A place to relax for a big chunk of the year, somewhere to escape to for long weekends or a space to keep all the now-adult children together for big family vacations. Everyone has their reasons for buying a vacation home.
But not everyone knows how to go about it when they don’t have the money ready to put down. Here are some ideas to help you learn how to buy a vacation home with no money down — and none of them include winning the lottery.
Disclaimer: This blog is purely intended for informational purposes and shouldn’t be used as a substitute for financial advice. Please seek professional financial advice before financing your vacation home.
- Use an Assumable Mortgage or Seller Financing
- Take Out an Additional Loan
- Use a Shared Ownership Agreement
- House Hack One of Your Properties
- Switch Your Primary Residence
- Remortgage to Release Equity
- Downsize Your Main Home
Use an Assumable Mortgage or Seller Financing
An assumable mortgage works by letting you, as the buyer, take over the seller’s existing mortgage. This is great for sellers who want out of their existing commitment, for whatever reason.
But this is tricky for you as a buyer because it could be due to problems with the property you’re going to purchase or because the mortgage has unfavorable terms.
Seller financing is another possible option — but it isn't for the faint-hearted. The seller acts as your lender and is financing your purchase in the form of credit. This means there’s a significant reliance on your negotiation skills and lots of professional services required to cover the legal paperwork (which can be expensive).
For both of these options, proceed with caution.
Take Out an Additional Loan
If you don’t have large cash reserves to hand but can support increasing your payment commitments, an additional cash loan could be an option.
Of course, it'll rely on having a sufficiently strong credit rating and your future circumstances being secure enough to sign up for paying not only your vacation home mortgage, but also the debt you’ve taken on to cover the deposit.
Pursuing credit options is entirely dependent on your appetite for debt and personal financial circumstances. So, it’s best to seek professional financial advice before doing so.
Use a Shared Ownership Agreement
If the idea of extra loans, private agreements or inheriting someone else’s mortgage isn’t for you, you could explore shared ownership. This takes many forms but works by not purchasing a vacation home alone but by pooling the resources you have with willing investment partners.
You might be at the stage in life where you have some money to put down, but not enough. If you have friends, family or colleagues who are in a similar position, they might be interested in sharing the ownership of your vacation home.
Alternately, some people in your network might have the money to put down but neither the time or energy to organize and manage the logistics. And that’s what you could bring to the table.
Again, like seller financing, it’s best to employ professional help to draw up terms and conditions, even if it’s with family because you never know what might happen in the future.
House Hack One of Your Properties
In years gone by, people purchased a home so you could own it all. They say in England, where homeownership is a societal expectation and renting isn’t as common, ‘An Englishman’s home is his castle.’
But, when you think about it, if you live in a castle, how much of it do you really live in? How many rooms and corridors sit there not being used to the fullest?
Well, that’s how ‘house hacking’ has grown in popularity.
The kids have grown up. You have more leisure time and aren't at home as much. Suddenly, a good chunk of your home space isn't getting used to the max.
Turn this into a money generating opportunity by ‘hacking’ a chunk of your house into its own living space. And then move into one of the sections yourself and rent out the other.
Income from this can then be the means to fund your vacation home purchase.
Switch Your Primary Residence
In a similar kind of outside-the-box thinking, you could switch your primary residence to what was going to be your vacation home. If your existing home is in a desirable location, there are all sorts of ways to turn it into a money driver. Switching your primary residence to your ‘vacation home’ will mean you can probably get more favorable terms on your next mortgage.
Remortgage to Release Equity
So far, almost all of these ideas on how to buy a vacation home with no money down have been ways to build up the money to allow you to put down a deposit. But, you might be one of many millions of people who already have the cash, but it’s tied up in your existing property.
If you’ve lived in your home for a long time, you’ve likely built up a good chunk of equity. Remortgaging your property could release this tied up equity and give you a big cash boost to unlock owning your vacation home.
Again, as a reminder, this is a big financial decision that depends mainly on your circumstances — and professional financial advice is probably best sought.
Downsize Your Main Home
Another option, especially if you want your vacation home to be for vacations rather than a new primary residence, is to downsize your current property.
As said, if the kids have grown up and grandkids don’t stay over every other weekend, downsizing your main home could be the best way to buy your vacation home and put down all or some of your life savings.
Unlike a remortgage, this means moving out of your property, so, again, it’s dependent on your circumstances. Consider the long-term investment potential of your existing property that you’re giving up, the future of the downsized property you’re purchasing and the emotional cost of moving out of your long-time family home.
And, as ever, seeking financial advice is always a wise move.
Things to Think About
All of these ideas unlock owning your very own vacation home. But, they all rely on having your ducks in a row and making sure you’re organized.
A vacation home is a big-ticket item. It’s best to make sure your credit rating is tight, you have the cash available to enjoy your new vacation home and you might even want to explore turning it into a rental when you aren't using it.
Consider the risks — but don't underestimate the benefits.
It’s all worth it when you’re sitting down for an evening drink or morning coffee on the balcony of your vacation property, without a care in the world.
You can’t beat that feeling.
Are You Thinking About Bermuda for Your Vacation Home?
The beautiful South Shore of Bermuda should be right up there in your plans. South-facing to maximise the sunshine, this coastline is home to the Bermudiana Beach Resort, Tapestry Collection by Hilton.
With 90 fully-furnished condos in the resort, you’re sure to find a property that ticks all of your boxes. Take a look at our detailed guide, which answers all the FAQs about the resort on the island’s South Shore.
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