Thinking of buying a vacation/retirement home? Now is the time! -

Interestingly, the sales of vacation homes skyrocketed last year. Recent studies show that more participants said they would likely buy a second home, such as a vacation or beach house, to use during retirement. For many Baby Boomers, the idea of finally purchasing that vacation home (that they may eventually use in retirement) makes more and more sense as the economy improves and the housing market recovers.

If your family is considering purchasing that second home, now is the perfect time. Prices are still outstanding. If you decide to lease the property until you’re ready to occupy it full-time, the rental market in most areas is still solid, and you can still get a historically low mortgage interest rate. 

But we know current mortgage rates won’t last forever…

In Fact, According to Freddie Mac, the interest rate for a 30-year fixed-rate mortgage at the beginning of April was 4.4%, and it predicts that mortgage rates will steadily climb over the next six quarters.

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Let’s assume you want to purchase a home for $500,000 with a 20% down payment ($100,000). That would leave you with a $400,000 mortgage. What happens if you wait to buy this dream house? 

Prices are projected to increase over the next year and a half. However, for this example, let’s assume prices remain the same. Your mortgage payment will still increase as mortgage rates climb to more historically normal levels.

This table shows how a rise in interest rates impacts a principal and interest payment: