Current second home mortgage rates
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How to get a second home mortgage
Here are the basic steps to scoring a second home mortgage:
- Build your credit
- Make a budget
- Set savings aside for both a down payment and monthly mortgage payments
- Research the best type of mortgage for you
- Compare current mortgage rates
- Choose the right lender
- Get preapproved
- See multiple houses within your budget
- Apply and get approved for a mortgage
- Close on your new house
How to qualify for a mortgage on a second home
Your second home has to be used as a residence in order to qualify for a second home mortgage — it can’t be an investment or rental property.
Similar to the mortgage on your primary residence, your credit, income, employment history and other factors need to meet requirements. As early in the process as possible, review your credit report to check for errors or ways to improve your score. If you can, work on paying down debt — this can help you qualify for the mortgage, and also boost your credit. Organize your paperwork, too, including pay stubs, tax returns and bank statements.
Depending on where your second home is located, your lender might also require flood insurance to qualify.
Why compare second home mortgage rates?
Shopping around for quotes from multiple lenders is a crucial step – one that can save you thousands of dollars over the life of the loan. When you shop, focus not only on the interest rate you’re being quoted but also the other terms of the loan. Be sure to compare APRs, which include many additional costs of the mortgage not shown in the interest rate. Keep in mind that some institutions may have lower closing costs than others, or your current bank may extend you a special offer. There’s always some variability between lenders on both rates and terms, so make sure you understand the full picture of each offer, and think about what will suit your situation best.
Pros and cons of a second home mortgage
- You can deduct the interest and property taxes – You can deduct the mortgage interest for both your primary residence and second home up to $750,000 total (or $375,000 if married filing separately). This applies only to “qualified” second homes, meaning you don’t rent it out, or you do rent it out but also use it yourself for a certain period of time each year. You can also deduct combined property taxes up to $10,000.
- You can use your primary residence to help pay for it – You can take advantage of the equity in your primary residence to make a down payment on a second home, either through a cash-out refinance or home equity line of credit (HELOC).
- It costs more – You’ll have a higher mortgage rate for your second home loan, so you’ll pay more in interest. You’ll also have a higher rate if you decide to refinance your second home mortgage down the line. Along with that, you’ll need to make a bigger down payment.
- It can be harder to qualify for – Because the home isn’t your primary residence, you’ll need to meet stricter credit, DTI ratio and reserve requirements.
Should you get a second home mortgage?
Buying a second home is a big step, one taken for many reasons. Perhaps you want to put more of your assets into real estate. Or maybe you want to create a familial gathering spot, one you could pass on to your children or grandchildren. If you’ve achieved second homeownership, congratulations – it’s a financial milestone not many reach. Whether to take a second home mortgage is something of a personal choice.
There are other options. You could tap the equity in your primary residence to pay for your second home. You could borrow against your investment portfolio, or maybe you could pay cash for the second home. If you have that financial flexibility, the decision comes down to what kind of a deal you can get on a second home mortgage. If the rate and terms are attractive, then you’re probably wise to take a mortgage on your second home.
FAQs about second home mortgages
Learn more about second homes:
Mortgage rates in other states
- United States
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- Washington DC
- West Virginia