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Second Home Mortgage Rate

You will generally pay a higher interest rate on a second home mortgage than on your regular home.

The second home mortgage rate is higher because lenders consider second homes a very risky investment. Since the second home is considered a luxury the prime mortgage rate is usually not available on it. Neither are special government deals like tax credits and VA mortgages.

This means that you will have to pay a higher mortgage interest rate if you want to buy a second home. Since the mortgage rate on second homes is so much higher most Americans may not be able to afford them.

Second Home Mortgage

Generally you should only take out a second home mortgage when you can afford to pay the second home mortgage rate. If you don’t know how you’re going to pay the second home mortgage payments you shouldn’t get a second home. Only buy a second home when you know that you can pay for it.

One way some people finance a second home mortgage is to rent out the second home. This can cover your mortgage payments but it can also keep you from getting a mortgage. Many lenders will not make second home mortgages if the second home is rented out.

If you want to rent your second home out it might be cheaper to get a commercial mortgage to finance it. Treating your second home as rental property might save you money because rental property is an excellent tax write off. All of the expenses you incur maintaining, buying and repairing a second home can be written off on your taxes.

One Way to Cut Your Second Home Mortgage Payment

Even though you probably won’t be able to reduce your second home mortgage rate there are ways you can reduce your second home payment. The best is to make a down payment of at least 20% of the mortgage principal on your second home.

If your mortgage down payment is below 20% you will be required to pay for private mortgage insurance (PMI). PMI can substantially raise your monthly mortgage payments. PMI is a kind of insurance that insures the lender but not the property owner against the risks of foreclosure.

Making a large down payment will get rid of the PMI and give you lower mortgage payments on your second home. This will also give you a lot of equity in your second home which will enable you to borrow against your second home.

Second Home Mortgage Rate

The way to get a really good second home mortgage rate is to shop around for your second home mortgage. Visit as many lender websites as you can and check out their rates using the mortgage calculator.

Shopping around can help you locate a mortgage that’s substantially cheaper than the standard second home mortgage rate. It can also help you locate other mortgage deals and products you might not be aware of.