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Are you considering buying a second home? There are some significant differences between a second home vs an investment property when getting a property loan, and it’s vital to know the ins and outs of each.
A second home is a property a homeowner buys in addition to their primary residence to use as a vacation home. You can earn income from this property by renting it out short-term for part of the year. To be a second home for tax and legal purposes, you must live in it for a minimum of 14 days per year.
For a second home, your lender will carefully consider your income, assets, and debt-to-income ratio. They want to ensure you can afford a second mortgage loan. You can use the equity in your primary residence to secure a loan, often a lump sum or line of credit.
Unlike second homes, you don’t need to occupy investment properties for any time during the year. Instead, you can rent them out short or long-term for the entire year. Their primary purpose is to bring in additional income in rent, appreciation, and tax deductions.
Financing is more difficult for an investment property vs a second home because there’s a greater risk for the owner and the lender. The risk of non-payment by your renters and damage caused while they live there makes this loan a higher liability for a lender. There are investor home loan opportunities available depending on your circumstances and qualifications.
If you’re ready to look at buying a second home or an investment property, your first stop should be a reliable and knowledgeable lending company. Contact the experienced team at Midland Mortgage Corporation to find out how our loan options can help you turn your vision into a reality.