Current Second Home Mortgage Rates (2024)

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If you’re planning to purchase a second home or refinance an existing one, current second home mortgage rates can significantly impact your finances. These rates are typically higher than primary residences due to the additional risk posed by second home ownership.

What Are Second Home Mortgage Rates?

Second home mortgage rates are interest rates for financing a second home—a property other than your primary residence. These rates can be fixed—a stable interest rate for the life of the loan—or adjustable—a rate subject to change based on market conditions.

When shopping for a second home, keep an eye on available mortgage rates, as they will significantly impact the overall cost of your investment. By securing a lower interest rate, you can save thousands of dollars over the life of the loan and make your second home more affordable in the long run.

Current Second Home Mortgage Rates

Current 15-Year Second Home Mortgage Rates

Current 30-Year Second Home Mortgage Rates

How To Get a Mortgage for a Second Home

Every financial institution has its own process for applying for a second home mortgage. However, there are a few general steps to follow:

Calculate affordability. Before buying a second home, determine your budget and factor in potential maintenance costs, insurance and other expenses.
Get preapproved for a mortgage. Obtaining preapproval will suggest the amount you qualify for. Not only is this important when shopping around for a second home loan, but a preapproval letter can also help you get a house under contract.
Find the best rate. Shop around to find the lowest interest rates available from reputable lenders. Then, compare the closing costs of each loan option before making your final decision.
Make an offer. Once you identify a property that fits your budget, make an offer and begin securing financing for your second home.
Apply for the mortgage. Submit all requested documents for income verification, credit score review, taxes and other pertinent information needed by lenders during this stage of the approval process.
Close on your loan. After approval, sign all necessary documents to finalize the mortgage and take ownership of your new home.

How To Qualify for a Mortgage on a Second Home

Each lender has unique criteria when approving a loan, so it’s always best to contact a qualified mortgage professional for more information. However, there are several factors that the best mortgage lenders consider when evaluating mortgage applications, including:

Credit score. You should have a minimum credit score of at least 640 to qualify for a mortgage on a second home. This requirement varies by lender and loan type, but the most competitive interest rates and loan terms are typically reserved for the most creditworthy borrowers.
Income verification. Lenders require proof of income through pay stubs, W-2 forms and tax returns to verify your ability to cover additional costs associated with owning two properties.
Employment history. Mortgage providers may also verify that your employment history is sufficient and stable enough to support your debt obligations. A lender may also consider whether you have other steady income sources available.
Down payment. Most lenders typically require larger down payments for a second home purchase. You should expect to make a down payment of between 10% and 20% of the home’s purchase price.
Debt-to-income (DTI) ratio. Your DTI ratio is used by lenders to measure how much debt you have relative to your gross monthly income. Lenders typically look for a DTI below 43% for loan approval.
Reserves. Lenders may require enough cash in reserve to cover at least six months of second home mortgage payments should an emergency arise.

Pros and Cons of a Second Home Mortgage

Second home mortgages can be beneficial if you want to invest in a vacation home or short-term rental. However, it’s important to fully understand this type of financing before choosing a lender—or committing to a loan. These are the main advantages and disadvantages of getting a second home mortgage.

Pros

Build equity in a second property. A second home mortgage makes it easier to purchase a second property and can help you build equity over time.
Tax deductions. The interest paid on mortgage payments for your second home may be tax deductible in some cases, which could significantly reduce your total costs.
A new revenue stream. If you choose to rent out the property, you can create additional income streams to offset the cost of mortgage payments.

Cons

Higher interest rates. Mortgage rates for second homes are generally higher than those for primary residences.
Higher down payment requirements. Lenders typically require a higher down payment for second home mortgages than for primary residences.
Higher taxes and insurance. Beyond typical home expenses, you’ll need to factor in taxes, insurance, maintenance fees and other expenses for your second property.

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Should You Get a Second Home Mortgage?

A second home mortgage can be a great way to acquire a property for vacation or rental purposes. However, it’s essential to consider a few factors before committing to a second mortgage. First, assess your financial situation to determine the affordability of additional monthly payments. You should also consider associated costs, such as insurance, property taxes and maintenance.

Second, consider the current housing market and the potential for property resale value. Last, reflect on whether you intend to use the property yourself or as an investment. By evaluating these aspects and seeking professional advice, you’ll be more equipped to make an informed decision and determine whether a second home mortgage is the right choice.

Current Second Home Mortgage Rates (2024)

FAQs

What are current rates of a 2nd mortgage? ›

Fixed 2nd Mortgage Interest Rates

Term	Rate "As Low As"	APR^* "As Low As"
0 to 60 Months	6.490%	6.490%
61 to 120 Months	6.990%	6.990%
121 to 180 Months	7.490%	7.490%
181 to 240 Months	7.740%	7.740%

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Are mortgage rates higher for a 2nd home? ›

Generally, you can expect to have a higher mortgage rate on your second home loan compared to the one on your primary residence, so you'll pay more in interest over time. You might also have a higher rate if you decide to refinance your second home mortgage down the line.

