Last updated on June 22, 2021
If you are considering how far away a vacation home should be, two things may come to mind: (1) practical considerations and (2) relevant mortgage rules in the United States and Canada. In this article, we explore these two items in greater detail to help better inform your purchasing decision.
Practically, if your vacation home will be primarily used for trips of 1 to 2 days, consider purchasing a property no more than 2 to 3 hours away, for trips of 3 to 7 days, no more than 3 to 5 hours away and for trips of 7 days or longer, then 5 hours away or more is likely feasible. For borrowers in the United States, the vacation home must typically be located at least 50 miles away from your primary residence in order to enjoy the “second home” classification that is coupled with a lower interest rate. For borrowers in Canada, similar considerations need to be taken into account.
Best Distance for Vacation Home – Practical Considerations
A vacation home can serve many purposes and be utilized in a number of different ways. From weekend getaways to part-time residences, vacation homeowners will have their own idea of what constitutes a vacation home. One thing all vacation homeowners can likely agree on, however, is the overarching purpose to which a vacation home serves: its a place for recreation and pleasure.
With that in mind, before purchasing a vacation home, you will need to consider the travel time between your primary residence and vacation home. After all, any time spent travelling will take away from your leisure time.
The Science Behind Vacations
Taking regular vacations has often been associated with a healthy lifestyle by allowing individuals to “recharge their batteries” so to speak.
In fact, research has suggested that foregoing annual vacations is associated with illness or even premature death.
According to an article published in the Journal of Happiness Studies, vacationers reported an increase of happiness over the first several days of vacation. On the eighth day, reported happiness peaked. An eight-day trip seemed to give vacationers enough time to “unpack, get their bearings, and settle into a new, more relaxed routine”. The study also found that vacation experiences, especially pleasure, relaxation, savoring and control, were particularly important for the strength and persistence of vacation (after-) effects.
So what does all of this mean when considering the best distance for your vacation home? In short, it illustrates the importance of vacation experiences, including pleasure and relaxation. For a property that is a considerable distance away, any excess travel time will only eat into your leisure time and ultimately the enjoyment of your vacation home. For example, ten hours of travel time for a weekend retreat may not be worth it. On the other hand, ten hours of travel time for a two week vacation seems reasonable given the extra time you have to settle in.
In order to fully enjoy the benefits of your vacation property, you should ensure that you will be able to use it as desired and reap the benefits of owning a vacation home, most notably the psychological benefit of taking a vacation. Taking into account the foregoing, here are some recommended guidelines:
- If your vacation home will be primarily used for trips of 1 to 2 days, consider purchasing a property no more than 2 to 3 hours away.
- If your vacation home will be primarily used for trips of 3 to 7 days, consider purchasing a property no more than 3 to 5 hours away.
- If your vacation home will be primarily used for trips of 7 days or longer, then purchasing a property 5 hours away or more is likely feasible.
Of course, if you need to fly to your vacation home, then you will also need to factor in travel time to and from the airport as well as the time it takes to clear security, customs (if applicable) and board the plane. Wait times for other transportation methods such as a ferry or train will also need to be considered. Above all else, be aware that any time spent travelling represents time that could otherwise be spent enjoying your second home.
How Far Does a Vacation Home Have to Be – Mortgage Rules
When buying a vacation property in the United States, there are two important classifications to consider from a lender’s perspective. In particular, will the vacation home be reserved for personal use or will it be used to generate rental income? If it’s the former then a lender will likely consider this a “second home”, assuming you live in the house for part of the year, it is located at least 50 miles away from your primary residence and the home is not subject to a rental or other similar agreement. If it’s the latter, then a lender will likely consider this as an “investment property”, which tend to have the highest interest rates and down payment requirements of all property types. For this reason, you will want to ensure that your vacation home satisfies the “second home” criteria in order to secure the most competitive rate.
While similar rules do not exist in Canada, the distance between your primary home and second home may be relevant for the purposes of determining whether you truly intend to use your home for vacation or investment purposes. For instance, if your second home is purchased only a few blocks away from your primary residence, lenders may take a hard look at whether the purchase makes sense as a vacation property or whether it is really an investment property. As rental properties are often seen as higher risk, more stringent qualifying criteria may apply than if the vacation home were for personal use only. Accordingly, you should keep in mind that the distance between your primary residence and vacation home may impact your mortgage eligibility.