Nathan Colmer | Van Dyk Group
C: 609.290.4293 | O: 609.492.1511
The vase majority of purchases in the Long Beach Island real estate market take place with a LBI second home mortgage. These mortgages are usually very simliar to a primary home mortgage and will usually offer the best interest rate. Rates will vary from lender to lender as will the fees charged so it is always a good idea to seek multiple quotes and compare the total net cost of the loan.
A question I am often asked has to do with the balance of using a home and renting a home when looking to buy in the LBI real estate market. Lending laws do permite a certain number of weeks to be rented in a home and still qualify for second home financing. Therefore, it is best to discuss your plans with your lender to make sure you fit the criteria for a second home loan and not an investment loan.
Second home loans follow some basic criteria that all potential buyer should be aware of. They are:
Unlike a mortgage for a primary residence, most second home loans work will require a minimum of 20% down payment. In the primary mortgage market, there are special products that will allow for low or 0% down payments… But these are not intended to be used for a vacation home or investment property. Recently there have been some banks that allow for a 10% down payment but these will usually carry PMI and may be more expensive.
There are a number of mortgage products available to those looking to purchase a second home in the Long Beach Island real estate market. The most common utilized second home mortgage is a conventional 30 year fixed rate loan however there are variable-rate products and interest only loans available as well. Typically, these variable-rate or interest only loan products will be used for buyers who are looking to build a speculative real estate portfolio or maybe planning to tear the home down and rebuild in the next few years.
Depending on your individual financial situation, the interest on a second home loan may be tax-deductible. In fact, some buyers purchase a second home for this tax deduction on the advice of their accountants. If a home will be rented as an investment property, it is possible in the second home interest may not be tax-deductible, so it is important to consult an attorney and an accountant to understand your unique situation.
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