Second Home Mortgage Rider Restrictions

A second home mortgage rider requires the borrower use the property for their personal use only. Renting the property would be a violation of the loan terms and cause the borrower to be in default of the loan.

Second Home

A second home is a property owned by a borrower other than their primary residence, which the borrower intends to use for a portion of the year as a vacation, second home or retirement property. Second homes are single-family homes, condominiums or townhouses.

Restrictions

Second home loan riders restrict the owner's use of their property to personal use only. The property cannot be used for rental purposes. If you intend on renting a second home, you will need to obtain an investment property loan. Investment property is used for rental income purposes.

Interest Rate and Terms

Lenders require higher down payments and charge higher interest rates for second homes and investment properties than loans on primary residences because there is more risk the borrower may stop making their mortgage payments on these properties first if they are experiencing a financial hardship. Rates and terms also vary depending on whether you are obtaining a second home mortgage or investment property mortgage.

References

• Fannie Mae: Second Home Rider

Resources

• FHA: Difference Between an Owner Occupied Second Home and Investment Property
• Bank of America:Learning Center