The only probable downside of having a vacation home is perhaps having a vacation home mortgage loan. Are you behind on your monthly mortgage payments on your vacation home mortgage loan?

To Refinance or Not to Refinance a Vacation HomeInstead of losing your vacation home to a forced foreclosure, you can refinance the loan and take out a new one. However, before refinancing the home loan, it’s wise to make a list of what you want to achieve from the transaction before you start shopping for loans.

You need to keep in mind your financial goals and objectives in mind when you shop among multiple lenders. The main reason behind all the mortgage refinances is to lower your monthly installment costs, according to the Consumer Federation of America.

But when it comes to the time within which you can recoup the cost of a refinance, there’s no surefire answer. It depends on your present financial situation. Here are some important facts that you need to know before refinancing your vacation home.

1. Are you ready for the paperwork: A potential refinance mortgage lender will possibly request income records worth 2 years, credit reports, 2 months’ bank statements and an income analysis. Unlike the previous days, a lot more paperwork is required nowadays as the lenders are becoming stringent.

Some compensating factors while you go out for mortgage loan shopping is good credit scores and enough money in the bank. Your DTI ratio or the ratio between the total debt that you have and the total income that you make in a month are an important measurement of your affordability.

In fact, most lenders don’t want the borrowers to have a DTI ratio above 40%. You also have to pay down a certain portion of the total loan amount and if everything runs smoothly, you can take out a refinance loan for you vacation home.

2. How much equity did you accumulate in your home: One of the biggest questions for any potential homeowner who is about to refinance his mortgage loan is to find out how much equity you’ve accumulated in your home. You don’t find out the total amount of equity that you’ve truly accumulated until the lender’s appraisal of your home comes back halfway through the process of underwriting the loan. So, if you’re self-assessing the equity that you’ve accumulated in your home, always be ironfisted.

3. How many mortgages are there on the vacation home: If you have more than one mortgage loan on your vacation home, refinancing gets more complicated. Unless both the home loans were taken out and used for buying that vacation property, combining 2 mortgages into one is often considered as cash-out refinance. Remember that with a cash-out refinance, lenders usually demand more equity in their property. Instead of combining both the mortgages, you can instead pay off the second mortgage loan before you refinance.

4. What kind of a borrower are you: Did you make a late mortgage payment in the last year? If answered yes, you’re probably have a very good time in refinancing your vacation-home mortgage. Even if you can refinance, the mortgage refinance rates aren’t going to be within your means. If you’ve had a short sale within the last 2 or 3 years, this could also hurt you. Ultimately, the lenders will ask for your salary, not your savings or investment and they’ll make sure whether it’s enough to make payments.

5. Should you get the mortgage loan locally: 
A logical place in which you can start shopping for a vacation home mortgage loan is the institution that made the initial home loan. You can have a talk with the real estate lending professionals where the vacational home is located. Compare the refinance rates when you find where you live year-round. Get at least 3 bids on a vacation home mortgage loan lest it guarantees your best price.

Therefore, if you’re wondering about refinancing your vacation home mortgage loan, you can take the above mentioned steps. Get help of the mortgage brokers or the agents in order to take the best step while refinancing your mortgage loan.

About Charlie Charles Valeston (77 Posts)

Charles Valeston is a national and international Vacation Home Specialist and Commercial Realtor. He specializes in the sales of Vacation Homes and the sale and leasing of industrial, retail, multifamily, office and vacant land real estate. He represents sellers, buyers, tenants and landlords.


Charles Valeston
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Charles Valeston

Vacation Home Specialist and Commercial Realtor at La Rosa Realty Florida
Charles Valeston is a national and international Vacation Home Specialist and Commercial Realtor. He specializes in the sales of Vacation Homes and the sale and leasing of industrial, retail, multifamily, office and vacant land real estate. He represents sellers, buyers, tenants and landlords.
Charles Valeston
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