Second Home vs. Investment Property
When you purchase a property and apply for a mortgage, the lender will ask how you intend to use the property. Will the property be considered a primary residence, a second home, or an investment property? The answer is: it depends. Learn more about what makes a house a second home or an investment property.
What is a Second Home? Second Home Mortgage Requirements
The term second home does not refer to the second property you have purchased. Instead, the term refers to the way the property will be used. A property is considered a second home when it meets the following parameters:
- Considered a vacation home
- You must live in the house for part of the year, whether it is a summer beach getaway or a winter mountain cabin
- Can’t be rented out or used as a timeshare (there may be exceptions)
- Typically, the property must be located at least 50 miles from your primary residence
- Use the property for your pleasure
What is an Investment Property?
A property is considered an investment property if it meets the following parameters:
- Property purchased to generate an additional source of income
- Must plan on having tenants and collecting rental income
- Generally, can be located within 50 miles of your primary residence
- Plan on selling the property for a profit in the future
- Owned but not occupied by the purchaser
Click here to learn more about the mortgage process for investment properties.
Is Buying a Second Home or Investment Property a Good Investment?
Before purchasing a second home or an investment property, it is important to understand what you can afford. The mortgage experts at GuardHill will evaluate your financial situation to help determine if purchasing a second home or investment property is right for you.