What's the Minimum Down Payment for a Second Home

Clever Real Estate


Clever Real Estate

October 21st, 2021
Updated October 21st, 2021


Lenders' requirements and options for buying a second home are different from primary residences — in general, you're probably going to have to put a minimum of 10% down in order to procure a mortgage. Of course, that's not the only cost you should be considering. Second homes mean double the utilities, taxes, insurance, mortgage payments, and more. Read on to learn more.

second home investment property

While staying in a hotel on vacation might feel exciting and luxurious, it’s certainly not cost effective — particularly if you’re traveling to the same place on a regular basis.

If you find yourself heading for the beach, mountains, or country every weekend (or even every month or so), it might be time to consider purchasing a second home.

A second home isn’t just a place to kick back and relax — it’s also a sound investment plan. Many people choose to turn their vacation homes into rental properties, using services like Airbnb, VRBO, and Home Away, to generate supplemental, passive income.

That said, before you take the leap of faith and buy your second home, you should have a clear sense of all the costs and risks associated with that decision. Of course, one of the first things you’ll need to determine is how much you’ll need to save for the down payment.

The Best Ways to Finance Your Second Home

The financing rules and regulations are stricter for second homes than primary properties.

There are also extra tax implications and expenses that are only applicable to vacation properties and second homes. Importantly, they’re completely different from investment properties and primary properties.

Here are a few options to finance your second home:

  • Reverse Mortgage - Attractive government-sponsored loan option that allows home buyers over 62 years to get money from the property without having to repay the loan until they leave or sell the home.
  • Home Equity Financing - Home Equity Loans and Home Equity Line of Credit (HELOC)
  • Loan Assumption - Allows you take over the mortgage loan payment of the seller and clear their dues at a low interest rate.
  • Cash-out Refinance - Allows you to refinance your mortgage loan for more money. It’s a good option if you’re getting lower interest rates than your initial interest rate.
  • 401 (k) Loan - Great option for funding your second home down payment. You can borrow money from yourself and repay the amount in the form of monthly installments.

Second Home Down Payment - An Overview

If you’re buying your first home, you’ll have a number of different low-cost financing options available to you — depending on your needs and goals, you can find mortgages that require down payments as low as $0 or 3.5%.

However, the down payment calculation for your second home purchase is different. You’ll likely have to put 10% to 20% down up front, depending on your lender and credit profile.

But even if you don’t have a huge amount of cash savings on hand, that doesn’t mean you can’t purchase a second home — you can borrow money for you down payment, too.

A survey conducted by The National Association of REALTORS has revealed that almost one-fifth of the second home buyers use equity from their main home to make the down payment.

Lean more: Want to Buy a Second Home? Read This First

7 Useful Tips for Buying a Second Home

Here are some tips to follow when buying a second to home to ensure a smooth process and good outcome:

  1. Don’t be an impulsive buyer. Take some time to think and assess if purchasing a second home is a good move, given your financial situation and the level of commitment it requires.
  2. Evaluate your long-term goals and needs. Do you want to make it a rental vacation home or do you want to use it as your retirement home?
  3. Assess different areas and home types before buying the property.
  4. Hire a local real estate agent with stellar reviews and ratings. They can help you find good deals, negotiate price, navigate financing options, connect with local contractors, and more, etc.
  5. Don’t settle for the first mortgage lender you find. Look around and see what others are willing to offer.
  6. Take into account the additional expenses that come with owning a home, such as maintenance, insurance, and utilities.
  7. Explore the tax benefits. Even though you cannot deduct the rental income from your tax liability, you can deduct expenses such as cleaning, construction, and maintenance.

Clever Real Estate has a nationwide network of top-rated Partner Agents from major brands and brokerages (Century 21, Keller Williams, RE/MAX, etc.) who are ready to help guide you through the entire home-buying process — from house hunting and evaluating financing options to negotiations and closing.

Fill out our online form to learn more about how Clever can connect you with a great agent and help make your dream vacation home become a reality.

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