Second Home Mortgage Rates: Everything You Need to Know

• What are today's second home mortgage rates?
• Current second home mortgage rates
• What is a second home mortgage?
• How to qualify
• Tips for getting the best rates
• Benefits and drawbacks
• Alternatives
• FAQs

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Wondering if now is the time to invest in your dream tropical vacation home, peaceful cabin in the woods, or big city condo getaway?

Check out the latest trends to see what kind of second home mortgage rate you might get. 

What are today's second home mortgage rates?

Because there's more risk to the lender, mortgage rates on second homes are typically slightly higher than mortgages for primary residences.

Average mortgage rates on a fixed 30-year mortgage decreased to 6.58% in June 2024, according to Zillow data. This is 18 basis points lower than the previous month's average. Rates have been trending even lower recently. 

Overall, mortgage rates are expected to go down in 2024 as inflation cools, which means borrowers who wait until later in the year to get a mortgage may benefit from lower rates.

Current second home mortgage rates

See where mortgage rates are at today for some of the most popular loan types and terms. That these rates are for all mortgages, not just ones for second homes.

Factors affecting second home mortgage rates

Mortgage rates are determined by a variety of factors, including current market trends, the level of risk the loan presents to the lender, the location of the home, and the borrower's credit profile.

You'll likely have a higher interest rate on a second home mortgage compared to a mortgage on a primary residence. But those with good credit scores and higher down payments can still get a good rate on one of these mortgages.

Mortgage rates can also vary by state, so if you're buying in an area that's more expensive than where your primary residence is, don't be surprised if you're stuck with a higher rate. 

How to compare rates

To be sure you're getting a good deal, it's always a good idea to shop around and compare rates from at least three different mortgage lenders.

As you look at mortgage rate quotes, make sure they're actually comparable to one another. Some lenders include mortgage points when they give you a rate estimate, which means you'll have to pay a fee at closing to secure that rate. Ideally, all the rates you're comparing should have no points included, so you're comparing apples to apples.

Additionally, don't forget to consider other fees a lender charges, such as an origination fee, when comparing offers.

What is a second home mortgage?

Definition and overview

When you buy a house, your mortgage lender will want to know how you plan to use the property.

A primary residence is the place you live for most of the year — it's your home. A second home, on the other hand, is a property that you live in only occasionally, like a vacation home or an apartment in another city you live in part time for work.

The requirements and cost of your mortgage will work a little differently depending on how your home is classified. You can also get an investment property mortgage if you want to buy a property to rent out.

Difference between primary and second home mortgages

The main difference between mortgages for primary residences and mortgages for second homes is that second home mortgages come with higher mortgage rates and are typically harder to qualify for.

Second home mortgages are riskier for lenders. If something happens with the borrower's financial situation, the borrower is more likely to prioritize paying the mortgage on their primary residence than their second home.

How to qualify for a second home mortgage

The process of qualifying for a second home mortgage is similar to qualifying for a mortgage on a primary residence, though some of the requirements may be slightly different.

Credit score requirements

Typically, you'll need a credit score of at least 620 to qualify for a conventional mortgage, but lenders may require higher scores for second home mortgage. 

Debt-to-income ratio

Debt-to-income ratio (DTI) requirements can vary by lender, but generally you should try to keep your DTI below 45%. This can be challenging when getting a second home mortgage.

One of the main hurdles to purchasing a second home is being able to afford two mortgages at once. If you're still paying off your primary residence, the lender will include both mortgage payments when calculating your DTI.

"For a second home, unlike a primary residence, buyers will need to qualify for both their primary residence costs and the second home costs," says Duncan Hsia, owner of Infinite Financial, a mortgage brokerage in Hawaii.

Down payment and reserve requirements

You'll likely need a down payment of at least 10% to qualify for a second home mortgage. Some lenders may have higher minimum requirements. 

Your lender may also require you to have extra cash in the bank that can cover your monthly payments if you lose your source of income.

"For both second homes and investment properties, lenders generally will require reserves, meaning cash in accounts that won't be used for the purchase," Hsia says. "That gives cushion in case things don't go well with the buyers' income. Retirement plans can be used for reserves."

