Buying a vacation home requires planning and some research. Vacation properties prices are at their lowest rates. Selecting the right location involves finding where your best vacation took place. Once you narrow down the region, focus on the type of property that you want. Are you looking for a condo on the beach or a vacation cabin in the mountains?
Both areas offer a lot of desirable vacation opportunities. Narrow down your choice and begin researching prices in the area. Financing your vacation home with an equity line of credit provides some significant advantages.
Advantages of an Equity Credit Line
Seeking a home equity line of credit offers significant benefits. First, there are no closing costs associated with the home equity credit line. Closing costs generally range from 1% to 2% or higher for a typical mortgage loan. A home equity line requires an appraisal and a small application fee which only costs a few hundred dollars.
According to the I.R.S, a home equity line of credit is tax deductible. Also, paying an equity credit line requires substantially lower monthly payments than a traditional mortgage since the home equity credit line provides an interest-only payment plan.
Obtaining funds usually requires a few weeks. The advantage of having substantial funds available for your vacation property gives you the ability to not only close immediately, but you might be able to negotiate a better price because your cash purchase. Lastly, some vacation homes are situated in communities with high foreclosures.
Financial restrictions limit banks from loaning money on condominiums that have more than a 50% default rate and have less than 50% owner occupied units. Having the funds lets you bypass this problem since many desirable vacation properties have financing issues.
Obtaining a Home Equity Credit Line
When considering an equity credit line, research rates from Bankrate. Here they provide national and state rates for a home equity line of credit. Most banks require an appraisal, a copy of your homeowner’s insurance, along with your mortgage statements. In addition, an application with proof of earnings along with a complete credit profile with the appraisal and application fee are all that is required. Approval times vary, but most banks offer approvals within two weeks. Drawing from the line only requires writing a check.
Owning a vacation home can make a dream a reality with a home equity line of credit. In addition, renting out your vacation home during peak times creates cash flow that helps pay the equity credit line and restores your home equity.
Blanca Sola - Blanca Sola, a graduate from the University of South Florida has worked in the staffing industry for over five years. Nine years ago, ...
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