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Considering investing in a second home for weekend get-aways? Perhaps you are looking for a summer retreat? You are not alone! Regardless if its a timeshare, a cottage in the country, a ski house, a waterfront home, etc., a growing amount of Americans are utilizing vacation home loans, which were previously only affordable and available to the affluent.

The National Association of Realtors recently released a study indicating that over eight million American own vacation homes -- a tremendous increase from past decades. They also estimate that over 25 million Americans will buy a vacation home in the next decade.


Prospective home buyers should familiarize themselves with vacation home loans. If you have any questions regarding the information below, please contact us.

Vacation Home Mortgages
It used to be difficult to achieve vacation home financing. Lenders would assume that their was greater potential for borrowers to go into default on their loans since this financing was typically for their second major mortgage. Today, even though getting approved for a vacation home loan is still not as a easy as getting a loan for a primary residence, it is not so much as a challenge as it was in the past. The increased property values across the United States and the fact that mortgage rates are near 40-year lows, is helping the approval rates.

Buyers will typically be required to make at least a 10 - 20% down payment for their home purchases. However, it is important to note that Star Loan Services only requires 5% down payments for qualified buyers. Buyers who rent out the property might face a higher down payment since that will further raise the risk for the lender. Apply now!

Nowadays, it even possible for buyers to receive financing for their vacation home mortgage from stock brokerage firms. For example, customers of Smith Barney can obtain loans with no down payment. If the buyer has an ample stock portfolio, the entire purchase price of the property can be financed by a Smith Barney vacation home loan.

Other options buyers have for financing these types of loans include interest only loans and 'pay option' adjustable-rate mortgages (ARMs). With the former, a buyers make the smaller interest-only payments for a fixed amount of time and then will obligated to pay both the interest and the principal, which will obviously be in larger payments. With the latter, a buyer selects from a variety of different payment methods every month.


Interest Rates for Vacation Home Loans
Being that the risk associated with these loans are passed on to borrowers, interest rates are nearly 1/4 to 1/2 of a point higher than rates on primary-residence mortgages. Nonetheless, there are tax advantages associated with owning a vacation home.

The homeowner is entitled to deduct the interest he paid on two homes and the interest on any debts that are secured by one or both of those properties. Specifically, if the balance of the principal and second home are not more than $1 million, plus up to $100,000 of home equity indebtedness, a borrower can deduct 100% of the mortgage interest. Check out more info on second home tax benefits.

In conclusion...
Prior to applying for a vacation home mortgage, potential buyers should explore all of their options -- interest rates and the different types of loans they can utilize. It is also important to determine how much you can afford.


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