Current Second Home Mortgage Rates | Bankrate (2024)

FAQs

What is the current interest rate on a second mortgage? ›

Generally, you can expect to have a higher interest rate on your second home loan compared to the one on your primary residence, so you'll pay more in interest over time. You might also have a higher rate if you decide to refinance your second home mortgage down the line.

Most lenders want the home to have at least 15%-20% equity available. You can usually borrow up to 85% of the home's current value, minus your first mortgage balance. There are also usually minimum credit score requirements of 600 or better, though some lenders may have lower requirements.

Second mortgages are often riskier because the primary mortgage has priority and is paid first in the event of default.

The best reason to get a second mortgage is a project that will increase the worth and ultimate market value of your home via a remodel, renovation or expansion. By investing in your property, you're using home equity to build more equity, in effect.

The downside of buying a vacation home is that you will have two of everything – mortgages, property tax bills, water bills, fuel bills, etc. It also means additional responsibility for repairs and general upkeep. At the same time, owning a second home can be very rewarding in tangible and intangible ways.

Whether buying a second home is a good investment depends on various factors, including your financial goals, the intended use of the property and market conditions. If the property appreciates and generates rental income, it can be a sound investment.

Expert predictions for mortgage rates in 2024

In Fannie Mae's latest rate forecast, the government-sponsored enterprise said it expects 30-year fixed rates to end 2024 at 6.4%. Even though national average rates have gone up over the past few weeks, Fannie Mae's forecast for Q4 2024 hasn't changed.

One Spouse's Income Doesn't Meet Requirements

Many lenders use the 2/2/2 rule to evaluate loan eligibility, which typically requires: 2 years of W-2s. 2 years of tax returns. 2 months of bank statements.

What is the average length of a second mortgage? ›

Second mortgage loans usually have terms of up to 20 years or as little as one year. The shorter the term of the loan, the higher the monthly payment will be.

If a home buyer secretly takes out a second loan from a different lender or a private investor to cover their down payment, it's considered a silent second mortgage. This is because the existence of this loan is being kept hidden from the first lender, which is illegal.

A home equity line of credit or HELOC is another type of second mortgage loan. Like a home equity loan, it's secured by the property but there are some differences in how the two work. A HELOC is a line of credit that you can draw against as needed for a set period of time, typically up to 10 years.

The lender of the second mortgage does not have that guarantee, so the loan is much riskier. Therefore, the borrower must pay a higher interest rate.

While a home equity loan would give you $50,000 upfront in the above example, a HELOC would give you access to a $50,000 line of credit. You might never borrow the full $50,000, and you'll only pay interest on the amounts you actually borrow.