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What is the 2 2 2 rule for mortgage? ›

One Spouse's Income Doesn't Meet Requirements

Many lenders use the 2/2/2 rule to evaluate loan eligibility, which typically requires: 2 years of W-2s. 2 years of tax returns. 2 months of bank statements.

Is it harder to get a mortgage on a second home? ›

Lenders typically require higher credit scores for second home mortgages compared to primary residence loans. Check your credit score and take steps to improve it if necessary, such as paying down debt, disputing errors on your credit report, and making all payments on time.

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Is a 2nd mortgage tax deductible? ›

Mortgage interest paid on a second residence used personally is deductible as long as the mortgage satisfies the same requirements for deductible interest as on a primary residence.

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Are 2nd mortgages a good idea? ›

You can use a second mortgage to finance home improvements, pay for higher education costs, or consolidate debt. However, there are risks when taking out a second mortgage, and they can be substantial. Notably, you run the risk of losing your home if you can't make payments.

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How to get a lower mortgage rate on a second home? ›

Down payment: Second home mortgages usually require larger down payments (typically 10% to 20%) than mortgages for primary homes. A higher down payment can result in a lower interest rate and overall cost of borrowing — so save your down payment as soon as possible.

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What are the disadvantages of a second home loan? ›

Interest rates and fees

Second mortgages are riskier for lenders, so they charge steeper rates. You'd also pay a lower rate on a regular rate-and-term refinance or cash-out refinance. Second mortgages also come with closing costs, which you'll need to pay upfront when taking out the loan.

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Do you need 20% for a second mortgage? ›

Qualifications for second mortgages vary, but many lenders prefer that you have at least 15 percent to 20 percent equity in your home. You can typically borrow up to 85 percent of your home's value minus your current mortgage debts.

How much house can I afford if I make $70,000 a year? ›

The house you can afford on a $70K income will likely be between $290,000 to $310,000. Aside from your gross monthly income, lenders look at your credit report, down payment, monthly debt payments (including car payments and personal loans), and your estimated mortgage rate, among other things.

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Can you negotiate a second mortgage? ›

Second mortgage lenders are often willing to negotiate lump-sum payments of significantly less than the total amount due in order to avoid default and foreclosure. Depending on your circ*mstances, a mortgage settlement may be your best path forward.

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What is the 28% rule? ›

According to the 28/36 rule, you should spend no more than 28% of your gross monthly income on housing and no more than 36% on all debts. Housing costs can include: Your monthly mortgage payment. Homeowners Insurance. Private mortgage insurance.

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What is the best loan to get for a second home? ›

Two of the most common mortgage loans to consider when purchasing a second home are conventional and jumbo loans. You'll be required to make at least a 10% down payment on a conventional loan, and 20% or more on a jumbo loan. The specific income, credit score and DTI requirements can vary by lender and loan type.

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How much higher are mortgage rates for second homes? ›

Mortgage interest rates are higher for second homes and investment properties than for the home you live in. Generally, investment property rates are about 0.5% to 0.75% higher than market rates. For a second home or vacation home, they're only slightly higher than the rate you'd qualify for on a primary residence.

What credit score is needed for a second mortgage? ›

A 620 credit score is the minimum for many second mortgage lenders, while others set the bar as high as 680. → You must qualify with two mortgage payments. A second mortgage means you'll make two house payments.

What is the typical term for a second mortgage? ›

The disparity is due partly to the loans' terms (second mortgages' repayment periods tend to be shorter, usually 15 to 20 years), and partly due to the lender's risk: Should your home fall into foreclosure, the lender with the second mortgage loan will be second in line to be paid.

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How is a $50,000 home equity loan different from a $50,000 home equity line of credit? ›

A HELOC works like a credit card that allows borrowers to use an open line of credit, as needed. A home equity loan, on the other hand, provides a specific upfront lump sum that borrowers can use at their discretion. You'll pay against that full amount, with interest.

How much of a loan can I get on a 2nd mortgage? ›

Compared to other products, like personal loans and credit cards, a second mortgage usually offers lower interest rates that can reduce your overall cost of borrowing. It also opens the doors to larger loan amounts — you may be able to borrow between 80% and 90% of your home's equity.

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Are 2nd mortgages 30 years? ›

Second mortgages usually have terms of one to 30 years with 10 and 15 years being the most common durations. Shorter terms will have higher payments and longer terms will have lower payments.

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