What is a Vacation Home?

Just as the name suggests, a Vacation Home is primarily used for the purposes of recreational activities, such as holidays and vacations. This one is a secondary dwelling, which is not considered as the principal residence.

A vacation home is also known as secondary property or recreational residence. Often, it is located in a different place than the primary residence of the owner. Since vacation homes are only used at specific times of the year, several owners prefer renting out their vacation homes when not using.

How are vacation homes different from primary homes?

In general, the property can be divided into different categories, typically for the purpose of income tax. The property wherein the owner resides is known as the primary or principal residence. Such type of property can be anything, be it an apartment, home, trailer, and more. To qualify as a principal residence, the owner – whether single or married – must live in a property for the majority of years. On the other hand, a vacation home is a different thing altogether. This property type, often, is regarded as the second home. In most of the cases, it is situated away from the principal residence. Similar to the primary residence, vacation homes can be of any type as well. Out of all, farmhouses and cottages are the most popular ones.

Apart from Offering a getaway place, vacation homes can also be rented out, as mentioned above, to generate extra Income, when not in use. This way, a couple with a principal residence in Bangalore may own a vacation house in Ooty and rent it out to the tourists throughout the year. However, there are a few things that owners would have to consider, such as how this additional house will be regarded for the purpose of tax. There might be certain restrictions in terms of how long the owner can live in the vacation house.

Also, selling the vacation house doesn’t fetch the same income tax deductions as selling the primary house. Although a vacation home is a considerable asset to own, it could; however, be a financial challenge as well. For instance, a loan on the vacation home generally comes with a higher interest rate than that of a primary residence. This is because such secondary houses have more risk of Default as people prefer saving their primary residence more than a temporary one.