Second home financing: Vacation homes and getaways

Buying a second home

Whether it's a beach house, mountain cabin, or a place closer to family, buying a second home is a significant milestone. The good news? Financing a second home isn't dramatically different from your first, though there are some key differences to understand.

Second home vs. investment property

This distinction matters because it affects your loan options and rates.

A second home is a property you plan to use personally for part of the year. You might rent it out occasionally, but it's primarily for your own enjoyment. Lenders give these properties favorable treatment because you have a personal stake in maintaining them.

An investment property is one you're buying primarily to generate rental income. These come with higher down payment requirements and interest rates. If you're planning to rent out your property full-time (like an Airbnb), check out our investor financing options instead.

What you need for a second home mortgage

Down payment: Plan on 10-20% down for a second home. Some lenders require the full 20%, while others work with 10% if you have strong credit and reserves.

Credit score: Most lenders want 680+ for second home financing. Higher scores (720+) unlock better rates.

Reserves: Lenders want to see you can cover both mortgage payments if something goes wrong. Expect to show 2-6 months of reserves for both properties.

Debt-to-income ratio: Both mortgage payments count against your DTI. Make sure you can comfortably afford both before committing.

Location requirements

Here's something that catches people off guard: the property needs to be a reasonable distance from your primary residence. Lenders typically want to see it's at least 50-100 miles away or in a resort/vacation area.

Why? They want to confirm you're not just buying a house down the street and calling it a "second home" to get better rates than an investment property would qualify for.

Interest rates on second homes

Second home rates are typically 0.25-0.50% higher than primary residence rates. That's still better than investment property rates, which can be 0.50-0.75% higher than primary residence rates.

The exact rate depends on your credit score, down payment, and the property itself.

Can I rent out my second home?

Yes, with some limitations. Most second home loans allow occasional rental use, but your personal use should be the primary purpose. A common guideline: you should use the property for at least 14 days per year or 10% of the days it's rented, whichever is greater.

If rental income is your main goal, you'll want to explore investment property financing instead.

Jumbo loans for vacation homes

Many vacation homes, especially in popular destinations, exceed conventional loan limits. That's where jumbo loans come in. We work with lenders who specialize in jumbo financing for second homes, even in luxury markets.

Current conforming loan limits vary by county. If your purchase price exceeds the limit for your area, we'll help you explore jumbo options.

Tax considerations

Mortgage interest on a second home is generally deductible, subject to the same limits as your primary residence (combined mortgage debt up to $750,000 for loans after 2017).

If you rent the property, things get more complex. Rental income is taxable, but you may be able to deduct expenses. Talk to a tax professional about your specific situation.

The buying process

Financing a second home follows the same general process as your first:

1. Get pre-qualified to know your budget
2. Find the right property
3. Make an offer and get it accepted
4. Complete the loan application
5. Close and enjoy your new getaway

The main difference is timing. Many second home buyers are less rushed, taking time to find the perfect property in their chosen location.

Ready to find your getaway?

Whether you're looking at the Jersey Shore, the Poconos, or somewhere further afield, we can help you finance your second home. Get pre-qualified to see what you can afford, or schedule a call to discuss your plans.