There’s really no time like the present for home buyers. The same goes for vacation home buyers – interest rates are favorable and the current market climate favors buyers who do not have a home for sale.
If you’re looking for a second home, now’s your time to jump at the opportunities that abound!
As investment properties, vacation homes are the perfect solution for people looking to broaden their investment portfolio.
If you have the right financing, this is a great time to pick up rental property.
So … the question becomes: can you finance a second home?
Think down payment:
If you’re planning to finance a vacation home, be prepared to make a bigger down payment than you would ordinarily have to make with a traditional mortgage.
Most lenders will require you to come up with more cash so that they know you can afford another house. Some loans will require you to put up 20 percent of the purchase price of the property.
Think risks:
When your loan application is evaluated by a lender you are evaluated in terms of lending risk. The lower the apparent risk, the lower the interest rate on your mortgage will be.
Taking on a second mortgage is considered to be riskier than when you only have a single loan.
The lender may add a risk premium to your interest rate, which essentially means you will have to pay a higher interest rate.
The loan for your vacation home will typically have a higher interest rate than a rate for a first mortgage.
Think income and assets:
When you are being evaluated for a second home loan, the lender will look at the amount of income that you bring in. You must have a sufficient income to handle both your primary and your secondary mortgage payment.
The lender may also be interested in the amount of liquid assets you have – such as how much money you have saved that could go towards paying your mortgage in the event of any issues with income interruption.
The bottom line:
While the conditions for purchasing a vacation home are favorable right now, there is also is a good market for people looking to rent.
Many people who purchase a vacation home decide to rent it out for a few weeks each year. While this isn’t a get-rich-quick scheme, it might very well be an important part of your retirement planning.
Renting out your second home when you aren’t using it quickly offsets the cost of ownership. After all, you are allowed to rent your home to friends and acquaintances rent their homes to friends for 14 days a year, tax free.
Since the average second home is owned for about 10 years, this is equivalent to approximately $50,000 in cash earnings over the ownership cycle.
If you’re looking to purchase a vacation home, why not consider North America’s best ski-in/ski-out value? Westgate Park City Resort & Spa’s condos are priced like short sales from $139,900.
For more information, please visit www.westgatepc.com/residences
