Obtaining a Mortgage for a Vacation Home

Have you reached the point in your life at which you’re thinking of buying a vacation home? Purchasing a second home in an area you love to visit can be an enticing notion for many reasons. Despite the bumpy road the market has seen over the last decade, real estate continues to be an excellent long-term investment. Additionally, if you are planning to rent out the home when you are not using it yourself, it can virtually pay for itself – or even make you a profit. A weekly rental during peak season could end up paying the mortgage for the entire month, depending on where the home is located.

So, what do you need to know about obtaining a mortgage for that second home you hope to buy? The answer is pretty simple. The requirements for a mortgage on a vacation home are the same as the qualifications for a traditional mortgage.

If you have decided on where you wish to own a second home, you can partner with a real estate agent who knows your target market. Ask questions about historical prices in the area and resale potential. If it seems like a sound decision, it’s time to talk with your loan officer about your options.

If you have substantial equity in your existing home, one option may be a cash-out refinance, which will allow you to obtain the cash you need for a down payment on the mortgage for your vacation home. A cash-out refinance is not the same as a home equity line of credit (HELOC), in which you are extended credit in addition to continuing to pay off your existing mortgage. Rather, a cash-out refinance replaces your current mortgage loan. By refinancing in this manner, you will be able to take out some of your home equity in a lump sum of cash. Your new mortgage loan will feature a new interest rate and payment amortization schedule. The good news is that a cash-out refinance, while providing you with the lump sum you need, can often feature a lower interest rate than a HELOC.

Of course, it could be that you have amassed enough savings to cover a down payment out of pocket, which is another way to meet the down payment requirement for your vacation home. Either way, you’ll need to be able to provide the down payment necessary to obtain another mortgage loan. Beyond the down payment, the same general standards apply when obtaining a second home loan: stellar credit is a must and will dictate the interest rate for which you will qualify, and you’ll need to provide all the same financial documentation to your lender that you supplied for your current mortgage.

If you’re thinking of buying a second home, speak with your loan officer to learn more about your buying power and financing options. He or she will be able to guide you down the path to owning the vacation home you’ve always dreamed about.

For more information, visit www.polimortgage.com