My wife and I are interested in a second home in Hawaii. We would like to purchase and use as a rental but were unsure of the various types of finacial loans that may be out there for us to look at. We have a home in California with approximately 500,000 of equity in the home, our balance on this home is 250000 with 12 years left on a 15 year loan. We also have several mutual funds and retirement accounts plus 100,000 as a down for the property in Hawaii. The rental property we are interested in is 755,000 and has 3 acres of surrounding property. Eventually we would like to spend half our retirement time in Hawaii and the balance in California how would I go about finding what types of loans are best designed for this time of investment?

I would suggest you finance this is a second home, rather than investment property.

With a small (10%) down payment you could more than likely use a stated income program if for some reason your verifiable income doesn't support the additional mortgage payment without using rental income to qualify.....

Rental Income would have to be supported by lease agreements, or something of the sort, and the interest rate on investment properties is traditionally higher, as well as down payment requirements, etc.

Most lenders will consider a property a second home if the deal "makes sense"....ie. no second home down the street from where you currently live...and, at closing, there will be, of course, an affidavit signed by you that you intend to occupy the property at least part of the year yourselves.

There would be no restrictions concerning whether or not you wanted to lease the property for at least part of the year (even 11 months out of 12) after the loan closed.

I work as a mortgage broker, and use 250 of the most competitive lenders in the country for financing....lenders with interest only options, fixed rates, 1.9% (the "pick a payment" that's becoming popular) and everything else in between. If you'd like to give me a call, I can explain your options to you more thoroughly. Best of Luck!

MS is partially right, you can get this home financed as a second home with almost anyone so long as you do not tell the lender you plan to rent it out. If the situation makes sense, they will probably never know. There are some risks involved however, and what your lender doesn't know could hurt you. When you close on a second home, you will be asked to sign a second home rider. This document states that you swear you will not use the property for anything other than personal use for a specific period of time, usually 12-36 months depending on the lender. If you are discovered to be in violation of this rider, the bank can foreclose on your home even if you are not delinquent on your payments. You also cannot insure the property as a rental which can cause a big liability issue should something happen to the house since many local and state governments require the landlord to provide "alternate housing" to a tenant should the home become uninhabitable. (A pretty serious risk in storm pounded, and volcanically active Hawaii) A mortgage broker who knowingly puts you in a second home program with the knowledge that you intend to rent the property out can at the very least burn a bridge with the lender or at the most, lose their license or even be criminally charged with fraud if serious damages occur as a result. The chances of anything like this happening are minimal, and brokers do it all the time, some loan officers are even trained to do it for the sake of making a buck, but in the end is it worth the risk? Your decision