Vacation Home


DEFINITION of 'Vacation Home'

A dwelling other than the owner's primary residence that is used for recreational purposes, like vacations (hence the name). Because vacation homes are only used at certain times, many owners will rent out their vacation homes when they are not using them. For example, a couple living in Maine might occupy a vacation home in Florida during Maine's coldest months and rent it out to other people for the rest of the year.

BREAKING DOWN 'Vacation Home'

Mortgages on vacation homes typically have higher interest rates than mortgages on one's primary residence, because they have a higher risk of default (in the event of a reversal of fortunes, individuals are more apt to save their primary residence than a temporary one). Nevertheless, most of the other perks of home ownership still apply, athough the restrictions are a bit tighter. If one does rent out the vacation home, then there are limitations as to how long the owner can reside there and still deduct rental expenses. The sale of a vacation home does not allow for the same income tax deductions as the sale of a primary residence does.

  1. Principal Residence

    The primary location that a person inhabits. It doesn't matter ...
  2. Personal Use Property

    A type of property that an individual does not use for business ...
  3. Non-Owner Occupied

    A classification used in mortgage origination, risk-based pricing ...
  4. Property Tax

    A tax assessed on real estate by the local government. The tax ...
  5. Personal Property

    A type of property which, in its most general definition, can ...
  6. Main Home

    A term used by the Internal Revenue Service (IRS) to define the ...
Related Articles
  1. Savings

    The 6 Best Alternatives to Hotels

    Discover information about some of the many-available and much-less expensive alternatives to staying in hotels when you are traveling.
  2. Insurance

    Top 9 Vacation Destinations For Wall Street Geeks

    Indulge your inner geek with one of these financial-themed holiday getaways.
  3. Budgeting

    Budget-Friendly Summer Fun

    Keep the kids out of your hair and wallet by saving on summer camps, sports leagues, day trips and more.
  4. Retirement

    Retirement Living: Renting Vs. Home Ownership

    Here are three simple questions you should consider when weighing this decision.
  5. Personal Finance

    Save On Planes, Trains And Automobiles

    Getting to, and around, your travel destination doesn't need to break the bank.
  6. Options & Futures

    Tips For Renting A Vacation House

    Follow these nine steps to get a picture-perfect summer shack at a great price.
  7. Options & Futures

    Timeshares: Dream Vacation Or Money Pit?

    This popular real estate product has its advantages, but don't expect to make a profit.
  8. Taxes

    Vacation Home Or Income-Producing Investment?

    There is an alternative to letting your cottage sit empty all year, but turning a profit won't be easy.
  9. Investing

    How to Use Technology to Save Big on Travel

    How to leverage the online community and technology to create a one of a kind travel experience that's economical.
  10. Personal Finance

    3 Castles That Cost Less Than a NYC Apartment

    Did you know you can rent an entire château, and that it might cost less than your New York pad?
  1. What are the warning signs of online hotel / travel booking scams?

    Travel booking scams ask travelers to book a vacation stay at a residential rental property that is fake or that belongs ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!