Investment property versus second home. Exactly what are the differences?

Hello from Scottsdale! Great question and the answer is pretty broad. As far as loan terms, rates and fees for a second home are going to be closer to those for a primary residence. Rates and fees for investment properties tend to be higher because those property designations tend to default at a higher rate. With respect to loan guidelines, investment properties will be the most strict. Cash reserves required, maximum loan-to-value, debt-to-income ratios and other guidelines may be more restrictive if the property is an investment. It is also important to note that if the property is rented out for even one day, it is considered an investment property. Please feel free to call me at 480-368-7715 or email me at john.moran@wjbradley.com with any further questions, I'm local and happy to help.

Investment properties are one of the most risky loan products offered, and because of that, they have higher interest rates and require larger down payments.. If the market goes bad or the investor has a hardship.. they are more likely to let the investment property go before they let go of their primary residence.. A 2nd home is a home that you live in part of the year, but live elsewhere most of the year.. if you buy a 2nd home with the intent of renting it out 1 weekend a year, it would be considered a rental, and you would be subject to investor guidelines.. where 2nd homes fall under owner occupied guidelines.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com

An investment property is a home you never plan on living. You will rent it for income. A second home is a vacation or maybe snowbird home you live in part of the year. Assume you have both a main home and an investment property. Assume you lost your job and were having financial difficulties. Which home would you focus on? Your primary home where you live, or the rental where someone else lives? Obviously your primary home. Because of this simple fact, investment properties are more are higher risk higher cost. Generally speaking, a second home is a vacation home for those a little better off. You are not renting it, and don't need any rental income. Those are generally not higher risk and therefore you can get better rates and lower down payments. People are always trying to buy rental property and pass it off as a second home. Don't do it. It is mortgage fraud.

A second home is one that you use for a vacation home or weekend home or whatever as long as the use makes sense. The rates are the same or very close to your primary residence and you can go to 90% loan to value. An investment property is one that you will most likely be renting out, the rates will be higher and the loan to value will be at least 5% less than a second home.