Vacation home is a seasonally occupied property that is not the primary residence of the owner. Such residences are usually found in areas with substantial opportunities for recreation or tourist activity.
Vacation Home As Investment
When market is booming, vacation homes become an investment tool. Among all home sales year 2004, 36 percent were second homes purchases. Among all homes purchased in 2004, 23 percent were purchased as investment properties and only 13 percent were purchased as vacation homes. 30 percent of buyers purchased a second home as an investment, 28 percent were looking for rental income, 14 percent wanted a personal or family retreat, 6 percent planned to use the home for vacations, and 5 percent simply had extra money.
Vacation Home Mortgage Rates
Lenders typically consider vacation homes as a higher risk, so you may pay a higher interest rate, higher fees and be required larger down payment comparing with primary residence.
Vacation Home Taxes
The interest you pay on your second home's mortgage is tax deductible, assuming you don't rent it out for more than two weeks a year. Any profit you make on the property is subject to capital gains, unless of course you eventually sell your primary residence, move into your second home and live there for at least two years.
Vacation Home Insurance
Homeowners insurance may be more expensive because you're not there full time or because it's is too far from the nearest fire station, or because it may require flood insurance.