Buying a second home: What buyers need to know

Key takeaways 

• Buying a second home is typically more expensive than a primary residence because it often involves higher mortgage rates, larger down payments and additional ongoing costs.
• Qualifying for a second home mortgage is more difficult, as lenders apply stricter standards and evaluate a borrower’s full financial picture, including existing debt and income.
• Plan for added costs and local rules, including separate insurance coverage and restrictions from homeowners associations, zoning and rental laws.
  

Buying a second home can provide a vacation retreat, a future retirement base or a source of rental income. It can also come with higher mortgage rates, larger down payments and added financial risks that differ from buying a primary residence.

A second home is any property that is not an owner’s primary residence. While the purchase process is similar to buying a first home, lenders and insurers often apply stricter standards, and the total cost of ownership can be significantly higher.

Before moving forward, prospective buyers should decide how they plan to use the property — a decision that will shape financing options, tax treatment and long-term costs.

Start by defining your priorities, including location, budget and how you plan to use the property. “The first step is to ask yourself why you want a second home,” said Carol Zuckert, a real estate agent at Sotheby's International Realty in Greenwich, Connecticut, and Palm Beach, Florida. Whether the goal is recreation, proximity to family or a place to work, that decision will shape where and what to buy.

Zuckert recommended starting with a trusted real estate agent in your primary market, who may be able to refer you to local agents through a broader network. “If you have a trusted real estate adviser in your hometown market, ask that person,” she said.

Buyers should also consider travel time and accessibility. Homes within driving distance are often used more frequently, while properties that require air travel may be visited less often but for longer stays. In resort areas, second homes are more likely to be sold furnished, which can simplify the move-in process.

Before making an offer, visit properties in person to evaluate condition, amenities and the surrounding neighborhood. Review recent sales and rental data to assess value and potential income, and factor in local rules, including zoning, homeowners association restrictions and short-term rental regulations.

A second home is a property the owner uses for personal purposes for part of the year, while an investment property is primarily purchased to generate rental income or for resale. To qualify as a second home, lenders typically require some personal use and limit full-time rentals, and the property must be suitable for year-round occupancy.

By contrast, investment properties are used mainly for income and may not be occupied by the owner at all. The distinction matters because second homes often qualify for lower interest rates and less stringent terms than investment properties, which are considered riskier.

Buyers purchase second homes for vacation, family, work or investment reasons. “They want to buy a property that they’re going to use, maybe just on weekends,” said Zuckert. “They view it as an investment.”

Some buyers rent out the property when they are not there, using short-term rental platforms to generate income. Others plan to spend more time there over time. “They’ll spend more time in their second home as they approach retirement or as their workload shifts,” Zuckert said.

Second homes can offer lifestyle benefits, such as access to vacation destinations or more flexible living arrangements, but they also come with added costs and responsibilities. Buyers should weigh their intended use — whether for personal enjoyment, family needs or income generation — against the financial risks and ongoing expenses.

Lenders typically apply stricter standards for second homes, requiring higher credit scores, larger down payments and lower debt-to-income ratios. Many lenders require at least 10% down, though 15% to 20% or more is common, and some buyers pay cash or use home equity to fund the purchase.

A conventional loan is the most common financing option, while most FHA loans are not available for second homes or income-producing properties, though some veterans may qualify for a VA loan. Credit score requirements are generally higher than for primary residences, often starting around 680.

Mortgage rates on second homes also tend to be higher. As of 2026, they average about 7.6%, or roughly 0.25 to 0.50 percentage point more than rates for primary residences, according to Experian.

Lenders charge more because borrowers with two homes are considered more likely to default on the second property in a financial downturn. Owners tend to prioritize payments on their primary residence, leaving the second home more vulnerable if income falls or expenses rise. That added risk — combined with the chance that second homes sit vacant for part of the year or rely on rental income — can lead to higher borrowing costs and stricter loan requirements.

Lenders also evaluate a borrower’s full financial picture, including existing mortgage payments and other debt. “The mortgage companies look at individual total debt,” said Zuckert. “The primary home will play into the additional mortgage you’re getting.”

“You should always speak with a mortgage professional who will let you know what you can afford and what you will be approved for,” Zuckert said. “They will cover the property, insurance and association dues. They’ll try to give you a full picture.”

Tax treatment depends on how the home is used — whether primarily for personal use, rental income or a mix of both. Buyers who use the property mainly as a second home may be able to deduct mortgage interest and property taxes, subject to IRS limits. If the home is rented out, rental income must be reported, though owners can deduct certain expenses tied to the property.

Selling a second home can trigger capital-gains taxes on any profit, and state and local taxes may add to the cost. Planning ahead can help reduce the tax burden. For example, some investors use a 1031 exchange to defer taxes by reinvesting proceeds from a sale into another property. Buyers should also consider how state-specific rules may affect deductions, reporting and overall tax liability.

Second homes require separate insurance coverage, which is often more expensive because the property is not occupied year-round. “Insurance companies want to know it’s occupied 12 months a year, and second homes typically aren’t,” said Zuckert.

Because second homes may sit vacant for extended periods, they are more vulnerable to damage from frozen pipes, storms and other maintenance issues. Standard homeowners insurance is typically required, but buyers may need additional coverage depending on location. Flood or wind insurance may be necessary in high-risk areas, and liability coverage protects against accidents or injuries on the property.

Some policies include vacancy clauses that limit coverage if the home is empty for long stretches. Buyers should compare policies, review exclusions and ask about discounts for security systems or bundled coverage.

Second homes can offer both lifestyle and financial benefits, including a place for vacations or family use and the potential to build wealth through appreciation or rental income. However, they also come with added costs, such as maintenance, insurance and property taxes. Owners may face vacancy risk if the home sits unused, and selling a second home can take time, particularly in a weaker market, which may affect its value and resale timing.

Buyers often underestimate the total cost of ownership, including insurance, taxes and maintenance or overlook local rules that can restrict rentals or usage. Misjudging rental demand can leave properties vacant and reduce expected income, while skipping inspections or due diligence can lead to unexpected repairs or legal issues. Careful budgeting, research and planning can help avoid these pitfalls.

Prepare finances, research markets and gather documents before you start shopping.

• Save for down payment and closing costs (aim for at least 20% of the purchase price).
• Check your credit score and improve if needed (680+ recommended).
• Get preapproved for a mortgage.
• Request insurance quotes for the property.
• Plan for taxes and review potential deductions with a tax adviser.
• Choose a local real estate agent with second-home experience.
• Visit homes and compare options in person.
• Review HOA rules, local rental laws and zoning restrictions.

This story was updated on May 28.