If you’re tired of paying premium prices for family vacations, are fantasizing about lakeside retirement, or are certain “it’s 5’oclock somewhere” – there’s a blackbelt money-move for you! Whether it’s at one of Pure Michigan’s gorgeous getaways or somewhere suited to snowbirds, a vacation home can actually build your investment portfolio — and increase your “family fun quotient.”
With careful planning, you can leverage your assets to make memories that will last a lifetime.
First, let’s make sure you know what you’re getting into buying a vacation home.
- You’ll need to spend at least 14 days a year or 10% of the days rented out to claim it as a residence on your taxes with associated benefits.
- You’ll need a min. of 10% or more for a downpayment
- You’ll need a strong credit score, min. 620 but you’ll have better terms at 680 or higher.
- Because vacation home lending is more stringent, you’ll need a rock-solid pre-approval before you shop.
Benefits of the Getaway-Homefree Move:
- Vacation properties tend to appreciate over time, so you’re turning your annual vacation expense into an investment!
- You can generate rental revenue to pay down a future retirement home or a legacy family retreat.
- You may even spend less annually on vacations, depending on the mortgage amount.
- Depending on your unique financial picture, you could enjoy additional tax benefits and/or a relatively passive revenue stream.
- You will have a great place to get away from it all!
Twin Benefits of a Cash-Out Refi
If you’ve lived in your current home for any length of time, there’s a good chance you’re in a substantial equity position given the current real estate market. Using a cash-out refi may be a great instrument to finance a healthy down payment – or the entirety — of a vacation property, all while possibly netting you a lower interest rate.
According to the National Association of REALTORS®, about a fifth of buyers tap into their equity for all or part of a second home purchase, through either a cash-out refinance or a home equity line of credit (HELOC).
So if owning a vacation home resonates with you, start strategizing with a trusted advisor to make your getaway a smart money move!