Buying a Second Home or Investment Property: How Financing Differs
Financing a second home or an investment property is meaningfully different from financing a primary residence, and the two categories — second home versus investment property — are themselves treated differently by lenders, even though both are "not your main home" in a general sense. Second home vs. investment property: the distinction matters A second home is generally defined as a property the owner personally occupies for at least part of the year, not rented out full-time (a vacation home is the classic example). An investment property is one purchased primarily to generate rental income, typically not occupied by the owner. Lenders apply different, generally stricter, terms to investment properties than to second homes, so correctly classifying the property with the lender matters. Higher down payment requirements Both second homes and investment properties typically require larger down payments than a primary residence — often at least 10% for a second home,...