Delaware is a popular retirement spot because of its beautiful beaches, central East Coast location and low cost of living, including low taxes. If you are seeking a second home for vacations that will double as your full-time residence during retirement, consider adding the First State to your shortlist.
When you start your search, keep these three factors in mind when buying a vacation or retirement property.
- Plan for tax costs
Most states, including Delaware, charge a higher property tax rate for a secondary residence than for a primary residence. Many buyers decide to rent out the property for part of the year to cover these costs. Others opt to sell their first home and move to the new property full time.
- Explore mortgage options
Even when you have good credit, mortgage approval is more stringent for a second home than for a property that you will live in all year. You will likely need a down payment of at least 20% and must prove that your total debt payments, including the new mortgage, represent less than 36% of your monthly gross income.
If you used a government-backed low down payment loan to purchase your first home, such as a mortgage from the FHA, USDA or VA, keep in mind that this option will not be available for the new purchase.
- Visit off-season
Many families who purchase a vacation home in Delaware have been spending summers here as tourists for years. If you are not a local, plan to spend time in your target town outside of the hustle and bustle of the high season. Doing so will provide realistic expectations of the lifestyle when you make the move to live here full time.
Although buying a second home can be complex, careful research and professional guidance can ease the stress. For many individuals and couples, a vacation or retirement property in Delaware is a smart investment that improves quality of life into their senior years.