Tips for getting the best second home mortgage rates

Improve your credit score

One of the best things you can do to snag a better mortgage rate is improve your credit score. The best way to do this is by building a history of making on-time payments. 

Another way to boost your credit is by paying down revolving accounts like credit cards that have a high balance or by asking for a credit limit increase on these accounts. 

Shop around for lenders

Getting approved with multiple mortgage lenders will help you compare rates and be sure you're getting the best overall deal. You may also consider working with a mortgage broker, who can help you easily compare multiple lenders and loan options at once. 

Consider different loan options

You have many different options when it comes to the exact type of second home mortgage you get, and the type of loan you get will impact your rate.

You can get a lower rate by opting for a shorter loan term, though keep in mind that this will result in a larger monthly payment. 

You'll need to decide whether you want a fixed-rate or adjustable-rate mortgage (ARM). You often can get a better rate with an ARM compared to a fixed-rate loan, but the rate adjusts after a certain number of years, which can cause your mortgage payment to go up. 

Except in a few situations, you can't use a government-backed mortgage purchase a second home. For example, if your current home is too far from your workplace to commute and there's no affordable rental housing within 100 miles of where you work, you may be able to get an FHA loan for a second home. Otherwise, you'll need to get a conventional loan. 

Benefits and drawbacks of second home mortgages

Advantages

Because real estate tends to appreciate in value over time, buying a second home can be a good investment. This is particularly true if you're buying in a desirable area, like a popular vacation destination. 

It can also be beneficial if you need a place closer to where you work, or if you want a designated vacation spot that you can visit as you please without having to worry about making reservations or paying for a hotel. You may be able to utilize the mortgage interest deduction to deduct the interest you pay on your second home's mortgage when you do your taxes.

Potential risks

Mortgages for second homes require larger down payments and come with higher interest rates. If you're still paying off the mortgage on your primary residence, you should be sure that your budget can handle two mortgages at once. 

Be sure to think about how your costs could go up over time as well. Your property taxes and homeowners insurance premium can change each year, potentially increasing your mortgage payment.

This is especially important to consider if you plan on buying a vacation home in an area that is likely to be impacted by the effects of climate change. Your homeowners insurance costs could increase sharply over time, or the property could end up being completely uninsurable.

Alternatives to second home mortgages

Home equity loans

If you have enough equity in your current home, you could use it to purchase another property with a home equity loan or HELOC.

Cash-out refinance

A cash-out refinance also lets you take equity out of your home, but it does so by replacing your existing mortgage with a new one. 

Non-QM loans

If you can't get a traditional second home mortgage, you may be able to use a non-QM loan to purchase another property. Non-QM loans are geared toward borrowers who have trouble qualifying for a mortgage through traditional means. They can be a good option for self-employed borrowers or those who have recent credit events that make them ineligible for traditional loan types.

The downside is that these mortgages are significantly more expensive than regular mortgages. 

Second home mortgage rates FAQs

Mortgage rates are generally a little higher for second home mortgages, but it depends on your lender and the strength of your credit profile. Be sure to shop around with multiple lenders to ensure you get the best rate available to you.

Typically, the minimum down payment required for a second home mortgage is 10%. But some lenders may require higher down payments, such as 15% or even 20%.

Lenders charge higher rates on second home mortgages to compensate for the risk they're taking in making the loan.

It's generally more difficult to qualify for a second home mortgage than it is for a mortgage on a primary residence. Lenders may require higher down payments, higher credit scores, and lower debt-to-income ratios.

A second home is a single-unit property that the owner lives in for a portion of the year. Vacation homes are a common example of a second home. A property won't be considered a second home for mortgage purposes if it is a rental property or timeshare.

You can ensure you get the best rate possible on a second home mortgage by getting quotes from multiple lenders to compare offers.

Mortgage rates are impacted by a variety of factors, including economic trends, how risky the borrower is, and location. 

• Mortgages and mortgage lenders
• Home equity
• The housing market
• The economy and the forces that impact mortgage rates
• Budgeting and saving
• Credit
• Insurance
• Retirement savings

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