If you are considering buying a vacation retreat or second home, you are not alone. A study last year by the National Association of Realtors (NAR) revealed a record 2.82 million second-home sales in 2004, up 16.3 percent from 2003. In fact, nearly a fourth of all homes purchased last year were for investment, and another 13 percent were for vacation homes.
The most frequently cited reason for purchasing a second home is to diversify portfolio investments, however. Low interest rates mean more people can afford second homes and, with second-home selling prices up 27 percent since 1999, they are an attractive alternative to lackluster returns on stock and other investments.
Many build a barn, shop or structure with small living quarters, which over time is expanded into a permanent dwelling or converted to a guesthouse or party room after the permanent home is completed.
"Day in and day out, Farm Credit can offer the most flexible packages with the terms, structure and conditions that are a perfect fit for second-home borrowers' needs. By capitalizing on the patronage refund and dividends being paid by Farm Credit lenders, we are usually able to beat any commercial lender's package," Echols says.
Other financing options include owner financing, home equity loans, cash and IRS 1031 tax-free exchanges. "Many times these purchases are made by multiple buyers, such as family partnerships or a group of friends. By pooling their resources, they can acquire a larger tract of land than would be possible individually," notes Echols.
Farm Credit financing for second homes is based in large part on the financial strength of the customer. Another important factor is how the property will be managed: owner-operated, custom-farmed or leased out. Interest rates and loan terms typically are similar to those for other Farm Credit mortgage loans.
When considering the best lender for your second-home purchase, don't overlook the importance of convenience and local knowledge. "Local lenders are more familiar with the area, have greater knowledge of land values and local farming and ranching customs, and know local operators who can look after the property in the owners' absence," says Echols. "Purchasers should weigh all those factors, along with the financing package itself, to select the best lender for their situation."
Article by Sue Durio
|The Scoop on Second-Home Buyers|
According to the National Association of Realtors' 2005 Profile of Second-Home Buyers:
vacation-home buyer is
years old, with a household income of $71,000.
Published in Landscapes, a Farm Credit Bank of Texas publication