what is the best alternative to financing a second (vacation) home?

sunlover1220 · #1 11-07-2007, 06:06

I currently have a mortgage balance of 95,000 on a home valued over 325,000. i want to buy a second home for 200,000

CommonCents · #2 11-07-2007, 07:16

The interest rate to finance a second home should be as good as the rate on your primary residence. Assuming that you have decent credit and can qualify, you shoudl refi your primary residence to 60% of the value, say $195K, which will give you $100K cash. Take the $100K cash and use as a down payment on the 2nd home. Both of your loans will be 50%-60% Loan to value (LTV) which is very little risk to the lender, and will get you a decent rate and might be easier to qualify for. The lower LTV the happier the lender is. You have the option to do both properties. What state are you located ??

ninasgramma · #3 11-07-2007, 07:55

I would not mortgage my primary residence to finance a second residence. If you cannot pay cash, or choose not to, then get a mortgage secured by the second home. You will still be able to deduct mortgage interest and real estate taxes. In the worst case, you may be forced to sell you vacation home, or have it foreclosed. You will not risk your primary residence.

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