There's nothing like settling into a new vacation retreat in time for a summer getaway.

Unfortunately for mortgage-hunters, financing a cottage on Cape Cod or a Lake Tahoe townhouse often involves more hassle than buying a primary residence.

Vacation home loans tend to require more money down, carry higher interest rates and feature other restrictions -- all factors that buyers must consider long before they can start leaving footprints in the sand or ski tracks in the snow.

"Logic and statistics indicate to us people are much more likely to default on a secondary home or vacation home than their primary residences," says Kirk Park, assistant vice president for secondary marketing at Market Street Mortgage Corp. of Clearwater, Fla.

"Our underwriters are definitely going to be looking for people with a little bit better credit and definitely more assets than somebody purchasing their primary, because they're going to be having two payments."

A booming market for vacation homes
The hurdles might be higher when it comes to buying a vacation home, but shoppers and mortgage companies alike don't seem to mind. The same forces that drove ownership of primary homes to a record level last year -- low mortgage rates, rising stock prices and low unemployment -- also benefit the vacation, or second, home market. Throw in the right age mix of potential buyers, lenders say, and you have the makings of a boom.

"The demographics for vacation homes have really created a lot of demand for them because the baby boomers fall into that age group where the kids are getting older, their house is paid off and they're looking for someplace to retire," says Julie Mealo, a Linwood, N.J., branch manager with Wells Fargo & Co.'s Norwest Mortgage division who handles vacation home financing on the Jersey shore. "Our vacation business has roughly doubled."

Down payments, interest higher
While lenders have eased back on some restrictions during this period of bliss, stricter rules still apply to many parts of a vacation home transaction. The down payment for a primary residence can be as little as 3 percent of the sale price, for instance. But second home borrowers generally will have to come up with at least 10 percent down to get the best interest rate.

People also pay more for the privilege of making small down payments on second homes, Mealo says. Private mortgage insurance for a $100,000 primary home with a 90 percent loan-to-value mortgage might cost $520 a year, for example, compared with about $650 for an equivalent loan on a vacation house.

Then there's the issue of crisis protection. Park says a first-home buyer might be expected to show they have two months worth of principal, interest, tax and insurance payments saved up in case of an emergency. The reserves could be in a checking or savings account or other type of relatively liquid asset such as stocks or bonds. Somebody looking to maintain mortgages on two properties, however, might need six months of payments on hand -- for each loan.

"It definitely requires more cash in the bank after settlement," Park says.

An extra cost for renting out
Home buyers who plan on renting out the house while they don't live there in order to cover the mortgage payments typically will pay a bit more from the start, too. Rates on so-called investment property loans usually are higher than those on standard second-home mortgages. Instead of paying 7.25 percent interest for a 30-year, 80 percent loan-to-value mortgage, Park says, someone might pay about 7.63 percent.

With some condominiums, borrowers may have to fork over more up front or pay a higher rate even if they don't plan to rent, Park adds. That's because loans to buy in high-rise buildings where a large concentration of owners rent out their units are considered higher risk.

Shop for a local lender
Still, experts note that these guidelines vary from lender to lender. Borrowers willing to pay a steeper interest rate can get loans that don't require as much in reserves or down payment. As a result, Norwest's Mealo suggests that buyers consider a lender with substantial experience and branch offices in the vacation area, rather than one based elsewhere who is simply licensed to make loans there. It's not tough these days to reach out via the phone or the Internet to find a lender in a vacation hotspot.

"We're not as remote as people think we are, and most of the vacation homes and second homes are purchased in resort areas," says Vernon Omori, a senior vice president with the residential loan division of First Hawaiian Bank. Part of BancWest Corp., the company has branches in Hawaii, Guam and Saipan.

"What I'm asking of you here is the same I would ask of a guy two miles away," he adds. "Communications are at a point where I don't think it's a real big factor of delays. We could close a guy out of Florida as fast as we could close a guy out of Honolulu if you have the information."