Interest rates are getting better for vacation homes and investment properties.
Ryan Haley, broker and owner of Atlantic Shores Sotheby’s International Realty, explains the recent changes that are benefiting homebuyers who are thinking about purchasing a vacation home or an investment property.
Earlier this year, the federal government implemented a restriction in lending practices, limiting the number of second-home and investment loans that any particular lender could do in a calendar year.
What does that mean?
Essentially, the government put an annual cap of 7% of the total loans that a lender allocates for second homes. For example, if the lender had 100 loans for the year, the maximum number of loans that they could do for a vacation home or a second home was seven of the total 100 loans.
When this happened, the mortgage interest rates for second homes and investment properties increased immediately. And this is fueled by the supply-and-demand situation. Demand was very high for second homes and investment properties. But because of the imposed limit, the price became higher as more people are willing to pay.
Lending Restrictions Removed
The good news for homebuyers is that the government has decided to remove the aforementioned restrictions. Thus, lenders are no longer limited to allocate just 7% of loans to investment properties.
Because of this, lenders who specialize in vacation homes and investment properties have more freedom as they can give out 100% of their loans to second homes.
This is great news, especially in the Delaware and Maryland real estate market where so many of the properties are vacation homes, followed closely by investment properties.
This is also great news for buyers who are thinking of buying in the Delmarva region. They should enjoy much favorable interest rates, compared to the interest rates in recent months. However, experts are predicting that rates are bound to go up in the next few months. Homebuyers can take advantage of the lower interest rates now and find that perfect property for them.