Is the Time Right to Buy a Second Home?


A second home can be an expensive undertaking (one home can seem like more than enough!), but there are numerous situations where it makes complete sense to make that second purchase based on need, want, or convenience. A popular misconception is that a second home is either a beach house or mountain getaway; however, consumers are using second homes to bridge commutes and support relationships. Popular reasons people are purchasing a second home include: a place to which they commute to regularly, a home they eventually would like to retire in, a location close to distant family members, or a favorite family vacation getaway.


A popular misconception is that a second home is
either a beach house or mountain getaway.


Second Home vs. Real Estate Investment

By definition, second homes must be a one-unit dwelling that is used and suitable for year-round occupancy. If you want to rent out the home 14 or more days in a year, it will be considered a real estate investment (see article on page 5). Multi-unit dwellings, mixed-use properties, timeshares, condotels, properties with mandatory rental pools, and recreational leases are all types of real estate investments and will require a commercial loan.


Extra Loan Requirements for a Second Home

If you are ready to purchase a qualified second home, you will be working with the bank’s residential mortgage team. When applying for a second home mortgage, there are a few stipulations you didn’t come across with your first mortgage, and several can be surprising. Below are the top additional items banks consider when underwriting a second home mortgage. If any of the below bullet points apply to your property, you will need a commercial loan instead of a mortgage loan.

Second homes must be:

  • Located a reasonable distance away from the borrower’s principal residence
  • Occupied by the borrower for some portion of the year
  • A one-unit dwelling
  • Suitable for year-round occupancy
  • A personal residence. It cannot be a long-term rental property or a timeshare arrangement.
  • Under exclusive control of the borrower. This mean the property cannot be subject to any agreements that give a management firm or other person control over the occupancy of the property.


How Much Can You Borrow for a Second Home?

At several area banks, qualified borrowers can finance or refinance up to 90% of their second home value. That will leave you a lot of room for financing and budgeting. One thing to keep in mind is the loan amount is based on the lesser of either the appraised value or sales price of the home, so be sure to use that amount when calculating your potential loan costs.


Are Rates Different?

Unlike with the purchase of a multi-unit dwelling or investment property, the pricing and rates on a second home are very similar to that of purchasing a primary residence (with the additional considerations mentioned earlier). Keep in mind, however, second homes are NOT eligible for government and state loan programs such as USDA, FHA, and PHFA. Those are strictly limited to primary residence homes.


If Now is Your Time…

With rates at unprecedented lows, it is an EXCELLENT time to purchase that home away from home! Do you have a desire to purchase a second home? We welcome you to contact a mortgage loan originator or simply apply for your home loan at