Current second home mortgage rates

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How to get a second home mortgage
How to qualify for a mortgage on a second home
Why compare second home mortgage rates?
Pros and cons of a second home mortgage
Should you get a second home mortgage?
FAQs about second home mortgages

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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.

Bankrate displays two sets of rate averages that are produced from two surveys we conduct: one daily (“overnight averages”) and the other weekly (“Bankrate Monitor averages”).

For Bankrate’s overnight averages, APRs and rates are based on no existing relationship or automatic payments. To determine the Bankrate Monitor mortgage rate averages, Bankrate collects APRs and rates from the 10 largest banks and thrifts in 10 large U.S. markets based on no existing relationship or automatic payments.

Our advertisers are leaders in the marketplace, and they compensate us in exchange for placement of their products or services when you click on certain links posted on our site. This allows us to bring you, at no charge, quality content, competitive rates and useful tools.

Learn more about Bankrate’s rate averages, editorial guidelines and how we make money.

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.

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

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.
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.
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.

Current second home mortgage rates

How to get a second home mortgage

How to qualify for a mortgage on a second home

Why compare second home mortgage rates?

Why trust Bankrate’s mortgage rates?

Pros and cons of a second home mortgage

Pros:

Cons:

Should you get a second home mortgage?

FAQs about second home mortgages

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

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

Can you refinance a second home mortgage?

Learn more about second homes:

Mortgage rates in other states