A second home mortgage is described as a loan on a property other than your primary home. People make second home purchases either as a vacation home or investment vehicle, especially if they rent it out for income purposes. The application procedure for a second home mortgage is similar to the one for the first home. You are required to furnish financial information such as http://www.talkinghomeloans.com/to-fix-or-not-to-fix-that-is-the-question and employment, income, current debts such as mortgage, car and personal loans as well as credit card bills.
Home Mortgage Lenders
Second home mortgages are available from various types of lenders such as commercial banks, mortgage companies and credit unions. Different second home mortgage lenders have different rates and charges, so it is advisable to contact several lenders to get the best rates possible.
Similar options are available for a mortgage on a second home with regards to terms of mortgage, fixed or adjustable interest rates, interest-only or pay-options ARM (adjustable rate mortgages). Generally second home mortgage lenders will impose stricter requirements for second home mortgages, as they feel that the risk of payment default is higher. They will impose higher interest rates and LTV (lending risk ratios) or require larger down payments. .
Lenders usually require a down payment of 20% for a mortgage on a second home. Some lenders are open to negotiation; however, if the down payment is low, a higher PMI (Private Mortgage Insurance) is required. The equity on your primary home can be to make all or some of the down payment for the second home. This can be done by a ‘cash-out’ refinance or getting a home equity loan or equity line of credit.
Lenders differ in their charges, rates and stipulations. For example, First Fidelity requires a second home mortgage down payment of 10%, while Navy Federal minimum down payment is 5%. Credit unions and such as Penn State Federal, require PMI for mortgages with LTV over 80%. Some lenders, such as Think bank charge the same interest rates as for first mortgages, while Suncoast Schools Federal Credit Union charges one percent higher.
The interest on your second mortgage is tax-deductible, as with the first one, though there is a limited amount imposed by the IRS. Another point to remember is that if you plan to rent out the second home, you have to spend some time there or else it is considered as rental property and subjected to different tax regulations.