home, which makes it an even better investment.
Connecticut is a Top Vacation Destination
Connecticut is a top vacation destination that draws in visitors from all over the country. The state has beautiful beaches like Hammonasset Beach Park, which attracts over one million tourists every year. The scenic park has boardwalks, hiking trails, a nature center with live turtles, and a campsite where you can stay overnight.
In the summer you can also fish on one of the state’s many lakes, tour the historic lighthouses that dot the coast, and enjoy fresh-caught fish at local restaurants.
During the fall, you’ll have a great time admiring the changing leaves and tasting local maple syrup. In the winter, you can visit one of Connecticut’s four ski resorts or participate in the wine trail that runs from January to April.
There’s always something fun to do in Connecticut year-round, which makes it a great place to purchase a vacation home and create memories with your family.
Before You Buy a Second Home in Connecticut, Make Sure You Can Afford It
Before you start your search for a second home in Connecticut, it’s important to make sure you can afford it.
If you plan to rent out the home for part or all of the year, it may be easier to pay the mortgage. But you still need to make sure you have a big enough emergency fund to cover any vacancies and home repairs.
Experts recommend budgeting about 10% of your monthly rental income for vacancies. Annual home maintenance usually costs between 1% and 4% of the property’s value, so you’ll need to keep some cash on hand to cover that too.
If you don’t plan to rent out your second home, you’ll need a high enough salary to be able to afford two mortgage payments.
Getting a Mortgage
Another thing to keep in mind is that it may be harder to get approved for a mortgage when you already own a home. Lenders may require you to have a high credit score above 700. You’ll also need a big down payment of 20% to 35% to be able to get another home loan.
Lenders look at your debt-to-income ratio as well, which is the percentage of your income that goes toward debt repayments like student loans and credit cards. If yours is over 45%, you may not be able to secure financing.
However, some lenders will allow you to use the property’s projected income to qualify for the mortgage, which could help lower your DTI.
Buying a second home in Connecticut is a big decision that you shouldn’t make lightly. Before you start putting in offers on properties, get pre-qualified for a mortgage and look at your finances to make sure you can afford another home.
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