Exploring Fire Insurance For Second Homes And Vacation Properties – Written by Mia Taylor Written by Mia TaylorArrow Contributing Writer Mia Taylor is an award-winning contributor and journalist with two decades of experience working as a staff reporter or contributor for some of the world’s leading newspapers and websites. of the country, including The Atlanta Journal -Constitution, San Diego Union-Tribune, TheStreet, MSN and Credit.com. Mia Taylor
Edited by Laurie Dupnock Edited by Laurie DupnockArrow Right Editor, Home Lending Laurie Dupnock is a mortgage editor on the Home Lending team. Connect with Laurie Dupnock on LinkedIn Linkedin Laurie Dupnock
Exploring Fire Insurance For Second Homes And Vacation Properties
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Buying a second home is a big step, but it comes with personal and financial rewards. Owning a vacation home beats staying in a small hotel room and saves the hassle of making reservations or worrying about the cost of rental fees. And in the long run, a vacation home can help you build wealth as the home appreciates.
Whether you’re thinking about getting a vacation home loan now or it’s still on your wish list for the future, there are steps that can make financing a vacation home smoother.
If you don’t have a home yet, you can use the vacation home as your primary residence. You can qualify for a home loan with as little as 3 percent down, assuming the purchase price is no more than the conforming loan limit in your area, and take advantage of the homeowners’ tax benefits.
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You can use the property as your second home, but you’ll likely need at least 10 to 15 percent down to secure a loan. Or, you can use the vacation home as an investment property if you plan to rent it out when it’s not occupied.
However, if you use it mainly as an investment property (rough rule: you will live there for less than 14 days a year), you will pay more in interest on the loan and the down payment will be much higher.
Before you decide to take out a mortgage on a vacation home, it’s important to understand the costs you may face and determine if a second home is in your budget.
In addition to the monthly mortgage payment, you will pay other expenses associated with vacation property ownership. These expenses generally include:
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If you are planning to get a vacation home loan, your mortgage lender may require you to purchase a vacation home insurance plan. These costs vary depending on the type and location of the property. For example, a beachfront home may be riskier because of the potential for hurricanes and flooding, so premiums are likely to be higher than homes further inland.
Look at the availability and cost of insurance before you decide to buy a vacation home and factor it into your budget.
It’s best to look for a mortgage lender with experience specializing in second homes in the area you want to buy, if possible. A local lender (who finances vacation homes) will have financing sources ready and will understand the regulations and specifics required of the area you are buying.
Once you find a lender, explore your vacation home financing options. You might consider paying the down payment through savings, cash-out refinancing from your primary residence, or a home equity line of credit (HELOC). If possible, using funds from your savings is often the best option because you won’t be facing additional debt.
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While lenders can be liberal in some ways when financing a primary residence, vacation homes are different. FHA and VA loans are out—they’re only for primary residences—but you can get conventional financing. You may just have to meet some requirements.
Even if your vacation home is going to be primarily a home — not an investment property — financing is often a little more stringent than for a primary home.
Mortgage rates for vacation homes are typically higher than financing for a primary residence – about 0.5 percent to 1 percent extra. Be sure to shop around for the best second home mortgage rates and terms.
Buying real estate in a new area—or even in an area you’ve vacationed in for years—requires expert guidance, so be sure to work with an experienced local real estate professional. They will know not only which properties are available, but also why you may prefer one over another, and any local regulations or restrictions.
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If you are considering buying a holiday home, think about how you will use it and whether or not you will buy it as a rental property. One of the best ways to start is to live in a short-term rental in the area to see if you like the location.
Consider distances and traffic conditions, shops and restaurants, and the availability of medical care and (if applicable) schools or day care centers. Talk to local real estate agents and visit open houses.
Keep in mind that obtaining purchase financing may involve meeting more stringent requirements than your first mortgage. The more you know, the better your chance of getting the vacation home of your dreams.
Mia Taylor is an award-winning contributor and journalist with two decades of experience working as a staff reporter or contributor for some of the nation’s leading newspapers and websites including The Atlanta Journal-Constitution, San Diego Union -Tribune, TheStreet, MSN and Credit.com.
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Edited by Laurie Dupnock Edited by Laurie DupnockArrow Right Editor, Home Lending Laurie Dupnock is a mortgage editor on the Home Lending team. Connect with Laurie Dupnock on LinkedIn Linkedin Laurie Dupnock Editor, Home Lending Despite facing the deadliest viral outbreak in more than a century, it hasn’t stopped Singaporeans from buying property overseas
. Underpinning this interest is rising inflation, property cooling measures in Singapore and real estate’s reputation for value retention and stability.
Beyond the performance of real estate in recent years – for example, the 72% increase in house prices in Australia over the past 10 years
Diversification is a strategy of mixing and matching different types of asset classes
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