James Asks… My wife and I are thinking about buying a vacation home in the mountains, how much of a down payment would I need?

The amount of money required for a down payment on a second home or a “vacation home,” all depends on whether you plan on using the home as a true vacation property or if you plan on offering it as a part-time rental property. If your and wife want to spend your weekends at this vacation property, then down payments can be as low as 5-10% the value of the home. Keep in mind a vacation property is one that is 100 miles from your primary residence or located in a resort area. If the location is right, on a $300,000 home you would only need to put down between $15,000 and $30,000.

On the other hand, if you want to use your second home as a full time or part-time rental property, you will be expected to put down a 20% payment. You will need to qualify for the loan with the potential rental income of the home. You should expect a slightly higher interest rate on a rental property purchase as well as some tighter underwriting guidelines. The lenders will want to make sure you have the assets to cover vacancy on the rental or in the event the desired rental potential is not achieved.

Buying another home, if done properly can be a great long term investment!

Meet Cheryl!

About Cheryl

As a successful business owner and community leader, Cheryl Braunschweiger is known and respected for getting things done with a degree of skill and enthusiasm that bring out the best in those around her - colleagues, clients and friends. The name of her business, ALMC Mortgage, reflects Cheryl's philosophy and personality. She says it stands for All Loans Must Close –a reflection of her determination to do whatever it takes to serve her clients. Cheryl has been in the mortgage lending business for 20 years. Read More About Cheryl
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