Obtaining A Loan For Investment Property, Vacation Home, or Second Home – A Sunriver Real Estate (resort area) Buyers’ Need to Know
Thinking about purchasing a piece of Real Estate in Sunriver? Will you be obtaining a mortgage loan for the purchase? If so, here are a few things to keep in mind…
Expect a higher interest rate than on a 30 year fixed traditional mortgage loan for a primary residence. Lenders know that you are a homeowner and will be adding to your debt burden. Thus, the lender views you as a riskier loan, the risk factor will cost you a interest rate percentage point or two.
20% down payment on purchase price. Remember the old days when prospective homeowners would waltz into lenders offices and be approved within minutes for a no cash down home mortgage? Notice I didn’t say good old days, the stated scenario is what got all of us homeowners into the housing depression. Thus, tighter lending requirements were instituted and a more responsible market persists.
Be careful on how you intend to use your investment property.
- For example, when intending to use a investment property as a long term rental, you will receive profits from renters. You will also be responsible for reporting your rent income on your taxes. It could also mean a higher mortgage interest rate.
- If you only intend to use your investment property as a second home than you will not be reporting any rent income on your taxes, and you will likely secure a lower interest rate than if you intended to use your investment as a long term rental.
- If you live in an area that allows nightly rentals, such as Sunriver, than you can use your investment as a nightly vacation rental. In most instances you can also avoid having to report those incomes as long as you meet certain specific criteria.
Do you need to incorporate? It depends… What are your intentions? If you are not planning on expanding your real estate portfolio beyond your personal use than the answer is most likely-probably not. Of course the first answer is the best-it depends. Speak with your accountant, tax specialist, lawyer etc… before making any concrete decisions.