It’s important to understand the difference between a second home and an investment property since it will affect the type of mortgage you qualify for.
A “second home” is a house, condominium, or townhouse that you intend to live in for part of the year, in addition to your primary residence. Usually, second homes are used as a vacation home. With a “second home loan,” you need to qualify for both your first home and your second home without consideration for potential rental income. Interest rates on second home loans are typically the same as traditional mortgages.
An “investment property” classification is used when you are buying the property strictly to rent out for additional income. To determine if you qualify, your lender may need to know the rental history of the property. Typically, mortgages for investment properties carry a higher interest rate than is charged for second home loans due to the risk of inconsistent rental income which is typically needed to pay off the loan.
A second home is a house, condominium, or townhouse that you intend to live in, as well as live in your primary residence for part of the year. Usually, second homes are used as a vacation home.
The mortgage interest tax on your second home might be deductible but there may be caps and limitations. Be sure to check with your tax professional for more information.