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Second Home Mortgage

It is possible to get a mortgage to purchase a second home to use as a vacation retreat.

It is usually harder to get a mortgage for a second home than for your primary home. This is so, because most of the laws and tax benefits that affect home mortgages don’t apply to second homes. Instead a second home is usually regarded as an investment rather than a place for you to live.

Lenders will usually require you to demonstrate that you have the income to pay for the second home. They will also ask for a down payment of at least 20% of the mortgage balance on a second home.

This means that you shouldn’t consider getting a second home mortgage unless you have a lot of disposable income. If you don’t have a lot of extra income you should probably forget about a second home mortgage.

Drawbacks to Second Home Mortgages

One big drawback to a second home mortgage is that you won’t be able to write the second home mortgage interest off on your taxes. The home mortgage tax deduction doesn’t apply to second homes.

You might be able to use the second home as a tax deduction if you rent it out. There are significant tax deductions on rental property.

When to Get a Second Home Mortgage

You should only get a second home mortgage if you plan to use your second home for at least a month out of the year. It simply makes no sense to spend a lot of money on a home that you will only be using for a few days or weeks.

Renting is a better deal because you only need to rent the house when you use it. You also don’t have to pay for the upkeep of a rental. When you buy a house with a mortgage you will have to pay to maintain it as well. You will also have to pay real estate taxes on your second home. Renting a vacation home makes a lot more sense for most people.

Second Home as Investments

There are some times when a second home can be a pretty smart investment and a second home mortgage is justified. If you like to vacation in the same place every year and property values are increasing that area it might make sense to buy a second home there. 

Another possibility is that you might want to buy a retirement home. Purchasing a retirement home now and using it as a second home can help you avoid paying more for it later.

You can also rent the second home this way the second home can pay for itself as a rental. There are also significant tax benefits to rental property. If you don’t make money renting a property out you can use the property as a tax write off.

A second home mortgage is something that you should only look into if you have a lot of disposable income.