A second home is a property you’ll live in for more than half of the year. To be considered a second home by your lender, your property must be either a single-family home, condo or townhome and available for personal use for more than six months each year. Multi-family homes cannot be purchased or refinanced as a second home, even if you plan to live in one of the units for part of the year.
A second home is a property you’ll live in for more than half of the year. To be considered a second home by your lender, your property must be either a single-family home, condo or townhome and available for personal use for more than six months each year. Multi-family homes cannot be purchased or refinanced as a second home, even if you plan to live in one of the units for part of the year.
Vacation homes are some of the most common second-home purchases we see here at NewCastle. For example, many of our Chicago-based borrowers buy lake houses in Michigan or condos in Florida, where they spend summer weekends and holidays. Some of these borrowers even list their homes with companies like Airbnb, renting out the property for short-term stays when they’re not in town.
These short-term occupancies are perfectly acceptable for second homes. As long as you don’t have a long-term lease agreement with a tenant, use the property as a timeshare, or grant a rental agency control over the property and its occupancy, mortgage lenders consider the property a second home.
But like there are specific rules for the occupancy of a second home, there are also specific restrictions and allowances for anyone looking to purchase a second home.
You cannot, for instance, use rental income generated by the second home to help you qualify for your loan. Instead, you will need to qualify for the loan outright, proving that you can afford the housing payment for the second home and the housing payment from your principal residence. Keep in mind that your lender considers your housing payment to be the total cost of your loan payments—both principal and interest—property taxes, and homeowner’s insurance, on top of your mortgage insurance and association dues, if applicable.
Though it might seem contradictory given the name, you don’t even need to own a principal residence to own a second home. If you’re renting a condo but want to buy a vacation place for next summer, your lender will use your monthly rent payment as a debt when qualifying you for the mortgage.