Current second home mortgage rates

Written by Zach Wichter

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money.

Higher rates are on the way

Get ahead of anticipated rate hikes in 2022 and lock in a new refinance rate now.

Countdown to Fed day

-- Days
-- Hours
-- Minutes
-- Seconds
ON THIS PAGE Jump to Open page navigation

What are the differences between mortgages for a primary residence and a second home?

A second home mortgage helps pay for a second home or vacation home. Unlike the mortgage for a primary residence — where you live most of the time — a second home mortgage typically requires a larger minimum down payment and has a slightly higher interest rate, and can have stricter requirements when it comes to cash reserves and debt-to-income (DTI) ratio.

A mortgage for a primary residence, for instance, might only require 3 percent or 5 percent down, while a second home mortgage might require at least 10 percent.

In addition to that, you’ll likely need two to six months’ of reserves, depending on your credit and financial profile, to ensure you’re able to cover mortgage payments on both your primary residence and second home.

Your DTI ratio, meanwhile — which helps determine your ability to repay the loan — might max out at 43 percent, although some lenders cap it at 36 percent. On primary residences, there’s usually flexibility up to 50 percent.

How do second home mortgage rates differ from rates for a primary residence?

Mortgage rates are somewhat higher on second home mortgages — by as much as 0.5 percent, 0.75 percent or 1 percent more. This is in part to compensate for the risk of a second home, which you’re much more likely to walk away from if you weren’t able to make payments compared to your primary residence.

Pros and cons of a second home mortgage

Pros:

  • 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).

Cons:

  • 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.

How to qualify for a mortgage on a second home

Your second home has to be used as a second home 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.

Can you refinance a second home mortgage?

You can refinance a second home mortgage, but as with any refinance, it’s crucial to ensure the savings outweigh the closing costs. Because interest rates are higher on a second home mortgage, it can take you longer to recoup these costs. You might also need more equity in your second home in order to refinance and, as with the initial loan, sufficient cash reserves.

Learn more about second homes