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Buying a second home

How do financing and taxes work when it isn't my main home?

Step 2 of 6

How is financing different for a home I won't live in full time?

The answer

Lenders see a second home as a little riskier than your primary residence and price it that way: expect a larger down payment (often 10–20%), a slightly higher rate, and a requirement to show cash reserves. If the home will be rented most of the time, it may be treated as an investment property with stricter terms still.

Terms vary between lenders more than they do for a primary home. Two or three quotes can save real money.

How long
Most people spend about a week here.
What to do0 of 5 done
  • How to: Compared two or three lenders

    Get pre-approved for a second-home loan with two or three lenders

  • How to: Know the down payment and reserves needed

    Confirm the down payment and reserve requirements

  • How to: Know my new debt-to-income ratio

    Understand how the new payment fits your debt-to-income ratio

  • How to: Know the rental rules on the loan

    Ask whether renting it changes the loan classification

  • How to: Considered all funding sources

    Consider a home equity line on your primary home as an alternative source of funds

Go deeper
What people wish they'd known
  • Assuming you can borrow the same as on your primary home. Both payments count against you now.
  • Not telling the lender you'll rent it. Misclassifying the loan is a problem later.
  • Skipping the reserve check. Lenders often want months of payments in the bank for a second home.

From the Thrive team

  • A home equity line on your primary residence can be cheaper than a second-home mortgage. Compare the total cost, not the label.
The next thing people ask

Which place, and what are the local rules?

Go to step 3

Questions you'll probably have

Questions about your situation?

Elliott or Ashley will answer, usually within one business day. No pressure, no pitch.

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