How much will a second home cost? Besides sale price, you should factor in mortgage, property taxes, insurance, utilities and maintenance fees-and some of those expenses are probably higher than you think-plus up to 1.25 percent of the purchase price to cover annual maintenance and unexpected repairs. You’ll also need to budget 20 percent more for insurance than you pay for your primary residence; if you rent out your second home, you’ll also need medical and liability coverage.
Can you truly afford a second home? You should only buy a second home after the rest of your finances are in tip-top shape. All of your mortgage payments-including the second home and remaining debt should consume no more than 36 percent of your monthly gross income. If you can’t make those numbers work, this probably isn’t the right time to spring for second home.