Ways to Fund Your Holiday Home
Do you cherish the dream of buying a holiday home or cottage or Ski Lodge? This dream can become a reality. The financing of a holiday home has some peculiarities.
Buying a second home to rent it or for a holiday can be an excellent financial calculation. Since it is possible to spend your holidays and rent the rest of the time. Whether you choose a property in Europe or North America, it will require most of the time, a mortgage. Even if one cannot claim homeownership assistance for a second home, it is nevertheless possible to find exceptional conditions, especially because such a purchase is usually made by people who are already owners of their primary residence.
The right solution to find the best deal is to use an equity release on a mortgage. This option makes it possible to stand a chance in financing the purchase of a second home. In most cases, these equity release experts have signed partnerships with the leading financial institutions. This status makes it possible to apply for credit online directly.
As this option of equity release is readily available, do not hesitate to compare them to be sure to have the best mortgage proposal to buy your second home. Feel free to consult the advice, news and various guides available to learn about the latest developments in the financing market.
Even if the acquisition of a second home does not have the same impact as the purchase of the main home, it nevertheless represents a significant investment. It is therefore essential to learn about the property in question regarding the quality of construction, services offered and environment. Any costs arising from this acquisition such as maintenance and local government charges should also be given special attention. This is especially true if it is a home purchased in a country where the legislation is different.
Steps to Fund Your Holiday Home
- Know How to Recognize the Different Formulas
In equity release on a mortgage, you can opt for a fixed rate loan or a variable rate loan. In the first case, you will have no surprise, since the rate is defined once and for all, at the signing of the contract. A rate-adjustable loan is subject to change as rates change. It can go up or down. Check that the investment offers security in the event of a sudden rise.
- Choose Your Warranty
Your bank will probably offer you different guarantees: the lien of the lender of money, the mortgage or the guarantee of a specialized body. It’s up to you to see the one that seems most appropriate to you. Some deposits are cheaper because they repay you at the end of the loan part of the amount paid out.
- Go Through a Broker
The role of brokers is to find the credit that is as cheap as possible and best suited to your situation. They try to see it, and this on terms often more advantageous than if you had dealt directly with a bank. Do not hesitate to ask them.
What to Know
- Unlike in the case of the main home, you need to bring more equity to finance the second home because the contribution of banks is less critical. Also, the interest charges may be higher for the secondary residence than for the mortgage on the main dwelling.
- The rental value of your holiday home must continuously be taxed in the canton where it is located. When the secondary residence is in a township other than the canton of residence, as is often the case, an inter-cantonal tax division is made.
- To find out whether the purchase of a holiday home is financially bearable, the rule is that the sum of the expenses for the main dwelling and the secondary housing must not exceed one-third of the gross revenue.
Holiday homes are rarely purchased for performance purposes. This type of property is often subject to significant fluctuations in value. Potential revenues barely cover ongoing costs, such as equity or loan remuneration and taxes. Also, the maintenance of your holiday home is another aspect not to be neglected. Having a trusted person on hand to handle the most urgent work is a benefit.
And here’s a tip for the seniors, that are over 55 and have a house worth more than £70,000. You may be able to release the equity to fund a holiday home.