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Can I get a home equity loan or HELOC on a second home?

Sunday, August 4th, 2024

Can I get a home equity loan or HELOC on a second home?

If you own a second home or vacation home in a sought-after area, you may have seen even bigger equity gains than average.

But what happens if you want to tap that equity? Can you take out a home equity loan or HELOC on your second home?

The answer may be yes, but the rules are a little different than for your primary home. Here’s what to expect.

Home equity loans and HELOCs on second homes

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Instead, you could access the value of your home using a cash-out refinance, home equity loan, or home equity line of credit (HELOC).

Cashing out on a second home can be more appealing to some homeowners than changing the mortgage on their primary home or reducing its equity.

Using your second home reduces the risk of being in a negative equity position with your primary residence should the market take a turn for the worse.

It’s a little more complicated if you’re trying to refinance a property that isn’t your primary residence, but that doesn’t mean you can’t benefit from historically low interest rates if you do your homework.

Rules for a second home HELOC or home equity loan

Due to the elevated risk that second homes pose for lenders, second home financing typically comes with higher interest rates and stricter financing rules.

Buying a second home involves a higher down payment of 10 percent or more. And if you’re refinancing a second home you already own, you’ll need enough equity to make cashing out worth it.

You often need to leave at least 25% of your second home equity untouched, which means you’ll need significantly more than 25% equity to make a cash out refinance or home equity loan worth your while. (more…)


Bryon Howard, RE/MAX House of Real Estate
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