How to find cheap vacation homes and low vacation home mortgage rates

November 6, 2019 - 6 min read

You can find affordable vacation homes, if you know where to look

Here’s a fun thought: Why not own your own vacation property and make some money on it, too?

This is possible if you purchase a vacation home in a good location and rent it out. Research shows that renting out a vacation home can help pay for most of the mortgage on it.

But to get cheap financing and potentially turn a profit on your getaway house, you’ll have to shop around carefully for the best vacation home mortgage rates.

Interest rates are still at historic lows, but they’re always a little higher for second homes. So compare lenders to make sure you can own a profitable vacation home.

Find a low vacation home mortgage rate. Start here

Buying a vacation home is “in” this year thanks to low mortgage rates

A fresh report by the National Association of Realtors (NAR) reveals that demand is up for vacation homes in 2019.

One big reason is that household net worth was at an all-time high of $100.3 trillion last year. That means at least part of the U.S. has more money to spend on nice-to-haves like a second home.

Another reason for the surge in vacation home buying? Low interest rates have made purchasing a second home more affordable.

Low interest rates make buying a second home or investment property more affordable on a month-to-month basis.

With mortgage rates hovering below 4%, homebuyers have $46,000 greater purchasing power than they did this time last year, according to a recent report from Black Knight Analytics.

Among the other key findings from NAR’s report:

  • Vacation home values are rising fast — The median sale price for vacation homes was up by 36% from 2013-2018, compared to 31% for all homes
  • Low-priced vacation counties are affordable — In the least expensive vacation counties, the median sales price was under $100,000
  • Cheaper vacation counties are affordable for locals, too — In the least expensive vacation home areas, average mortgage payments were less than 10% of the median family income
  • The cheapest vacation homes aren't in traditional "vacation spots" — The most affordable vacation counties are found in Maine, Missouri, Michigan, Idaho, and Pennsylvania

Perhaps the most important point here is about mortgage rates.

Thanks to 2019’s historically low interest rates, affording a vacation home could be a reality for many people that wouldn’t have even considered it a year ago.

Get a personalized rate quote for your vacation home

Looking closer at the findings

Gay Cororaton is the director of housing and commercial research for the NAR. She says it’s unexpected that several counties in Michigan, Minnesota, Wisconsin, and Missouri were among the top vacation home counties.

Surprise finding: Great Lakes states are home to many of the most popular, and most affordable, vacation counties in the U.S.

“We tend to think of nationally recognized destinations like Florida, Hawaii, and California. But there are, in fact, many locally known and popular vacation home destinations that most of us are just not aware of,” she says.

Cororaton was also surprised at the wide price variation.

“The median vacation home price in Nantucket, Massachusetts, is $1.6 million. But in nearby Maine, the median vacation home price can be below $100,000.”

Melanie Fish, a spokesperson for Vrbo (Vacation Rentals by Owner), explains why more people are interested in buying vacation homes today.

“The vacation rental space is a growing category,” she says. “And travelers are increasingly drawn to vacation homes instead of hotels or resorts when going on family or group trips.”

Brian Davis, director of education for SparkRental, concurs.

“Vacation homes remain relatively affordable for two reasons. The first is ease of vacation leasing. The second is extremely low vacation home mortgage rates,” notes Davis.

Cororaton agrees that mortgage rates remain near record lows.

“That makes a second home purchase more affordable. We see that second home loans made up more than half of purchase loans in several top vacation home counties,” says Cororaton.

The average homeowner can earn nearly $31,000 per year by listing their vacation rental property.

Back to Davis’ first point: It’s easier than ever to buy a vacation rental property that can generate income.

“That’s due to the rise in popularity of peer-to-peer vacation renting platforms like Airbnb and Vrbo. It’s also because of the adoption of private home listings on traditional hotel platforms like,” Davis says.

Fish says Vrbo data shows that the average homeowner can earn nearly $31,000 a year by listing their vacation rental property.

“Also, over half of Vrbo homeowners cover 75% or more of their mortgage through renting,” adds Fish.

Find out how much a mortgage would cost on your own vacation home. Connect with a lender today

How to buy a cheap vacation home in 2024

Buying a second home has pros and cons. But if you do your homework carefully and choose the right location, it can pay off. You can offset your mortgage payments and closing costs by renting out the property.

Before you set out to buy a vacation home, consider these key factors:

  • Your income: Would you be able to afford the mortgage in a scenario where the vacation home is not rented out for long periods of time?
  • Location and amenities: Your ability to rent out the property and turn a profit is highly dependent on how desirable the location and property are
  • Management: It can take eight to 10 hours per week to manage a rental, and there are cleaning and maintenance services and fees to consider

“Vrbo found that, on average, it takes 155 days to shop for, purchase, and prepare a newly acquired vacation home for short-term rentals,” Fish says.

The first step is to “take stock of your income stream over time. You need to determine if you can afford to pay your extra mortgage,” suggests Cororaton.

Lindsay Bolton is the marketing manager for Finger Lakes Premier Properties, a vacation home property management company. She recommends taking time to shop around for different vacation homes in popular locations.

“Get a rental projection on a couple of different homes if your ultimate goal is earning income,” advises Bolton. “For example, three different four-bedroom homes may rent very differently. This is based on factors like amenities, location, and the home site.”

“Three different four-bedroom homes may rent very differently. This is based on factors like amenities, location, and the home site.” —Lindsay Bolton, Markerting manager, Finger Lakes Premier Properties

You also need to decide how the property will be managed.

“On average, it takes eight to 10 hours a week to manage your rental inquiries, booking, management, marketing, and post-booking processes. That doesn’t include the cleaning time needed in between each reservation,” Bolton notes.

If you lack the time or means, “look into hiring an outside management company,” adds Bolton.

Shop for vacation home mortgage rates

It’s important to know what to expect when it comes to financing a vacation home.

Do you still pay a mortgage on your primary residence? That could make it harder to qualify for a loan on a second home. Luckily, new lending rules make it easier to purchase a vacation property.

Three common strategies for financing a vacation property include:

  1. A cash-out refinance on your primary home
  2. A HELOC (home equity line of credit) on your current home
  3. A conventional loan on the second home itself

If you opt for the latter — a traditional mortgage — be prepared. Vacation home loans are often considered a higher risk. That’s because you won’t use that home as your primary residence.

As a result, the interest rates can be slightly higher on these loans.

Also, keep lending rules in mind. If you buy a vacation home, you can’t rent it out 100% of the time. You must occupy it some portion of the year for it to be considered a secondary residence.

If you don’t plan to use the home personally, you’ll need to purchase it as an investment property. That requires higher rates than for a vacation property loan. (That only applies if you get a loan on the property itself. It doesn’t matter how you use the property if you finance it via equity from your primary residence.)

In short, approach your lender with your true intentions for the property. A small interest rate reduction is not worth committing mortgage fraud.

What are current vacation home mortgage rates?

Vacation home mortgage rates are usually at least 0.5% higher than rates on your primary residence. But the exact rate and fees on vacation properties vary a lot by borrower. Compare custom quotes from a few different lenders to find the best rate on your new property.

Time to make a move? Let us find the right mortgage for you

Erik J. Martin
Authored By: Erik J. Martin
The Mortgage Reports contributor
Erik J. Martin has written on real estate, business, tech and other topics for Reader's Digest, AARP The Magazine, and The Chicago Tribune.