Why Getting A Second Home Mortgage Is Difficult

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Owning a home is a dream most people aspire. Even people who loved their initial home think of buying a second home. This is a good idea for those who want a vacation home, a place for their children, or to diversify their property. If you need a mortgage to buy it, be prepared for stricter rules. Before considering a second home mortgage, consult a team of real estate professionals or financial advisors to learn the difficulties for approval.

Second-home mortgage requirements

Second-home mortgage requirements have strict guidelines for both the borrower and the home being bought. You may be required to part with a non-negotiable amount of at least 10% as a down payment.


Lenders do not consider employment as equal. Most of them prefer full-time employment in one company over a long period, compared to part-time or freelance jobs for several employers. If you frequently shift from one job to another within two years or less in each position and other earnings, your mortgage becomes challenging to approve.

Existing Debt

Taking an extra mortgage when you have an existing debt is a red flag to lenders. The lenders will move you to the "difficult" loan category in case of debts such as cars and motorcycles. The expenses make a lender wonder why you did not use the money spent on cars instead of taking another mortgage. It is another red flag for lenders if you get substantial income but spend it quickly. You do not need to apply if you have massive credit card debt and student loans, even if you are making the payments.

More: How Much Money Do I Need to Buy a Home?

Credit history

Your credit history has a significant influence on mortgage approvals. Any debts left unsettled, or if the lenders allowed you to pay less than the initial debt, reduces your chances of approval. Consult your lender before closing accounts or repaying any debts.

The value of your home

The primary thing for most mortgage lenders is the value of your property. The secondary lender accepts the remaining amounts from the foreclosure sales. They are therefore less likely to lend on homes with less value. If your home with the initial mortgage has equity, it means it is sufficient to pay the first loan and the second in case of foreclosure. If you need a loan for the second home, the secondary lender may ask you to attach equity in your first home for collateral. This may sound like a cumbersome task, and foreclosure in such a situation may mean you are losing both houses. Evaluate your finances, establish a budget and talk to your family and financial advisors to help you purchase a good home.

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