Buying a vacation home offers a sense of flexibility and the freedom to enjoy some time off without the inconvenience of making reservations. Whether you’re looking for financial benefits or simple enjoyment, learning how to pay for a vacation property is a crucial part of the purchase process. Here, we’ll tell you what you need to get started and discuss the most popular financing options, regardless if you want a timeshare resale vs. cancellation.
Vacation Home Financing Options
If
you’ve bought a home in the past, you’re likely familiar with the financing
options mentioned above. Some options, depending on location, may be
unavailable for vacation homes. The most common options are:
· A timeshare
purchase. A
timeshare, which is sometimes referred to as vacation ownership, is a lifelong
contract. Here, buyers finance or prepay lump sums upfront, plus yearly
maintenance fees. You’ll get to visit the property at least once a year. Visit https://acagroup.org/ for additional details. If you find that you need to sell, visiting Hilton Timeshare Resale Specialists will give you many tips for this transaction.
· Traditional
mortgages. A
mortgage is the most common way to pay for a vacation property. These loans are
not available through government programs, so they’re tougher to get. With
vacation properties, however, mortgages are one of the few available options.
· Government
loans. These
lending products are part of government-backed programs that ensure timely
payments. VA, USDA, and FHA loans are typically not available for vacation
homes, but there are limited exceptions.
· Home equity
loans and lines of credit. If you are already a homeowner, it may be possible to borrow
against the home’s value through a home equity line of credit or loan. These
loans are closed-ended, which means they’re repaid over a preset term and have
a fixed payment.
·Cash-out refinancing. Here, an existing mortgage
is replaced with a new one at the property’s appraised value. You’ll get the
difference between the new mortgage’s amount and the loan balance in a cash
payment.
In
some cases, sellers offer financing so buyers can make payments on vacation
homes. This might be a good choice if you can’t tap into home equity or get a
traditional mortgage.
Financial Documents and Requirements
Before
approving a loan for a vacation home, the lender will check to see if you can
afford to make the monthly payment. Below is a list of all the documents you’ll
need.
· Proof of income and employment. Before
approving a vacation home loan, lenders verify employment and income to ensure
that you can make steady payments. You’ll provide pay stubs, employer names and
contact information, and the last two years’ W-2 forms. Proof of income from
additional sources will also be helpful.
· Lists of
assets and debts. Some lenders request itemized lists of assets and debts, including
monthly payment amounts. Be ready to provide a minimum of three months of bank
statements showing that you can afford the down payment and several mortgage
payments.
The
reserve requirement, or the amount to be set aside for mortgage payments, may
be higher for vacation homes depending on the number of properties you have.
Timeshares: A Great Way to Get Into a
Vacation Home
While
these options are all viable, they don’t work for everyone. For instance, a
home equity line of credit will put your primary residence and vacation home at
risk if you can’t make timely payments. For that reason, we recommend
purchasing a timeshare to get a vacation home at an affordable price.
