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VACATION HOME MORTGAGES
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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