After a nice getaway you may think to yourself that it could be beneficial to purchase your own short term rental property, similar to the one you just experienced. However, lenders are far from eager to provide funding for properties intended for short term stays. You can always rely solely on your mortgage qualifications to purchase a second property and your reasoning behind it won’t come into play. If you're buying depending on the rental income to sustain your monthly mortgage payments, it will quickly become clear that lenders don’t look at short term tenants the way they look at long term tenants.

If you’re already a homeowner, then purchasing a vacation home or condo will usually have stricter qualification requirements then if you were just purchasing a second home. Some lenders offer high ratio mortgages for as little as 5% down. Depending on what type of property you’re looking at and the owner occupation you can apply to purchase or refinance your home to access the equity within it to secure your vacation home.

Can I buy this as an investment property?

If you’re purchasing for the means of renting you will have to apply for an investment property mortgage. This type of mortgage has specific requirements and qualifications. You’ll have access to the best rates with a small premium if you have 20% towards a down payment, good credit and steady income.

If your plan is to rent it out short term when you’re not there such as Airbnb or VRBO instead of a long-term tenant, then it's unlikely that you will be approved for this type of mortgage. In most cases, securing a mortgage specifically for short term rentals is difficult, if not impossible.

Here are the reasons why:

It is hard for lenders to properly assess the income reliability for your qualification portion of the approval. This income amount can also vary seasonally or by location, have a slow start, and often can rely on reviews and amenities. Lenders view this as a risk to the property therefore a risk to them and getting their money back if you can’t make your payments.

So if your mortgage is solely based on short term rentals you will need a commercial mortgage which is a registered business. This is always more expensive, usually harder to qualify for, and has a much longer approval process.

Private lenders:

Private lenders are much more lenient and flexible than a regular financial institutions.  Some may even allow short term rental purchases with a higher interest rate or down payment.  No matter what your dreams consist of, there is a path you can take to achieve them.  Talk to your mortgage expert today and we will strive to make your dreams come true.