Buying a second home on the beach, in the woods, or anywhere you love to spend time lets you spend more of your time exactly where you want to be. For some people, it’s also a good way to earn rental income when you’re not there. However, lenders have different rules about financing main (or “primary”) homes and vacation homes. Here are a few things to consider:
1. You cannot use FHA loans to finance vacation homes.
Without this option, most buyers choose to finance these homes with conventional loans or home equity loans.
2. Minimum down payments for vacation homes may be higher.
Because this is not your main residence, the lender may require a down payment of at least 20%, and interest rates can also be higher.
3. You’ll pay for maintenance, utility fees, association fees, and property taxes.
Paying for a second property involves more than a monthly mortgage payment. Make sure your budget takes the entire amount into consideration.
4. You can write off mortgage interest and property taxes for both properties.*
However, as of 2018, the total of all state and local taxes deducted, including property taxes, is limited to $10,000 per tax return.
*Not intended to be tax advice. Consult your tax professional.
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