HOW TO FINANCE A VACATION HOME

On the Atlantic coast, from Maine to Texas, resort areas are full of people eager to buy something near the water. Prices are rising with demand. Maybe you have come back from vacation, taken a look at your stock gains, and decided to take the plunge yourself. How will you finance the purchase?

If you're able to make a down payment of 20 percent to 40 percent of the purchase price, it will make the monthly payments much easier to handle, and if you buy in an area with a good rental history, the rent may cover much of your mortgage cost.

For example, you find a beach house fully furnished for $250,000. Make a hefty 40 percent down payment, and that leaves you with a mortgage of $150,000, which at 7 1/2 percent over 30 years,  would mean monthly payments of $1,048.00.

Rent the house to vacationers for 8 prime weeks of summer at $2,000.00 per week and the entire mortgage payment-principal and interest- will be covered for the entire year with profits. Now reduce the down payment to 20 percent on that $250,000 property and you will only fall $775.00 short of covering a years worth of mortgage payments with 8 weeks of rental income.

The beach property may help on your taxes too. List it as a second home, and you can take deductions for the mortgage interest and taxes and visit the place as often as you like.

List it as a rental property, and you can only use it 14 days a year or 10 percent of the time it is rented out, whichever is greater. But you can make other visits to do repairs and upkeep.

Please consult with your tax-adviser regarding your own personal situation. The above is not intended as tax advice.