Have you visited your favorite holiday destination and wished you owned a part of it? But have you considered how much it will cost you and how long it will take to pay for it? If you buy using a mortgage, the property may incur higher costs than your own house. So what are the reasons that make vacation home mortgages incur higher costs?
In Massachusetts, vacation home mortgages require higher installments payments, high-interest rates, and property taxes. It’s because the mortgage financiers take a bigger risk than they would on a typical home in various ways. They include:
- In most cases, the vacation homes are vacant or are rented by individuals who might not take care of the property as they don’t own it. It means there will be damages to the property that might reduce its value.
- Regular houses are mostly occupied, making them less risky than vacation homes. The vacation homes have no one to maintain them like regular homes as no one leaves there permanently.
- Many vacation homes are in areas that are prone to natural disasters such as flooding and hurricanes. So, this makes it riskier, contributing to the rising mortgage costs.
How much is a vacation home down payment?
The down payment differs from lender to lender. Most vacation home mortgage programs in Massachusetts require a 10% down payment. However, if you want to rent the property, the payment can go up to 15%. Besides paying high down payments on vacation homes, the mortgage interest rates are also high compared to homes.
Before purchasing a vacation property, you must evaluate all the risks involved. You will have to pay more for the home in down payment, interest rates, and insurance premiums. It goes up, especially if renting it out and not using it yourself. So, have all that in mind to avoid the disappointment and frustrations of being unable to make the payments.