Residential Investments vs. Second Home

We frequently get asked about residential investments vs. second homes. In most cases our borrower’s are looking to purchase a second home that they would potentially rent, but have for their personal use most of the time.

The answer is that lenders require you to state how you will be using the home. You must choose primary, second home, or
investment property; lenders do not allow mixed occupancy. A second home is not income from a lenders perspective; you either do it as an investment property or a second home.

The majority of lenders offer the best rates for investment properties with 25-30% down however; some lenders allow you to put as little as 20% down but the rate will certainly be higher. Second home rates tend to be about ½% lower than investment properties.

Often times our borrowers will buy a home as a second home or even a primary and then change the occupancy in future years. This is a possibility, however if you try to refinance a home that you bought as a second home and you have rental income on your tax returns it will be considered an investment property, even if it is only a small percentage of usage as a rental.

If you have any questions, please don’t hesitate to give us a call!