Buying a Second Home
Are you considering buying a second home? You’re reading the right article. In this article, we’ll look at what a second home is and how to get mortgage financing for one.
What is a Second Home?
As its name suggests, a second home is a secondary property to your primary residence. A second home can be one of two things. It could be a cottage/vacation property; or a secondary property that you occasionally use. For example, you might live in one home during the week when you work in one city and another home during the weekends. In that instance, your second home is the property you spend the least amount of time at.
A second home can also be a home that a family member will be living at, but the family member will not appear on the property’s title and the mortgage. A common example is parents buying a property for their daughter or son to live at during college or university. The parents will be the only ones who appear on the title but won’t live at the property themselves. Their adult children will be living there while going to college or university.
A second home is not to be confused with a co-signer or co-applicant. It’s considered a primary residence if a family member lives at home and appears on the mortgage and title, earning about the same income as the primary mortgage applicant. However, suppose the family member living at the property makes less than the principal applicant. In that case, it could be done as a second home, even if the family member living at the property will be appearing on the mortgage and title.
Second Home Financing
Mortgage financing for second homes is a lot like mortgage financing for primary residences. You can put as little as 5% down on a second home, depending on the purchase price, similar to primary residences.
When you put down less than 20%, you’re required to purchase mortgage default insurance. The mortgage default insurance premiums for second homes are the same as primary residence. There are no additional premiums.
Likewise, the mortgage rates are usually the same for second homes as primary residence. You shouldn’t need to pay any sort of premium.
That being said, some programs may only be available for primary residences and not second homes. For example, the mortgage default insured stated income program for self-employed individuals cannot be used for second homes.
The Bottom Line
Looking for second home mortgage financing? Not sure whether the property you want to buy should be structured as a primary residence or second home? Speak with our mortgage experts today, who can help you determine the best way to go about structuring your mortgage application.