SECOND HOME LOANS & VACATION HOME MORTGAGES CHARLESTON SOUTH CAROLINACharleston SC, Isle of Palms, Sullivan’s Island, Kiawah Island, Folly Beach, Wild Dunes Resort and Edisto Island are riddled with second homes (vacation homes), and getting the right mortgage financing is of the utmost importance for such a large investment. As an ex-mortgage expert for over 13 years I have an understanding of what it takes to get approved, and the important factors involved in obtaining the right loan and insuring mortgage approval for buying a vacation second home.
Buying a second home can be like planning the vacation of a lifetime. Because it’s a significant investment, there are many things a future homeowner should know about the purchase process, and this article will cover the most important parts. Owning a second home is a great option, but it is important to do one’s research before committing to such a big responsibility.
There are two main types of second homes: vacation homes, and investment homes. The definition of a true “second home” varies from lender to lender, but typically, to be defined as a vacation home the house must be at least 50 miles away from your primary home. Usually, the property must be capable of year round occupancy, and it must be occupied for a portion of the year. Investment homes are usually defined as property that the owner does not intend to occupy, or they can be vacation home that is too close to your first home. Here in Charleston South Carolina one can gather that there are a lot of second homes because of us being a coastal beach town, and a historic luxury vacation destination as well. In many instances there are 3rd and 4th homes that people own here, however these wouldn’t qualify for standard mortgages.
As far as mortgage rates go, second homes will always have a higher rate than your first home. Properties not considered a primary residence are assigned much higher rates because the bank is taking a greater risk, and therefore, the risk is represented in the rate. The risk for the bank is; if you were to go into financial distress (such as 2008) the first property you were relinquish would be the vacation home. Banks also consider what’s called the “loan to value” of the requested mortgage loan. This is the amount borrowed as a percentage of the appraised value of the property. Keep in mind that a higher loan to value of the house means a the higher rate.
It is harder and more expensive to obtain a loan for your second home, and you should expect to put down at least 10 percent, likely more, and to pay a higher interest rate that is a quarter (.25%) to half (.50%) of a percentage higher or possibly more if the property you want to purchase is an attached home such as: condo, or villa.
There are many factors that one should consider when thinking about buying a second “vacation” home, but once you’ve made the decision that a second home is right for you. Be sure to get the right real estate agent and lending professional before you begin your search for the perfect get away.
Article Written By: Meg Robb Guild Mortgage