Over the last year, both individuals and companies learned the value of working from home. Employees with flexible work arrangements can be more productive and loyal to their company over time. With the ability to work from home comes the ability to work from anywhere, including a second or vacation home. If you’ve been considering a second home for your family, 2021 may be the year to make that purchase.

Though there is limited housing inventory available right now, interest rates are still quite low compared to previous years and historical averages. Lower mortgage rates offer buyers more options. For example, if you purchased a $250,000 house in January of 2020 with 20% down at the average rate of 3.62%, your monthly payments would be $912 for the mortgage, not including taxes and insurance. The same purchase in December of 2020 at the average rate of 2.68% for a 30-year loan would cost you $809 per month. Or, if you have enough for a slightly larger down payment, you could buy a more expensive, $280,000 house and pay $906 per month at the December 2020 average rate.

There are important financial considerations to make before you decide to buy a second home. Your mortgage company will want to ensure you meet a specific debt-to-income ratio (DTI) of no more than 43% to approve your second home purchase. Your DTI can be calculated by dividing your monthly debts by your pre-tax salary.

Buying a second home may also require a larger down payment than your first home. Mortgage companies and banks typically reserve the best rates for buyers with excellent credit scores who are able to put at least 20% down on a second home. You can work with your bank or mortgage company in advance to secure the best possible rates in the pre-approval process.