Buying a second home: A how-to guide

There are many good reasons for buying a second home, from having a private getaway spot for you and your family to earning money by renting it out. But the process is slightly different from buying a primary residence, so you'll want to understand how to buy a second home before you start shopping.

What is a second home?

A second home is a property you own in addition to your primary residence. You can rent it out when you're not using it, but you need to use it yourself for it to qualify as a second home for your mortgage lender.

With Rocket Mortgage, a property may qualify as a second home if you rent it out for no more than 180 days in a calendar year. You also must live in the home for either 14 days or for the equivalent of 10% of the days you rent out the property, whichever is greater.

Can you afford a second home?

There are financial implications and responsibilities that come with buying a second home. Here are some key factors to consider.

Down payment

If you're planning to take out a mortgage to buy a second home, you'll need cash up front for the down payment.

Expect your lender to require a higher down payment on a second home than for a primary residence. Why? Lenders view mortgages on second homes as riskier because borrowers are more likely to default in the event of financial hardship.

Rocket Mortgage requires a minimum down payment of 10%.

Interest rates

Mortgage interest rates for second homes are typically higher than those for primary residences. Again, lenders are hedging against potential losses if you default. To determine the mortgage interest rate and other terms of your second-home loan, your lender will consider your credit score and history, current housing market conditions, and your debt-to-income ratio (DTI).

Debt-to-income ratio requirements

You will have to meet DTI requirements to qualify for a mortgage on a second home. DTI shows how much of your gross monthly income is required to pay your debts. You can quickly calculate your DTI by adding up your monthly debts and dividing by your monthly pretax salary.

A good guideline is to keep the DTI at 43% or less.

Maintenance and rental expenses

If you decide to rent out your second home part of the year, you'll need to be prepared to maintain the property.

A common rule among homeowners is to set aside 1% - 3% of the home's value each year for maintenance. You may need to set aside more if you plan to rent out your house.

You'll also need to handle the business of buying a rental property, including marketing the property, accepting payments, and having it cleaned between uses.

Uses for a second home

Here are some of the most common ways people use a second home.

Vacation home

If you have a large family, vacation often, or want your own spot to call home when you are away, you can use your second home as a vacation property.

For many home buyers, jumbo or conventional conforming loans are the best options for a vacation home mortgage. It is important to remember that this mortgage process is similar to taking out a loan on your primary home, just with slightly stricter requirements.

Secondary residence

Does your job require a good deal of travel or time spent in another city? You might consider using your property as a secondary residence. Buying a second home in a location you frequent for work or other purposes can let you come and go without worrying about booking accommodations.

However, a secondary residence does not have to be work-related. For example, a retiree may have a second home in a warm climate for the winter months, or someone who spends significant time in a location may consider it more than just a vacation home.

If you are considering buying a second home in retirement, it's important to understand how lenders view retirement income.

As with a vacation home, a mortgage for a secondary residence will likely come with stricter requirements.

How to buy a second home

Let’s look at 5 key steps for buying a second home.

1. Evaluate your finances with a professional. Make sure a second home does not burden your finances or put your primary residence in jeopardy, as you are stretched too thin.
2. Review the equity in your primary residence to determine whether you can leverage it for a second home. Some buyers use home equity loans, or cash-out refinances, to buy a second property.
3. Consider the tax implications of a second home. The IRS allows you to deduct mortgage interest on a second home if it is used personally and the total mortgage debt on all qualified residences does not exceed limits. Property taxes on second homes also are deductible, though combined state and local tax deductions are capped. You should always consult a tax adviser on your personal situation.
4. Go over the specific approval requirements for second homes. Any lender will consider the state of finances on your primary home, since they assume you will prioritize that property if money gets tight.
5. Borrowers should prepare to prove that they can cover the costs of both homes. Lenders typically require additional reserves when buying a second home.

Types of loans for buying a second home

The good news is that your options for second-home mortgages are plentiful. Let us dive into a few different options so you can think about which one might work for you. These include conventional mortgages, home equity loans, and cash-out refinances. ^1,2 Investigate all these options and think about which one might fit your specific financial situation and goals. Note that some loan types, including FHA loans, are not meant for secondary homes.³

Conventional mortgages

If you already own a home, you may have used a conventional mortgage to get it. With this type of loan, you pay monthly toward your principal balance and interest. These payments also usually include your property taxes and homeowners insurance. The amount you pay depends on your down payment, mortgage interest rate, credit, and DTI. This type of mortgage is not limited to primary residences; you can use it to purchase a second home as well.

Home equity loans

If you have built up equity in your current home, a home equity loan might be a good option for acquiring your second home.¹ This type of loan allows you to borrow against the difference between your home's current fair market value and what you owe on it. It is important to remember that this does not replace your current mortgage; rather, it creates a new, separate loan that you will need to pay each month in addition to your current one.

HELOCs

Similar to home equity loans, you can use a home equity line of credit (HELOC) to finance a second home. A HELOC works like a credit card, giving you access to a line of credit based on the equity in your home.

One advantage is that you only pay interest on the amount you draw, not the entire credit limit. However, like a home equity loan, a HELOC could put your primary residence in jeopardy if you fall behind on payments.

