The idea of having a separate home to go to when taking a vacation can be really exciting. But for anyone who plans to do this and who plans to buy that home with a mortgage loan, there is important information they need to have. Mortgages for vacation homes are not going to be quite the same as loans for first homes, so asking all the right questions before signing on the dotted line can help prevent significant misunderstandings. Here are the main things any vacation home buyer should know when they start looking for a second home and a mortgage to go with it.
In most cases, the mortgage rates for vacation homes are higher than they are for homes that are occupied as primary dwellings. There are several reasons for that, with one of those reasons being that the home is vacant for much of the year. That puts it at more risk, and that means the lender is also taking a bigger risk. Additionally, if a homeowner has a mortgage on their first home and is looking for another mortgage to buy a second home, they may be a higher financial or credit risk to the bank. With that in mind, the lender will charge a higher rate of interest in order to help protect themselves from financial loss.
It Can Be Harder to Get a Vacation Home Mortgage
Getting a mortgage for a vacation home is generally not going to be as easy to get. Part of that comes from the higher financial risk that a lender takes on, and also from the additional paperwork. Lenders generally like to loan on homes in their local area, and if the vacation home is located far away the lender may be reluctant to loan on it. Doing so would require them to potentially work with title companies, appraisers, and others that they are unfamiliar with, which could cost them time and money they would prefer to avoid spending. Additionally, the lender may take into consideration the condition of the property. But not all lenders feel this way and there are many that will lend on vacation homes.
Not All Lenders Will Offer Vacation Home Mortgages
Talking to several lenders before looking for a vacation home can help a home buyer decide which lender to work with and get a preapproval for their loan. That can make it easier to move forward with the purchase and the transaction. There may be a particular lender that the home buyer would like to use, and the first step to doing so is making sure that lender works with vacation homes. If they are not in that business, the home buyer will need to move on and choose a different lender to meet their needs. There are always options, but they may not be the home buyer's first choice.
Buyers Should Carefully Check Their Finances
Before setting out to get a mortgage for a Beacon Hill vacation home, buyers should take a good look at their finances, what they can afford, and what they are prepared for if something should go wrong. That way they can decide if a second home is realistic for them, and whether they should request a mortgage now or wait until their finances are different. Making that choice is not always easy, but it is always an important way to stay as financially secure as possible.