Vacation Home Archives - George L. Duarte

Should You Use A Home Equity Loan To Buy A Vacation Home? If you are looking for a way to diversify your investments while also making it easier to go on vacation, you may have thought about purchasing a vacation home. Saving up enough money for one house was already hard enough, so how are you going to save up money for a second house? If you have owned your primary residence for a while, you might be able to take out a home equity loan. Then, you could use this to purchase a vacation house.

How Does A Home Equity Loan Work?

A home equity loan allows you to borrow against the equity you have already accrued in your house. A home equity loan typically has a lower interest rate when compared to a personal loan because you use your house as collateral. If you have at least 20 percent equity built up in your home, you may be able to tap into this equity to use it as a down payment for a vacation home.

The process of applying for a home equity loan is similar to the process of applying for a mortgage. Then, you can pay back the home equity loan on your own schedule. You are only required to pay the interest every month, and you can work with the lender to figure out when you would like to repay the rest of the loan.

Consider Added Expenses With A Vacation Home

If you purchase a vacation house, some of your expenses might be higher. For example, your home insurance premium will probably be higher on your vacation house because there is a greater risk of something going wrong. You aren’t in the house all the time, so there is a greater risk of something going unnoticed. Furthermore, real estate taxes are typically higher on a vacation house than they are on a primary residence. You should have enough money put aside.

Consider Using A Home Equity Loan To Buy A Vacation House

A vacation house can be a great investment and a home equity loan can provide you with the flexibility you need to purchase one; however, you should consider all of the expenses that go along with a vacation home before deciding if you can afford one.

Three Tips To Get The Best Financing On Your Second Home Are you buying a property as your second home? Perhaps you are looking for a small cottage or apartment where you can escape to for your vacations, or maybe you want to have another home closer to your relatives?

Maybe you want to rent out your second property and make a steady income from your investment. Whatever the reason, a second piece of real estate can be a fantastic investment. However, sometimes getting a mortgage on your second home can present a challenge.

Generally, a mortgage lender will have tougher standards for vacation home — or second home — loans than primary home loans. This is because usually when you are buying a second home your finances will be stretched thinner and you will have less money to spare due to already paying a mortgage on your primary home.

This additional risk may mean that your second home mortgage can be more difficult to close and likely could carry a higher interest rate.

Here are three tips to keep in mind that will help you to get the best mortgage on your second property:

Build up a decent amount of savings.

Your mortgage lender will want to be able to see that you have a large amount of savings in reserve so that you will have enough to pay for the mortgage even if you were to lose your job or other income source.

Pay off any credit card or installment debt.

Many lenders will be hesitant to approve your second home mortgage if they see that you have a lot of debt on your credit card. They will want to see that you have a low debt to income ratio so that you will be able to pay back the loan.

Use your primary home as a resource.

If you have always made your payments on time and you are well on your way through paying off your first house, you may have equity to borrow against for some or all of your second home purchase.

These are just a few tips to keep in mind in order to make getting a mortgage for your second property as easy as possible.

To find out more about investing in a second home or vacation property, contact your trusted real estate professional today.