Thinking About a Second Home?

We would like to buy a cabin, but our neighbor said it was very hard to get financing; what are our options? Second homes are generally treated the same as your primary residence. You can finance them with a low down payment, and the rates and closing costs are reasonable. The biggest hurdle is proving that the property will actually be a second home.

Second homes are considered vacation homes and you must prove it will not be a rental property. Typically, it must be at least 50 miles from your primary residence, and located in a resort type area. A mountain cabin or lake home would be a good example of a second home. In some cases, you may be able to claim a second home less than 50 miles away, if you meet this “resort” designation.

The second requirement deals with any lease or other agreement that you have regarding the property. If you have a lease that prevents you from access to your home, then it may require that you treat the home as an investment (rental) property instead of a second home. Typically, investment property requires a 20-25% down payment and would have higher closing costs, or a higher rate.

You can rent the property, but cannot have an agreement with a rental company that gives them exclusive rights to the property and prohibits you access.

Take the time to understand the loan guidelines and make sure that you are upfront with your intent. In most cases, mortgage fraud is a felony; not just for the lender, but for you as an individual.

This blog is for informational purposes and is the opinion of the writer. In financial matters always solicit professional advice and legal counsel if necessary.