Vacation Home

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Personal Use Property

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

    A classification used in mortgage origination, risk-based pricing ...
  3. Principal Residence

    The primary location that a person inhabits. It doesn't matter ...
  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. Insurance

    Top 9 Vacation Destinations For Wall Street Geeks

    Indulge your inner geek with one of these financial-themed holiday getaways.
  2. 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.
  3. Retirement

    Retirement Living: Renting Vs. Home Ownership

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

    Save On Planes, Trains And Automobiles

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

    Tips For Renting A Vacation House

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

    Timeshares: Dream Vacation Or Money Pit?

    This popular real estate product has its advantages, but don't expect to make a profit.
  7. 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.
  8. Personal Finance

    The Cheapest Times To Fly To New York City

    Summer is the costliest season to travel to the Big Apple from abroad. You'll save money in the colder months, as long as you avoid the holidays.
  9. Personal Finance

    When Is It Cheaper To Fly To Europe?

    When can you fly to Europe for the lowest fares? Hint: You'll need gloves and a scarf.
  10. Personal Finance

    The Cheapest Times To Fly To Hawaii

    What's the best way to save money on flying to Hawaii?

You May Also Like

Hot Definitions
  1. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  2. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  3. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  4. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  5. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  6. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
Trading Center