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Second home mortgage rates explained

Published On: September 2nd, 2022

Hotels are always nice for a weekend getaway, but buying a second home has many benefits, including a consistent place to vacation and a potential return on your investment. If you’ve purchased a home before and are looking into buying another home, this article is for you. This process is different and so are the mortgage rates for this kind of loan. Keep reading to learn more.

What are mortgage rates for a second home?

Generally, second homes have lower mortgage rates than investment properties but higher rates than primary residences. Many lenders’ websites show “today’s rates,” but that can be misleading, so we choose not to show those rates on our site.  Just because you see a rate listed on a site, doesn’t mean you’ll be able to lock that in. Those are often the lowest rates available, and your application may need to be near-perfect to get that rate. While it’s important to stay competitive, customer service is our number one priority at Guild. Building strong connections and long-lasting relationships is why we’ve been in business since 1960. We’ll work with you to get a loan to fit your life, with a competitive rate. If you’re ready to find out what your mortgage rate for a second home might be, contact a licensed loan officer today.

Which factors influence second home mortgage rates?

Applying for a second home mortgage is similar to applying for a primary residence mortgage. You will, however, have to meet stricter guidelines and be willing to accept a slightly higher mortgage interest rate in some cases. Since you’re not living in this home most of the time, it might not be your first priority for repayment, making the loan riskier for the lender. We’ll discuss these guidelines later in this article. Just like your first home, lenders will take into consideration your credit score and credit history, debt-to-income ratio, and the Fed’s base interest rate based off the current market conditions.

Mortgage rates for a second home vs. a primary residence

Since this purchase is not your primary residence, it’s a riskier loan for lenders, so interest rates can be slightly higher. While there are many loan options for a primary home, you’ll probably have to use a Conventional loan or a Jumbo loan to purchase a second home. Get an idea of how much home you can afford with our total payment calculator.

5 things to know before you buy a second home

  1. Be ready with 10% or more for a down payment. You’ll need to put down at least 10% of the total cost. If you can afford to put more money down up front, you may get a lower interest rate or qualify with a lower credit score.
  2. Your credit score likely needs to be 620 or higher to qualify. This depends on other factors in your application, but this is a good benchmark. Our loan officers can help you better understand what will work for you. The higher your credit score, the better the interest will be.
  3. You’ll need to have part-time occupancy. You must prove that you’ll be living in the home for at least part of the year. This is different from investment property requirements.
  4. You can rent the home when you’re not using it. This is a bonus! If you want to rent the property and generate income, this is a great option.
  5. The property must be a one-unit home. It cannot be a duplex or multiple unit property.

Ready to find your second home?

Purchasing a second home is a huge accomplishment and a great way to invest your money. If you’re ready to start this process, we’d be happy to help along the way and be your partner in helping you achieve this dream. Our loan officers can provide personal service and answer all your questions to help you feel comfortable with such a major decision. Contact a loan officer to learn more about second home financing options. Don’t forget about closing fees too! We have a nifty cash-to-close calculator to help you figure out how much you might owe.

The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction. *By refinancing an existing loan, total finance charges may be higher over the life of the loan. *Information is for general illustrative purposes only. The information is believed to be reliable, but Guild Mortgage does not warrant its completeness, timeliness or accuracy. Guild Mortgage assumes no responsibility for errors or omissions in the information provided. *Typically, a non-purchase second mortgage. **Please consult your financial advisor on the consolidation of short term debt into long term debt.

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