Your choice of a mortgage provider and a specific program should
primarily depend upon your future plans for the home, current
mortgage rates, and your own individual requirements. Always consider
the promotional incentive that may be offered by your chosen developer
to use their mortgage company. However, because mortgage products
are constantly evolving and adapting to specific market trends,
you will certainly want to contact an independent mortgage broker
that has experience with financing short-term rental properties.
Although you may not use his or her services in lieu of a more
attractive developer offer, the value of the expert advice and
competitive comparisons will help guide you to a confident choice.
If a house is a house - why shouldn't I use my mortgage broker?
Ask your mortgage broker if he or she has ever financed a home
near Disney World that was totally furnished, and included not
only furniture, but televisions, pots and pans, towels, linens,
small appliances, artwork, etc. He/she most likely will tell you
that personal property cannot be financed in the mortgage. But,
it is done every
day in this specific housing niche. Because many income producing
vacation homes are a total turnkey furnished package, mortgage
brokers who specialize in these properties know which appraisers
to call to get the necessary appraisal. Also, they have pre-established
relationships with specialty money sources for the financing.
Ask your Realtor which lending institution they recommend and
call them. Do not allow your own mortgage broker to learn at your
expense.
How much of a deposit should you make?
Most mortgage lenders require non-U.S. residents to deposit 20%
to 30% minimum. As I mentioned in the "Things to Consider"
chapter, your goal should be to deposit enough money on the home
so that the mortgage payments and other expenses will be covered
by the rental income. Your chosen management company should be
able to recommend an amount that will achieve that purpose. Do
not put too much down. The more you deposit on a house, the lower
your return on money invested. True investors would choose to
deposit 20% on five houses, rather than pay cash for one. Why?
Let's say that the investors are considering homes that sell for
$300,000 each. They would be investing the same total amount of
capital whether they purchased one with cash, or financed five
with a 20% deposit. If they bought five, the investors would realize
appreciation on
$1,500,000 of real estate. If they bought one home, their investment
return would be based on the appreciation of property valued at
$300,000. You will find that there are many finance options. Many
vacation homebuyers prefer a fixed rate loan that locks in a set
monthly principle and interest payment for typically 25 or 30
years. The payment is lower with the longer term and thus easier
to cover with the rental income. Some homebuyers who plan on selling
their property in a few years select a fixed payment term of five
or seven years that converts to an adjustable rate at the end
of the fixed period. A good mortgage broker or lender will take
the time to explain the options and prove to be a most valuable
consultant.
