Q: What type of mortgages should you consider when buying a vacation rental home?

A: When you are pondering or researching the idea of buying a vacation home, whether for pleasure or profit, financing your home will likely come to the forefront of your process. While there isn't a simple answer to the question of “which loan program,” the right type of mortgage for you depends on many different factors:

What does your current financial picture look like?

• Can you afford the home without any consideration of rental revenue?
• Do you expect your finances to change within the next 3-10 years? Are you going to retire soon? Children going to college? New job, etc.
• How long you intend to keep your second home?
• How comfortable you are with the prospective mortgage payment and the possibility of it changing (Important to consider if you if are thinking abut an adjustable rate mortgage)?
• Do you intend on renting your home? If so, how many weeks you intend to rent your property?
• What is a reasonable rental income potential, or the property's past rental history?
• Do you intend on “renting by owner” or using a management company to rent (which means you will have to pay commissions)?
• Do you expect to pay the property off through principal payments or are you banking on property appreciation to make you money?

For current mortgage rate information, a mortgage calculator, and different loan options in your area, consult BankRate.com.

What advice do you have for other homeowners about financing a vacation rental home?

Using Self-Directed IRAs to Buy Vacation Properties Did you know that you can buy real estate, including vacation properties, with funds from your IRA?   How to Avoid the Bubble When Buying a Vacation Home Start with a plan and do your research to avoid getting caught in a  speculator's market   Second Homes vs. Investment Properties How to tell if you're buying a second home or an investment property for tax purposes   Mortgage Financing Options for Vacation Rental Homes The differences between loans for second homes and investment properties

© Christine Karpinski, 2007, U.090507.AF