Your Mortgage Blog

Posted on
May 1, 2025
by
Neena Vlamis

All About Purchasing a Vacation Home: What You Need to Know

Dreaming of your own getaway spot by the lake, nestled in the mountains, or close to the beach? A vacation home is not only a great place to escape and make memories, but it can also be a smart investment—if done right. At A and N, we’re here to guide you through the ins and outs of purchasing a vacation home, so you can buy with confidence and peace of mind.

1. Why Buy a Vacation Home?

There are plenty of reasons people choose to purchase a second home:

  • A personal getaway: No more booking hotels or rentals—your favorite destination becomes your second address.
  • Rental income potential: Many buyers offset costs by renting the property when they're not using it.
  • Long-term investment: Over time, vacation properties often appreciate in value.
  • Retirement planning: Some buyers use vacation homes as a future retirement destination.

2. Financing a Vacation Home

Buying a second home is a bit different than purchasing a primary residence. Here’s what to expect:

  • Higher credit standards: Lenders often require a stronger credit score—typically 680 or higher.
  • Larger down payment: Vacation homes usually require a down payment of at least 10-20%.
  • Interest rates: Rates may be slightly higher than those for primary residences.
  • Debt-to-income ratio: Lenders will look closely at your existing obligations to ensure you can afford two mortgages.

💡 Tip: Already own a home? Consider using the equity from your primary residence as a down payment.

3. Location, Location, Location

Think about your goals: Do you want frequent weekend trips, or will it be a seasonal escape? If you’re planning to rent the property, consider:

  • Local rental demand and regulations
  • Proximity to attractions and amenities
  • Seasonal accessibility (especially in mountain or rural areas)

4. Rental Income Considerations

If you plan to rent out your vacation home, here are a few things to keep in mind:

  • Some lenders may consider potential rental income when approving your loan, but not all.
  • You may need to finance it as an investment property rather than a second home—this can affect your rate and down payment.
  • Local ordinances and HOA rules might restrict short-term rentals, so do your homework!

5. Tax Implications

Vacation homes come with different tax considerations. Depending on how often you use it vs. rent it out, it may impact:

  • Property taxes
  • Deductibility of mortgage interest
  • Rental income taxes

It’s best to speak with a tax professional to understand how the purchase could affect your unique financial situation.

6. Be Prepared for Extra Costs

Second homes come with extra responsibilities. Don't forget to budget for:

  • Maintenance and repairs
  • Utilities and insurance (including flood or hurricane insurance if applicable)
  • HOA fees (if in a resort community)
  • Property management (especially if you live far away)

Final Thoughts

A vacation home can be a wonderful way to invest in your lifestyle and your future. Whether you’re buying for relaxation, rental income, or long-term planning, we’re here to make the mortgage process smooth and stress-free.

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