Second Home Definition

Updated 2026-05-17

A second home is a dwelling that is owned and occupied by the borrower for personal use, such as a vacation home, but is not their primary residence. Unlike an investment property, a second home is not primarily intended to generate rental income.

Characteristics and Lending Implications

Mortgage terms for second homes typically fall between those for primary residences and investment properties:

• Personal Use: The borrower must intend to occupy the property for a portion of the year, and it should not be rented out on a continuous basis.
• Risk Profile: Lenders generally consider second homes to be a moderate risk, higher than a primary residence but lower than an investment property.
• Interest Rates: Adjustable-Rate Mortgage (ARM) for second homes are usually slightly higher than for primary residences but lower than for investment properties.
• Down Payments: Down payment requirements are often higher than for primary residences, typically 10-20%.
• Loan-to-Value (LTV) Ratios: Maximum LTVs for second homes are generally lower than for primary residences.

Connection to Occupancy Fraud

A common scenario for Mortgage Loan Fraud and Misrepresentation involves a borrower falsely claiming a property will be a second home for personal use, while their true intent is to rent it out for income, effectively treating it as an investment property. This misrepresentation allows the borrower to access more favorable loan terms than they would for a true investment property.