How to Buy a Vacation Home

Buying a vacation home is an exciting opportunity, but turning that dream into reality requires careful planning. Here, we’ll explore the process of buying a vacation home, from evaluating whether it fits your lifestyle to understanding the implications of owning a second home. We’ll also help you think through how to narrow down vacation home options, and how to pay for it.

1. Contemplate your goals and lifestyle 

A vacation home is a commitment that affects your finances for years to come. If you’re not certain you’re ready for that, consider these questions:

How will you primarily use the vacation home?

Generally, if you rent out a vacation home for less than 15 days during the year, it’s considered a personal residence, not a rental property. That means you may not be able to leverage certain tax deductions that apply to rental properties. If you plan to rent out the home for a longer period of time, that’ll complicate your taxes, as well. 

Likewise, consider whether you’re prepared to handle landlord responsibilities (or hire a property manager). Whether it’s a short- or long-term lease, someone has to coordinate listing and marketing the property, bookings and clean-up. That may be more than what you’re willing to do — or, it may not matter, especially if you already have experience as a landlord.

How often will you use it?

Consider your family and social commitments, work schedule (if applicable) and travel preferences. If you already know the location for your vacation home, think about: 

• How easy is it to get to? Can you take a car, or do you have to fly?
• How long does it take to get to?
• Will the climate prevent you from using it year-round?
• If you have younger children, how feasible is it to take them out of school for trips?

Are you interested in visiting the same location multiple times?

When you buy a vacation home, you’re committing to return to the same area over and over. This may not be an issue if you already love the location or previously traveled there. If not, you may find the time spent at the home affords you less time to explore other places. In a similar vein, the cost of owning the home may limit your ability to pay for travel elsewhere.

Can you manage a second set of costs?

If you aren’t paying cash for the home, can your budget handle a second monthly mortgage payment, and at a higher interest rate? A vacation home mortgage costs more because it’s for a second home that you don’t live in all the time, making it a riskier prospect for a lender.

What about additional homeowners insurance and property taxes? The average homeowner spends almost $16,000 per year on insurance, taxes and home maintenance, according to Zillow research. While a vacation home may not need as much maintenance as a primary residence, it’ll always need insurance coverage — possibly a flood insurance policy, too — and is always subject to taxes.

What are your personal preferences when you travel?

Consider what you value most on vacation. Some like the process of packing and staying in hotels, where everything is taken care of, while others prefer the convenience of keeping things at a vacation home. You won’t have to pack as much in the latter scenario, but you’ll also need to plan for things like stocking the kitchen and potentially hosting guests. Think about these questions and what’s most important to you when you travel.

2. Set your budget

Depending on where you’re looking, a vacation home may be more expensive than your primary residence. Use our Affordability Calculator to estimate what you may be able to afford based on your income, debt (including the mortgage for your primary residence) and other variables. 

Beyond the home’s purchase price, factor in:

• Down payment: Generally, a vacation home requires a bigger down payment compared to a primary residence. If it’s exclusively a second home, you’ll likely need at least 10% down. If you plan to treat it as a rental property, you may need as much as 25%.
• Closing costs: The closing costs on a mortgage can run 2%-5% of the home’s purchase price. They include an appraisal fee and title services fees.
• Homeowners insurance: For a vacation home, a basic insurance policy won’t cover it. These types of properties are riskier for insurers, and may be located in a riskier area. 
• Property taxes: Depending on where the home is, the property tax rate for your vacation home may be higher compared to your primary residence.
• Maintenance and utilities: A good rule of thumb is to set aside 1%-2% of the home's value for maintenance yearly. Even if you aren’t using the home or renting it out, you’ll still need to cover things like electricity and water during vacancies.
• HOA fees: If the vacation home is a condo or in a planned community, you’ll likely have to pay homeowners association dues.
• Furnishings: If the home isn’t already furnished, you’ll need to spend money upfront to make it livable. This may be a significant expense if the home is especially large or has many bedrooms.

3. Explore financing options

There are several ways to finance a vacation home. You can get another mortgage, refinance your primary residence and take cash out or take out a home equity line or loan, depending on your credit and finances.

Mortgage

You can take out a conventional loan to buy a vacation home, similar to how you bought your primary residence. Note that you can’t use an FHA, VA or USDA loan to buy a vacation property — only conventional loans. If the home is a condo, be prepared for additional loan paperwork and scrutiny in underwriting.

Cash-out refinance

With a cash-out refinance, you can refinance the mortgage on your primary residence for more than you owe and use the difference as a down payment or to buy the vacation home outright.

Home equity line of credit (HELOC) or home equity loan

f you have a good interest rate on your primary mortgage, it may make more sense to borrow against the equity in your primary residence instead of doing a cash-out refinance. You can do this through a home equity loan (a lump-sum second mortgage) or a line of credit, used as needed.

If you need help financing your vacation home, check out our various mortgage options at Zillow Home Loans.* Our loan officers are available 7 days a week to answer all your questions and help you find the best solution. Get pre-approved or start the process today.

4. Find the right property

You may not be as familiar with the housing market where you plan to buy a vacation home, so it’s important to work with a local real estate agent. Many specialize in vacation and rental properties, especially in resort towns.

If you’re considering a faraway location, your agent may handle the process of visiting and vetting homes for you. Once you decide on “the one,” they’ll also know local vendors who can help with any renovations or repairs.

When you’re ready to find your vacation home, we can help. Browse waterfront listings on Zillow, filter by HOA fees, use AI Mode to search by terms like “cabin,” “lake,” or “summer house,” and more.

*Zillow Home Loans; an equal housing lender. NMLS #10287