Vacation Home Rates Going Up on 4/1/22

by Tim Hart | Jan 7, 2022 1:29:39 PM

Decrease Buying Power By 10%!

Bad news for 2nd home buyers starting April 1 and Ill explain why... This week we got notice that Fannie Mae is increasing their Loan Level Price Adjustments for 2nd Homes starting on 4/1/2022.

Here is the article:

So far it may just seem like mortgage mumbo jumbo to you but let me translate what this means to the Borrower. Spoiler alert, it’s not good.

2nd home rates thumbnail

I’m using a sales price $400,000, 20% down, loan amount of $320,000, 740 credit score, 30 year fixed payment of 3.625% and a monthly payment of $1,459.

Assuming rates stay in the same on April 1, the loan example above will turn into the following if the borrower wants the same 30 year payment of $1,459

Sales price lowered to $355,000

Loan Amount lowered to $284,000

Interest rate increased to 4.625%

Yikes! This means you lose just over 10% of your purchase power. Not good!

What does that mean if you don’t care about the monthly payment and you want the same sales price?

Just with the rate increase of 1% from 3.625% to 4.625% will increase the monthly payment from $1,459 to $1,645. Increase of $186 a month.

So basically if you want to get a 2nd Home OR refinance your current 2nd home, you better do it ASAP.

FYI- This change is because of how many borrowers are using the 2nd Homes as Vacation rentals which is an Investment Property. It sucks but this is the reality.

Let us know if we can help with anyone you know that wants to buy a 2nd home or refinance their current 2nd home.

Have a rate day!

Born and raised in Southwest Florida, I have been in the Mortgage business since 2001 I'm a grizzly, battle tested mortgage veteran. I am also the Host of Rates & Reels, which is the most popular fishing show in Southwest Florida, hosted by a guy named Tim. In my spare time I love spending time with my family, coaching baseball, and anything else my kids or wife want me to do. I would be happy to help you or someone you know with any of your Mortgage needs.

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