ON TREND Smart Money Moves

by Inlanta Mortgage

Smart Money Moves:

Owning a Vacation Home

IF YOU’RE NOT FEELING warm and fuzzy with chestnuts roasting on an open fire, and if Jack Frost is ticking you off, you might be ready to explore the charms of a more southern exposure. (One sure sign of winter-blah-phobia is the sudden onset of craving Pina Coladas and humming Jimmy Buffet tunes.)

Even if you love the four seasons, a vacation home in the snowy mantle of the Mitten or sunny shores of Florida can actually build your investment portfolio. The right move on a vacation home can also lay the foundation for a future retirement nest, generate extra revenue and increase your family fun quotient.

Relatively low mortgage rates make vacation home financing more affordable than ever. Travel hassles, such as cruise and resort risks during the time of COVID, make owning a vacation home more attractive than ever. With careful planning, you can leverage your assets to make memories that will last a lifetime.

Benefits of Owning a Vacation Property:

•Vacation properties tend to appreciate over time, so you’re turning your annual vacation expense into an investment!

•You can generate rental revenue to pay down a future retirement home or a legacy family retreat.

•You may even spend less annually on vacations, depending on the mortgage amount.

•Depending on your unique financial picture, you could enjoy additional tax benefits and/or a relatively passive revenue stream.

•You will have a great place to get away from it all!

Things You Should Know Before Buying:

• You’ll need to spend at least 14 days a year or 10 percent of the days rented out to claim it as a residence on your taxes with associated benefits.

• You’ll need a minimum of 10 percent or more for a downpayment

• You’ll need a strong credit score, minimum 620 but you’ll have better terms at 680 or higher.

• Because vacation home lending is more stringent, you’ll need a rock-solid pre-approval before you shop.

• If one area of your application is weaker, you can often compensate for it by being strong in other areas. Thanks to this flexibility, it’s possible to qualify for a second home mortgage even without perfect credit or a huge down payment.

Twin Benefits of a Cash-Out Refi

If you’ve lived in your current home for any length of time, there’s a good chance you’re in a substantial equity position given the current real estate market. Using a cash-out refi may be a great instrument to finance a healthy down payment — or the entirety — of a vacation property, all while possibly netting you a lower interest rate. According to the National Association of REALTORS®, about a fifth of buyers tap into their equity for all or part of a second home purchase, through either a cash-out refinance or a home equity line of credit (HELOC).

So if owning a vacation home resonates with you, start strategizing with a trusted advisor to make your next getaway a smart money move!

Jonathan Arnold Branch manager at the Ada office of Inlanta Mortgage NMLS# 1016. Connect with him at MoveUpMi.com. Jonathan is also licensed in Florida – learn more at FloridaHomeLoanSolutions.com