Vacation rental properties have seen their demand skyrocket in recent years, with sites such as Airbnb and Vrbo offering short-term rentals more than ever before. Tourists are turning to vacation rentals more frequently than hotels for their privacy, home atmosphere, and flexibility. This increased demand is a highly profitable opportunity—not only for investors, but for mortgage brokers, private lenders, and referral partners who can match clients with the proper vacation rental financing options.
If you're a third-party originator seeking to diversify your products, facilitating your customer's vacation property financing can be a game-changer. Whether you're dealing with seasoned or first-time investors in the short-term rental industry, knowing the top vacation rental loan products will make you a go-to financing expert.
In this blog, we'll take you through the different vacation home loans, what lenders take into account, and how you, as a mortgage broker or referral partner, can use these financing options to expand your business.
For clients with good credit and steady income, conventional vacation property loans can be the first line of inquiry. Conventional loans have some of the best interest rates available in the market, which makes them appealing to borrowers.
These loans, however, have stringent underwriting standards. As a mortgage broker or private lender, here's what you need to make sure your clients qualify:
If your client is eligible for a conventional mortgage, it is usually the best deal. But a lot of real estate investors—particularly those growing their portfolio—won't meet these tight qualifications. That's where alternative vacation rental financing can help.
As a mortgage broker or private lender, you’ll often work with real estate investors who don’t fit the conventional mortgage mold. Asset-based loans (also known as DSCR loans) provide a faster, more flexible option for financing rental property purchases.
As opposed to conventional loans, which rely on personal earnings, asset-based loans depend on the potential rental yield of the property. Lenders analyze the Debt Service Coverage Ratio (DSCR), which relates the rental income of the property to its mortgage.
By providing vacation rental loans on a property income basis, you have the opportunity for more clients—including full-time real estate investors who might not be able to make it through typical DTI standards. That means more deals for you and larger commissions.
A cash-out refinance is another useful mortgage broker tool for clients who want to finance a vacation rental property. If your client has a home with high equity, they can refinance their mortgage for more money and use the excess funds to invest in a vacation home loan.
Since interest rates fluctuate, this strategy works best when rates remain relatively low. As a trusted broker or lender, advising your clients on timing can help them secure the best terms.
For clients who prefer not to refinance their original mortgage, a Home Equity Line of Credit (HELOC) can be a vacation property funding alternative. The revolving line of credit enables homeowners to borrow from the equity of their home like a credit card.
By offering HELOCs, you are offering an alternative solution for customers who wish to invest in vacation rental properties without having to restructure their existing mortgage.
As a referral partner or mortgage broker, your job is to walk clients through vacation rental financing approval. Here's how you can set them up for success:
By actively educating your clients on these variables, you improve their chances of approval—resulting in more closed transactions and higher commissions for yourself.
If you are a mortgage broker, private lender, or referral partner, providing vacation rental loans can be a great way to grow your business. At RCN Capital, we offer short-term and long-term investment property loans that are specifically intended to make it easy for your clients to finance vacation properties.
We at RCN Capital appreciate our third-party originators and offer you the tools and assistance necessary to build your business. Whether a mortgage broker, private lender, or referral partner, our loan programs assist you in closing more transactions while bringing your clients leading-edge financing solutions.
Ready to begin making more with vacation rental loans? Get in touch with RCN Capital today and see how our broker-friendly programs will enable you to grow your business in 2025 and beyond!
With the booming vacation rental market, there’s never been a better time for mortgage brokers and private lenders to expand their financing options. Whether your clients need a traditional loan, DSCR loan, cash-out refinance, or HELOC, offering the right vacation rental financing solutions will set you apart as a go-to expert.
The best way to save on a real estate investment is to obtain financing from a lender that can provide you with the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate professionals. If you are looking to finance investment projects, RCN Capital has competitive loan options and an award-winning broker referral program available to partners. Connect with us today to learn how our lending solutions can help you grow your business.