There are numerous reasons why people choose to purchase a 2nd home. They can range from a rental property for investment to a vacation home to a fixer upper that will be flipped in the short term. Regardless of the driving force behind the purchase one thing will remain the same: you are going to need a 2nd home mortgage.

Financing a 2nd home can be challenging because lenders have specific criteria and conditions for approval that often are different than those required to purchase a principal residence. You may need a larger down payment and / or have a sizable net worth. If you have very little equity in your existing home then it will be that more difficult to secure a 2nd home mortgage. However if you have built up equity in your principal residence you can take out a home equity loan or line of credit and apply that against the down payment required on the new purchase. 2nd home interest rates can vary depending on weather or not the property is considered an investment or not.

You will find that it is generally easier to be approved if the home is not an investment property. Especially easier if you do not require the rental income qualify for financing. Lending institutions prefer home that are being purchased and will not be rented out at any time and they reward those borrowers with more favorable terms and interest rates.

It is for this reason that when you are shopping for a 2nd home refi, your lending will ask to see your tax return. They are checking to see if you have claimed any rental income and if you have then the home will be considered an investment property and your rate will go up.

It is recommended to consult with your mortgage lender or broker what will be required so those details can be tended to before you find yourself in the negotiation process with a prospective seller. Additionally when you are negotiating a purchase price you want to be able to act quickly and with confidence.

Taxes can be confusing when you own a 2nd home and the ins and outs will vary depending on weather or not you are or intend to earn income from the property. Additionally how much time you reside in the home throughout the year can make a difference as well. Be certain to consult with a tax professional so that you can accurate advice as it relates to you specific situation.

If you are purchasing the 2nd home for your personal use, but it will remain unoccupied for a significant portion of the year, then you will want to pay particular attention to home security and the crime activity in the area you are buying.

Even if you are purchasing the home for your personal use, you still have the option of renting it out during the time that you will not be using it. The rental income earned can then be applied against the mortgage payment. This strategy works particularly well if you are purchasing the 2nd home to be used in retirement. If it is your vacation home, then you may run into obstacles with respect to finding a renter who will not need the home when you want to use it.

Remember interest rates on 2nd home mortgages are usually higher if the home is rented out at all through out the year as it is then considered an investment property.

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