Refinancing a Vacation Home Means Stricter Loan Requirements

Blue Ridge Mountains in the falls.Refinancing your home can be a great way to reduce your monthly mortgage payments, pay off your loan faster or consolidate debt. Unfortunately, refinancing a second home is a little more challenging.

Homeowners who want to take advantage of low interest rates by refinancing a vacation home or investment property should be prepared for stricter loan requirements. Lenders will typically want to see lower loan-to-value ratios (LTVs), higher credit rankings (somewhere between 700-720) and an ample amount of liquid assets for second home refis.

In addition, homeowners homeowners shouldn’t be surprised if their lender presents a higher-than-average interest rate for a second home refinance. Higher rates and the stricter qualifying requirements are necessary due to second home loans being considered a higher financial risk. If you plan to rent out your secondary home (investment property), the level or risk increases further and you should expect even tougher loan requirements. For instance, you may be asked to show six months’ worth of funds in your bank statements. This will show the lender that there is a monetary cushion, should there be a problem with tenants not paying rent.

While refinancing a second home or investment property may challenging, it can still be a wise choice for qualified borrowers. Keep in mind that loan requirements vary from lender to lender so if you’re curious about refinancing your vacation home or investment property, you should speak with a mortgage consultant servicing your area.

Find additional information on this subject at http://www.cnbc.com//id/48726793

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