Your Lake of the Ozarks Mortgage Lender: What’s the Difference: Investment Property vs. Vacation Property

There are few things that compare to owning a second home at the Lake of the Ozarks. You have a prime place to vacation at your leisure, and the ability to rent it out for some investment income while you’re not using it. But at what point does it become more of an investment property than a vacation property? Well, in this week’s blog, I’m going to be discussing the difference between an investment home and a vacation home.

What is a Vacation Home?

First, it’s important to understand what a vacation home is. A vacation home is an additional residential property that you purchase to live in part of the year. For a home to be consider a second/vacation home, it must be over 25 miles away from your primary residence (although this can vary between lenders). A vacation home also has a specific amount of days that it can be rented throughout the year to avoid being classified as an investment property. When it comes to the taxes, a vacation home must be rented out for fewer than 180 days throughout the year and must be occupied by you personally at least 14 days of the year to remain a second/vacation home.

What is an Investment Home?

As for an investment property, this is a property purchased with the intention of generating income. While you can stay in this home, but property must be rented out more than 180 days per year to be considered an investment property on your taxes. A property can also be considered an investment home if you intend to flip the property or utilize it as a commercial space.

How the Mortgage Differs

The types of mortgages will vary depending on your classification of home as well. Lenders are typically more lenient on the terms with lower qualification requirements for second homes as opposed to investment properties. You’ll find higher mortgage rates on investment homes than on second homes. Investment property loans typically require proof of more liquid reserves, as well as a higher down payment required. It should be noted that it is fraudulent to mislead your lender about the classification of your home. So, being upfront about your plans for the property is essential to your mortgage process as it will clearly be reflected on your tax returns.

So, when it comes to obtaining a mortgage at Lake of the Ozarks, these tips should help you choose the right mortgage to suit your needs as a homeowner. Understanding the difference between investment properties and vacation properties at Lake of the Ozarks can help you obtain the best possible results with your home. As always, I am here to assist you with all your mortgage needs and look forward to helping you achieve your dreams of living or investing at the Lake.

LIKE my Facebook Page, Follow me on Twitter or Connect on LinkedIn