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Should I mortgage against a vacation home purchase or against my fully paid for home?

I am buying a vacation home. Should I use it as collateral for the loan or should I take a mortgage against my fully paid for primary residence?
  • November 27 2013 - Cranberry Township
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Answers (5)

Just be prepared for a large down payment because most second/vacation homes will require this. But the best thing for you to do is to speak with a lender directly to see if you can get started on financing a new vacation home with your situation. There are lenders like myself that would be glad to speak with you to help you get the loan that you need. Well I hope this helps! If you have any further questions or if you would like a loan, feel free to contact me.

Good Luck!


  • December 04 2013
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I would agree with the consensus on the rate similarities between the 2 options as well as the advice to seek tax advice from a professional.  There is a potential benefit of taking cash out in your negotiation power for the purchase.  It may be a scenario where a cash bid and quick closing can win the property for you and potentially get you a better purchase price as there is no financing contingency.  

There also is the ability to do "delayed financing" if you purchase in cash and decide that you want to put a mortgage in on the 2nd property.  Within 6 months of closing you can take cash out of the property and it is treated exactly the same as a purchase so there is no impact on the rate.  

Just a few options to consider.

Good Luck 
Tom

 

  • November 27 2013
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the rate would be the same, so you'd want to talk to a CPA about which scenario would be better for your income tax return. Lenders can't give you tax advice so be careful of the answers you get.
  • November 27 2013
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If you finance the purchase of the second home you will have to put 20% down.  If you pull cash out of your primary and then pay cash for the new house you will only be able to get 75-85% equity out depending on which program you use and your scores ect. so it will really depend on home value and what amount you can pull out of your primary residence as to if that would be enough for the purchase of the new property just buying it in cash.

Would be happy to help you figure it out, you can contact me though my profile if you would like my help, we are a nationwide lender.

Regards,
Brynn

  • November 27 2013
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The rate will should be the same so long as you have at least 20% down.  Chat with a tax accountant, as there can be tax differences to a primary home mortgage vs a second home mortgage.
  • November 27 2013
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