A vacation home can be a wonderful thing. You'll have the opportunity to get away and explore somewhere new, and you'll also be able to avoid the high costs of a motel. Especially if you vacation in a very popular area, getting a motel room for a few nights could really add up. With a home in that location you won't have those costs, but you will have other expenses that are important to consider. One of those is the mortgage payment, and when you finance a vacation home it's not quite the same as getting a mortgage on the primary residence where you spend the majority of your time.
What About the Interest Rate?
In general, rates for second homes and vacation homes are a little bit higher than the rates on primary homes. That's true across the board with the majority of lenders, because they see a higher level of risk with second homes and a bigger chance that someone might default on their loan. Even if you're a great credit risk, that higher default chance is factored in for everyone who is buying a second home. It's not something you can avoid, but it's a good idea to make sure your credit is as good as possible, so you can get the lowest rate the bank is offering.
Should You Just Pay Cash?
Many buyers pay cash for a second home, and if you're in a position to potentially do that, there are several things to consider. At a glance, cash may seem like a good choice, however it is important to make sure you aren't taking too much money away from emergency funds or places where it may make you more money in the long run. Take a look at where that cash is coming from. If you're taking the cash from an investment, consider the rate of return you're getting and what you'd pay in mortgage interest. You may want to leave your money where it is.
What About the Time of the Year?
In some cases, the time you buy is going to matter. Banks sometimes offer specials and promotions for second homes or vacation home buying, and if you can combine that with a time when prices and competition are lower, you can get a good deal on a home you really love in your favorite vacation spot. That's something worth considering, especially when money may be a little bit tight and you're stretching your budget to get a home in a great location. Talk to your bank about rates and promotions, so you can get a good deal on the home you're been dreaming of.
You may also want to consider how much the particular market is heating up during different times of year—buying in summer is often a popular choice in West Calgary, and that may lead to more competition and higher prices.
Can Keep Your Interest Rate Low?
There are some things you can do to try to keep your rate as low as possible. For example, you'll want to get a copy of your credit report and make sure there isn't anything wrong on it. If there are accounts that don't belong to you, or there's information that's not yours or that's incorrectly reported, you want to get that cleared up. Then you may see a higher credit score, which can translate to a better interest rate. You can also talk to the bank about how they determine rates, and what you can do to lower yours. There are usually options.
Getting that vacation home can be a beautiful thing. Just make sure you're financing it the right way and with the best possible rate for your situation. That financial savings can really help you enjoy your time away from home on your vacation.