Vacation & Second Home Mortgages

A vacation or second home mortgage is a loan used to finance the purchase of a residential property that is not your primary residence. These properties are typically used for personal enjoyment and not intended as a full-time rental or investment.

There are two main categories:

• Vacation Home: A property used primarily by the owner for personal vacations or seasonal living.

• Second Home: A property located some distance from the primary residence, often used regularly or part-time throughout the year.

While similar to traditional home loans in structure, second home mortgages usually come with stricter qualification criteria and slightly higher interest rates. Key differences include:

• Higher Down Payments: Lenders often require 10–20% down, compared to 3–5% for some primary residences.

• Stricter Credit Requirements: A strong credit score (typically 700+) is often needed.

• Debt-to-Income Ratio (DTI): Lenders may impose more conservative DTI thresholds, as borrowers must demonstrate the ability to manage multiple mortgage payments.

• Occupancy Requirements: You must intend to use the property for personal purposes and occupy it for part of the year.

• Conventional Loans: The most common method, requiring a solid financial profile. These can be fixed-rate or adjustable-rate mortgages.

• Home Equity Financing: If you own a primary residence with significant equity, a Home Equity Line of Credit (HELOC) or Home Equity Loan may be used as a down payment or full financing for a second home.

• Portfolio Loans: Offered by some lenders for unique borrower scenarios that may not meet conventional loan guidelines.