Major Moves · Major Purchases
Second Home Affordability Calculator
Can I actually afford a vacation home?
How This Calculator Works
A second home is two financial decisions wearing one deed: a lifestyle purchase (a place you love and use) and a capital allocation (a leveraged, illiquid asset competing with everything else you could do with the money). This calculator models both. From the purchase price, down payment percentage, and mortgage rate it computes your upfront cash requirement and monthly carrying cost — mortgage payment plus the recurring ownership costs that scale with the property. If you plan to rent the place part-time, the rental income and occupancy sliders net expected revenue against those costs to produce a realistic monthly net cost, which for most vacation properties remains a cost, not a profit.
Two investor metrics anchor the analysis. Cap rate — annual net operating income as a percentage of the purchase price — lets you compare the property against other income-producing assets on level ground. Equity at horizon tracks what appreciation plus principal paydown builds over your chosen holding period. The headline output, net wealth impact, weighs that equity against the cash you sank in and what it could have earned elsewhere, which is the honest frame for a purchase this large.
The model doesn't include every ownership variable — property-specific taxes and insurance quotes, management fees if you outsource rentals, or the tax treatment of rental income and deductions, all of which vary by location and usage mix. Treat its output as the structural picture: what the property costs to carry, what the rental offset realistically covers, and what has to be true about appreciation for the purchase to compete financially.
Worked Example
Say you're looking at a $500,000 lake house with 20% down at a 6.5% mortgage rate, expecting $2,500 a month in rental income at 50% occupancy — that is, $1,250 a month of realized revenue on average across the year. If carrying costs run around $3,200 a month, the property's net cost is roughly $1,950 a month after rental offset: that's the real number your budget has to absorb, and it's the number that should be compared against how many weeks a year you'll actually use the place.
Over a 15-year horizon at 4% annual appreciation, the projection shows meaningful equity building from both appreciation and principal paydown — but the net wealth impact figure asks the harder question: does that equity beat what the down payment and years of monthly net costs would have become invested elsewhere? Small changes in occupancy and appreciation assumptions swing the answer substantially, which is precisely why they're sliders. If the purchase only pencils at optimistic occupancy and above-average appreciation, you're buying a lifestyle asset — which can be a fine decision, as long as you're making it knowingly.
Frequently Asked Questions
How much down payment do I need for a second home?
Lenders typically require more down for a second home than for a primary residence — commonly starting around 10% for a true vacation home and often more when the property will operate as a rental, since investment properties carry stricter terms and higher rates. Beyond the minimum, a larger down payment lowers the carrying cost that the rental offset has to fight against. The calculator's down-payment slider shows exactly how that trade-off moves the monthly numbers.
Is a second home a good investment?
Judged purely as an investment, a part-time-rented vacation property often underperforms simpler alternatives once realistic occupancy, carrying costs, and illiquidity are counted — the cap rate output makes that comparison explicit. Where second homes earn their keep is in blended value: the use you get, plus rental offset, plus long-run appreciation. If the calculator shows a manageable net monthly cost and you'd happily pay that amount for access to the place, the purchase can make sense even when a spreadsheet-only investor would pass.
What occupancy rate should I assume for a vacation rental?
Assume less than the listing sites imply. Seasonal markets concentrate demand into part of the year, and cleaning gaps, maintenance windows, and your own use all subtract rentable nights. Running the calculator at a conservative and an optimistic occupancy shows how sensitive your net cost is to this one assumption — if the purchase only works at high occupancy, that's a warning worth respecting, because occupancy is the input owners most consistently overestimate.
What's a good cap rate for a second home?
Pure investment properties are often evaluated against cap rates in the mid single digits, but vacation homes bought partly for personal use routinely come in lower — sometimes near zero once honest costs are counted. That doesn't automatically kill the purchase; it tells you how much of the property's return is lifestyle rather than finance. The metric's real job is comparison: against other properties, and against what the same capital earns in liquid investments with zero maintenance calls.
Should I pay cash for a second home or finance it?
Financing preserves liquidity and, when your assumed investment return exceeds the mortgage rate, can leave you wealthier — but it raises the monthly carrying cost and adds leverage risk to a discretionary asset. Paying cash eliminates the carrying pressure and makes the property resilient to rental shortfalls, at the price of concentrating a large share of your wealth in one illiquid asset. Run the calculator both ways: financed with the cash invested elsewhere, and owned outright with no mortgage line, and compare the net wealth impact of each.
The model behind this calculator
spec v1.1.0 · 250 open casesThis calculator runs a published model: its inputs, formulas, assumptions, and exclusions are documented in a versioned specification, and it is Concordance-tested — an independent second implementation, built from that spec alone, must agree with it on 250 open test cases before any change ships. The same model is callable by AI assistants and developers.