Buying vacation house: better to get mortgage for 2nd home, or take home equity loan on primary res?
![[Post New]](/jforum/templates/default/images/icon_minipost_new.gif){kind=icon}
Anonymous
| Hi, wonder if anyone has been through this... we are thinking seriously of buying a beach house, after years renting every summer. The idea would be to buy a house, rent it out for a couple of months each summer, and use it ourselves for a month or so. We're trying to figure out how best to finance this. We own our own primary residence with no mortgage, and could probably rummage up the cash for about 20-25% of the purchase price for the beach house. From a tax perspective, is it better to get a mortgage to buy the beach house? Or is it better to get a home equity loan on our primary residence, and use that loan to buy the beach house? |
Anonymous
|
There's IRS rules about vacation homes, I think you can only use it for like 2 weeks a year. Consult a tax professional on that.
Consider that if you don't pay the mortgage, you lose the beach house, not your primary residence. There are tax advantages, though, to taking out a HELOC on your primary residence. I assume though that the numbers are such that you could just sell the mortgaged house should you get into trouble with paying off your mortgage. |
Anonymous
The answer is, it depends. This is tricky stuff for your accountant. I do like pp's strategy that mortgages the beach house, leaving your primary residence out of harm's way should things go south. |
Anonymous
|
We got a mortgage on the second house. Definitely did not want to put our primary house at risk. Also not sure we could have gotten a HELOC large enough to cover the second house even though we had plenty of equity.
We don't rent ours though, so not sure if that makes a difference. |
Anonymous
| Pp here just to clarify, our mortgage on the 2nd house is fully deductible so no real tax difference there. And the rate is the same as our primary mortgage. We went with a local (to the second house) bank for the mortgage. |
Anonymous
| Tax wise it is better to have I on the vacation property |