Rocket Mortgage does not currently offer HELOCs.

Cash-out refinances

Like a home equity loan, a cash-out refinance lets you borrow against the equity in your current home. The difference is that this type of loan replaces your first current mortgage. Essentially, you add the new amount you are borrowing to the amount you currently owe on your mortgage, and that becomes your new mortgage loan amount.

Types of loans for a second home mortgage

The good news is your options when it comes to second home mortgages are plentiful. Let’s dive into a few different options so you can think about which one might work for you. These include conventional mortgages, home equity loans, and cash-out refinances. Investigate all of these options and think about which one might fit your specific financial situation and goals.

Conventional mortgages

If you already own a home, you may have used a conventional mortgage to get it. With this type of loan, you pay monthly toward your principal balance and interest. These payments also usually have your taxes and insurance rolled into them as well. The amount you pay is dependent on a number of factors including your down payment amount, interest rate, and credit score. This type of mortgage is not specific to primary residences, as you can use them for the purchase of a second home as well.

Home equity loans

If you have built up equity in your current home, a home equity loan might be a good option for acquiring your second home. This type of loan allows you to borrow against the difference between your home’s current value and what you owe on it. It’s important to remember that this does not replace your current mortgage, but rather creates a new and separate loan that you will need to pay each month in addition to your current one.

Cash-out refinances

Similar to a home equity loan, a cash-out refinance also allows you to borrow against the equity in your current home. The difference is that this type of loan replaces your current mortgage. Essentially, you just add the new amount you are borrowing to the amount you currently owe on your mortgage and that becomes your new mortgage loan amount.

FAQ

Buying a second house could be an option for you. Do you have more questions about the process? Check out some additional FAQ on how to purchase a second home below.

What is the difference between a second home and an investment property?

The biggest difference between a second home and an investment property is how you intend to use the residence. A second home is a house you plan to live in part of the year, while an investment property is a house you make available to renters with the primary goal of generating income.

Second homes and investment properties have different lender requirements. Mortgages for investment properties typically carry higher interest rates than those for second homes. Lenders may also require down payments of 15% or more for investment properties compared with second homes.

What is considered a second home for tax purposes?

Mortgage interest is only deductible on second homes if they are intended for personal use (like a vacation home). The debt can also be used to buy, build, or improve a home.

If you purchased the property before December 15, 2017, tax filers who are single or married filing jointly can deduct up to $1 million in interest on your second home mortgage ($500,000 for those married filing separately). You also qualify under the old limit if you had a contract to purchase a home before December 15, 2017, to close before January 1, 2018, and you actually closed before April 1, 2018.

If you bought the second home after December 15, 2017, you can deduct up to $750,000 if you are single or married filing jointly ($375,000 if you are married filing separately). You can also deduct property taxes on second homes, though state and local tax deductions are subject to caps.

Can I use an FHA loan to finance a second house?

With very few exceptions, you cannot finance the purchase of a second home with an FHA loan. FHA loans can only be used to buy primary residences. The FHA generally requires that borrowers occupy the property as their principal residence within 60 days of closing.

Can I buy a second home without a mortgage loan?

Yes, there are other ways to finance your second home without taking out a traditional home loan. If you have built up a large amount of equity in your primary residence, you can use it to purchase your second home. You may qualify for financing options such as a cash-out refinance, a home equity line of credit (HELOC), or a home equity loan.

The bottom line: Should you buy a second home?

Buying a second home is an excellent way to expand your real estate portfolio, generate another stream of income, or create a personal retreat. Before you buy a second home, determine how you will use it and which location makes the most sense for your lifestyle and financial goals.

Once you have budgeted and decided to invest in a second home, start thinking about getting preapproved for a mortgage. This step is crucial in deciding how much of a second home you can afford.

Learn more about how to partner with Rocket Mortgage and get mortgage approval today.

¹ Home Equity Loan product requires full documentation of income and assets, credit score and max loan-to-value (LTV), combined loan-to-value (CLTV), and home equity combined loan-to-value (HCLTV) ratios. Requirements were updated 11/19/25 and are tiered as follows: 680 minimum FICO with a max LTV/CLTV/HCLTV of 80%, 700 minimum FICO with a max LTV/CLTV/HCLTV of 85%, and 740 minimum FICO with a max LTV/CLTV/HCLTV of 90%. Your debt-to-income ratio (DTI) must be 50% or below. Valid for loan amounts between $45,000.00 and $500,000.00 (minimum loan amount for properties located in Michigan is $10,000.00). Product is a second standalone lien and may not be used for piggyback transactions. Product not available on Ameriprise products. Guidelines may vary for self-employed individuals. Some mortgages may be considered “higher priced” based on the APOR spread test. Higher priced loans are not allowed on properties located in New York. Additional restrictions apply. This is not a commitment to lend.

² Refinancing may increase finance charges over the life of the loan.

³ Rocket Mortgage is not acting on behalf of FHA or HUD.

This article is for informational purposes only and is not intended to provide financial, investment, or tax advice. You should consult a qualified financial or tax professional before making decisions regarding your retirement funds or mortgage.

Rocket Mortgage is a trademark of Rocket Mortgage LLC or its affiliates.