How to Get a Vacation Home: Mortgage Requirements, Second Home Costs and Financing Options

Find out what it takes to buy a vacation home, from second-home mortgage requirements to financing and ownership costs.

Click to navigate:

1. What Is a Vacation Home?
2. How to Get a Mortgage for a Vacation Home 
3. Financing Options for a Vacation Home
4. Cost Considerations for Vacation Homes
5. Insurance Considerations for Vacation Homes
6. Should You Buy a Vacation Home?
7. The Bottom Line
8. FAQs

Owning a vacation home can give you a dedicated place to unwind, spend time with family, or enjoy your favorite travel destination. You might be dreaming of a beach house, a condo in a city you love to visit, a cabin in the mountains or another type of getaway.

Before you start browsing listings, it can be helpful to understand how vacation home financing works, what lenders look for and the ongoing costs you'll need to budget for.

What Is a Vacation Home?

A vacation home is a property you purchase for your own personal use that is separate from your primary residence. Many vacation homes are financed as second homes, depending on how the property is used and occupied.

Lenders generally expect a second home to be:

• Suitable for year-round living
• In an area where it can reasonably function as a second home
• Occupied by you for part of the year
• Under your control
• Available for your personal use for a significant portion of the year

If you already have a primary residence, qualifying for a mortgage on a second home can involve stricter requirements than purchasing your first home.

How to Get a Mortgage for a Vacation Home

These steps can be helpful when you’re trying to get a mortgage for a second home.

Prepare for a Larger Down Payment

Mortgages for second homes often require more money upfront than loans for primary residences.

While some borrowers may qualify with a down payment as low as 10%, required down payment amounts can vary based on factors such as:

• Credit score
• Loan amount
• Property type
• Occupancy classification
• Lender guidelines

Putting more money down may also help improve your loan options and reduce your monthly payment.

Organize Your Financial Documents

When evaluating a vacation home loan application, lenders take a close look at your overall financial picture.

You may be asked to provide information about:

• Credit history and credit score
• Income and employment
• Existing debt obligations
• Your current mortgage payment
• Assets available for the down payment
• Available savings and cash reserves
• Planned use of the property

One major factor is your debt-to-income (DTI) ratio. Since you'll be responsible for both your primary residence and your second home, lenders want to verify that your income can comfortably support both obligations.

Many lenders also require reserve funds after closing, which could require you to show that you’ll have money left in savings after covering your down payment and closing costs.

Get Preapproved Before You Shop*

A mortgage preapproval can give you a clearer idea of your budget before you begin your home search.

During the preapproval process, lenders typically review documentation related to your income, assets, debts and credit profile. Having a preapproval letter in hand can also help you make an offer if you find a property you want to purchase.

Financing Options for a Vacation Home

There isn't a one-size-fits-all approach to financing a second home. The best option depends on your goals, finances and long-term plans.

Fixed-Rate Mortgage

A fixed-rate mortgage keeps the same interest rate throughout the life of the loan.

Because the rate remains unchanged, your principal and interest (P&I) payment stays consistent month after month.

This option may appeal to buyers who:

• Prefer predictable housing costs
• Plan to keep the property for many years
• Want protection from future interest rate increases

Adjustable-Rate Mortgage (ARM)

An adjustable-rate mortgage starts with a lower introductory interest rate for a specified period. After that initial period ends, the rate adjusts based on market conditions, which could increase your monthly P&I payment.

An ARM may be worth considering if you:

• Expect to sell the home within a few years
• Plan to refinance before the adjustment period begins
• Want a lower initial payment

However, it's important to understand how high your future payment could become if rates rise.

Home Equity Loan**

If you've built equity in your primary residence, a home equity loan may provide funds that can be used to help purchase a vacation home.

A home equity loan offers a lump sum and typically comes with fixed monthly payments.

The primary consideration is that your current home serves as collateral for the loan, making it important to borrow responsibly.

Cash-Out Refinance***

A cash-out refinance replaces your existing mortgage with a new, larger loan and allows you to access a portion of your home's equity as cash.

Those funds can then be used to help pay for a second home.

While this approach can unlock equity, it may not make sense for every homeowner—particularly if your existing mortgage has a significantly lower interest rate than today's market rates. Carefully compare the long-term costs before moving forward.

Cost Considerations for Vacation Homes

A mortgage payment is only one piece of the puzzle. Before purchasing a vacation home, make sure you've accounted for other ongoing expenses.

Common expenses can include:

• Property taxes
• Homeowners insurance
• HOA fees or condominium dues
• Utilities
• Routine upkeep and maintenance
• Unexpected repairs

The location of the property can also affect your costs. For example, a coastal home may require flood or wind insurance, while a mountain property could bring added expenses for snow removal, weatherproofing, or seasonal maintenance.

If the home will be vacant for extended periods, you may also want to budget for security systems or property monitoring services.

Insurance Considerations for Vacation Homes

Insurance costs can vary significantly depending on the property's location and exposure to risk.

In addition to standard homeowners insurance, you may need coverage such as:

• Flood insurance
• Windstorm insurance
• Hurricane coverage
• Earthquake insurance
• Umbrella liability protection
• Condo loss assessment coverage

Because insurance premiums can impact affordability, it's a good idea to obtain insurance quotes before making an offer.

You should also review any HOA or condominium requirements (if applicable) to understand whether additional coverage is required.

Should You Buy a Vacation Home?

Here are some factors to consider before making a decision.

Benefits of a Vacation Home

• A dedicated getaway
• Potential long-term property appreciation
• A future retirement home
• Not needing to rely on hotels or short-term rentals to stay in that area

Drawbacks of a Vacation Home

• The ongoing cost of a second mortgage
• Maintenance responsibilities for a second property
• Insurance costs and other ongoing homeownership costs
• Challenges associated with managing a home from a distance

The Bottom Line

A vacation home can provide years of enjoyment, but it's useful to look at more than just the purchase price before deciding to buy. Considering mortgage requirements, estimating ongoing expenses, evaluating financing options and reviewing additional costs associated with homeownership can help you determine whether a second home fits comfortably within your budget.