Your
choice of a mortgage provider and a specific program should be
primarily dependant upon your future plans for the home, current
mortgage rates, and your own individual requirements. Comparatively,
consider the promotional incentive that may be offered by your
chosen developer to use their mortgage company. 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 their 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 everyday 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-US 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 paying
cash for one. Why? Let's say that the investors are considering
homes that sell for $200,000 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 $1,000,000 of
real
estate. If they bought one home, their investment
return would be based on the appreciation of property valued
at $200,000.
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.
