Should I buy a vacation home?

A vacation home is a delightful luxury. It allows you to escape your daily surroundings. In some cases, it can give you regular, easy access to milder climates and your favorite recreational activities.

Maybe you want to spend parts of your winter a short drive from Florida golf courses and tennis courts or have ski-in privileges at a Rockies ski resort. If you live in the country, you may want a hip city loft.

A recent survey by the research group Statista found that more than 10 million Americans own vacation homes. It's no secret that a vacation home is on the wish list for many people. Before you start considering such a purchase, you need to ask yourself: can I afford a vacation home? Here are 6 things to consider.

Do the math

Analyze and calculate your finances. You might start by listing all your monthly expenses, including both the basics like utilities and non-essentials. Be as precise as possible. If a monthly bill fluctuates, such as your heating bill, add up all your bills for a year and divide by 12 to get an accurate monthly average. Don't forget to budget for savings and retirement investments.

Now, subtract your monthly expenses from your household income. What's left? Is it enough to cover a second mortgage, a second homeowners insurance policy and the cost of utilities? The mortgage payments on a large vacation home may be steep, but you may find that a smaller home is well within your budget after crunching the numbers.

Additional expenses

A second mortgage isn’t the only expense associated with a vacation home. Some potential buyers may overlook certain costs. For example, you'll need gas or plane tickets to get to the vacation home, and there will be upkeep and maintenance in addition to utility costs. Will you be there frequently enough to handle maintenance, or will you hire that job out? If so, that's another expense.

Renting isn't always an option

If you plan to rent out your vacation home when you're not using it, you should ensure it's allowed. Some homeowners associations or condo associations have rules against renters, and if you're counting on that rental income, it could be a problem.

A large down payment might be needed

To buy a second home, you might need a larger down payment than you're expecting. In most cases, you'll need 20% down.

Your credit score is important

If you're going to have two mortgages, banks expect a strong credit rating. If your credit score is below 700, speak with your accountant or financial professional about making efforts to raise your score before applying for a second loan.