Borrowing Money for Your Florida Vacation Rental

April 21st, 2022 by admin Leave a reply »

When buying a vacation property in Florida there are many details to consider once you have decided on type of home, location, budget and which Realtor will represent you in your purchase. On finding the perfect home for you to invest in the real work starts – the writing up of the offer so negotiations can begin. However before you even get to this point, your Realtor should have discussed with you how you are going to fund this purchase as this makes all the difference when writing up the offer.

On a Florida sales contract for property there is a finance section on the front page that allows the buyer to tailor-make the offer to suit their financial situation. There is a line for you to fill in regarding initial deposit to show good faith in your intention to buy the home you are making the offer on. There is also a line to complete regarding finance from another source, i.e. a mortgage and how much this will be. This may sound a little detailed for some not familiar with the US way of purchasing property but this is a good thing. As a seller you can see at a glance how serious an offer is and consider it accordingly.

So before you even write up the offer you need to have thought about and made a decision on how you are going to finance this purchase. How much have you got to hand to put down? It is fairly usual that the deposit should be placed in escrow no later than 7 days beyond the final agreement of the sale (the contract), signed and dated by all parties. Who are you going to use as a lender if you decide to finance the purchase with a mortgage? If you are an overseas buyer is it more beneficial to borrow the money in your home country and maybe trade on the fluctuating dollar. Or is borrowing in Florida the best bet? These are big questions that need serious consideration as they can affect how much you have to spend on the property.

Do remember that when you borrow money from a lender for a Florida home purchase there are additional taxes to pay on borrowing that money which will increase your closing costs. It is also fairly usual for the lender to ask for the year’s estimated property tax bill up front to ensure the buyer does not default on property tax and result in a lien on their property. Another thing that lenders are increasingly asking for is for a home insurance policy to be in place and ready to be activated at the time of closing so the home is fully ensured as the title deed is transferred from the seller to the buyer on signing of the closing documents.

As a general rule of thumb and by no means a hard and fast guarantee, when financing a purchase by mortgage, expect your closing costs as a buyer to be around 3.5% of the agreed sale price. If you paid cash for the home then the closing costs would be around 1.5% of agreed sale price.

So remember, before you go headlong into searching for the perfect Florida vacation property, do your math first and decide how you plan to finance the deal – it will make the writing up of the sale contract a whole lot easier for your Realtor!


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