​Creative Solutions For Buying Your Dream Vacation Property

States such as Arizona are known for their abundant rays, excellent recreation opportunities such as golf, and many other great things to do every day like hiking and exploring the beautiful landscape. Buying a vacation home could make sense if you have a location that has become your personal favorite, and frequent on your visiting itinerary.

When the stress level mounts, the unanswered emails are piling up, and any tension that trying to chase down a bachelor's or masters degree may include is unavoidable, one of the best remedies in existence is to pack your bags. Purchasing a vacation home is not quite the same as simply booking a hotel room one trip at a time, and is an expense that you'll have to figure out exactly how to come up with the funds for.

Wherever your primary home is, you may consider the possibility of tapping into the equity for the purchase of a vacation home. Although you'll want to consider whether the choice of using home equity makes good sense, if you can find a way, it could minimize what you pay out of pocket for your desired vacation home.

There are basically two ways to think about using your precious home equity for a vacation home purchase. The first is how the equity can actually be accessed, and the second is fulfilling the goal of what it can be used for. When you narrow it down, there are three primary ways to pull equity from a home:

A Home equity line of credit

Home equity loan

Cash-out refinancing

All three of these options can provide a freeing up of cash that you can use at your discretion to purchase a vacation home, but each one can impact your overall financial snapshot in different ways. The home equity line of credit option is a flexible credit line, that you can draw against as you need. One advantage of taking this route is that you may only have a low monthly payment for the initial draw period, and your payments could actually be interest-only.

But as many experts point out, HELOCs typically have a variable, rather than fixed interest rate, and if rates trend upward, that could ultimately increase the amount of interest you'll pay. After the initial draw period, it would be expected to make full principal and interest payments.

A cash-out refinance provides for you a brand-new mortgage to incorporate for wiping out the old one, and then withdraw your total accumulated equity via hard cash, an attractive asset. There is just a single payment for you to manage during the days ahead, but if you extend the term of the mortgage further than the number of years you had left on your original mortgage, there could be more interest paid when all is said and done.

There is a bit of wiggle room in relation to how exactly said equity can be used to buy a vacation home. This type of property will usually require 10% to 20% for the down payment, so depending on the amount of equity you possess, you can use it for down payment purposes or to buy your next home outright.

If your home has seen gains that give you the opportunity to buy a vacation home outright, you may be able to use a portion of it to make needed renovations, or remodel your favorite new escape hatch once closing is complete. If your current mortgage is situated under terms that are favorable for you, you may not want to refinance at all, but if the current market rate is lower than what you have on your primary mortgage, you can actually refinance the first mortgage, acquire cash, and bypass any other costs that are associated with using that equity.

Owning a second home can also bring about potential advantages within the tax realm, depending on what type and exactly how it's used. However, owning a vacation home is a bit different from an investment property, and the differences can adversely affect the taxes eventually owed on the property, and the type of insurance coverage desired.

If you happen to be putting to use tax-advantaged retirement plan assets to buy your home or make the all-important initial down payment, there could be penalties. If you are planning to obtain finances from a traditional individual retirement account or 401K before age 59.5, you may have to pay a 10% early withdrawal penalty, added to the standard income tax take on the withdrawal.

You need to be thinking constantly about how much capital you'll need to finalize the transaction on the vacation home, and if it could ever generate gainful rental income in today's market. Using resources such as Air BNB can help generate revenue when others pass through your prime vacation spot and rent It out for a short-stay.

If you can find a way to make the home's equity work for your family, you are really enjoying one of the true benefits of homeownership, and after consulting a seasoned expert, can proceed with an on-schedule plan. If you ever plan to call your vacation home your only home, you may have some hurdles that inevitably pop up.

There are companies such as out there that will offer cash for your house, and work hard for you to make the move that much easier. Offering amenities such as final touch-ups, alleviating the hassle of open houses, and obtaining vouchers for extended-stay options are other elements that can be ironed out for you by Phoenix's seasoned professionals!