Whether you dream of buying a vacation home to rent out to paying guests or an investment property you can eventually retire in, there are many financing options to make it happen. One possibility: Tapping into the equity of your current primary home.
Taking out a Home Equity Line of Credit (HELOC) could minimize the immediate out-of-pocket expenses you’ll face when buying an investment property. Before you do, it’s smart to consider the pros and cons, as well as alternative options. Let’s explore.
A HELOC is a revolving line of credit that allows you to borrow money against the equity in your primary home. Generally speaking, a HELOC works like a credit card. You have a maximum amount that you can borrow. You spend, repay, and repeat. And, only pay interest for the amount of credit you actually use. The funds can be used for almost anything, including a downpayment for a vacation home, paying closing costs, or even purchasing a second home in full.
Here are some key details:
There are a number of advantages to using a HELOC to finance a vacation rental property, including:
HELOCs also come with some potential drawbacks, including the following examples below:
Taking out a HELOC for investment properties is useful, but it’s not ideal for every homeowner. Here are some financing alternatives to consider in place of a HELOC. Work with a financial advisor to guide you on the best financing option.
Ready for the next steps? Try our handy guide on how to buy a vacation home. You can read up on the vacation home buying process from searching to closing, and the key steps in between.
Call 844-518-0967 to speak with a Homeowner Consultant, who can answer preliminary questions and see if we’d be a good fit for you.
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Disclaimer: This publication is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual's legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this reason, you are advised to consult with your own attorney, CPA, and/or other advisor regarding your specific situation. The information provided here is for your use and convenience only. We have taken reasonable precautions in the preparation of this material and believe that the information presented in this material is accurate as of the date it was written. However, we will assume no responsibility for any errors or omissions. We specifically disclaim any liability resulting from the use or application of the information contained in this publication.
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