To Buy or Not to Buy

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You take your family to the same quaint rental cottage on the beach for two weeks every summer. Wouldn't it be great to have a place to call your own? With mortgage rates still relatively low, this is the perfect time to buy a vacation home, right? Not necessarily. There are a few things you need to consider first.

One is that financing will be a little tougher for a second home than for a first home. Since many banks believe there is a greater risk of a borrower's defaulting on a vacation home, mortgage rates can be higher than they would be on a primary residence.

You also need to think about the hidden costs of vacation-home ownership. How will you take care of the place when you're not there? Security systems and caretakers can be expensive, but leaving the home unattended for long periods of time could lead to break-ins and costly damage if, say, a water pipe bursts and no one is around to notice. If this is your first vacation home, the Better Business Bureau suggests hiring a rental agent or management company to help you take care of it for the first year.

There are other considerations beyond the financial. Do you really want to spend all your weekends or vacations in the same place? Consider making trial trips to your dream spot in different seasons and talk with homeowners in the area to get a feel for what life is like in the community year round. The perfect beach in June could be unbearably touristy in August or unpleasantly isolated in January.

Decide how often you will actually be using the property. Studies show that most second-home owners don't use their houses more than four weeks a year. If you really won't be spending much time there, it's probably more cost effective to rent than to buy.

For those who want a vacation home but are reluctant to take on one more household to-do list, there's another option: fee-based membership clubs that offer access to a range of luxury homes. Unlike traditional time-shares, which give you access to a single place on the same dates every year, these clubs let members stay whenever they like in a number of places around the world. One, the Portofino Club, features homes in properties that range from New York City's Trump International Tower to a palazzo in Venice. For some homeowners, access to a world of second homes may be better than owning just one.