Second home mortgage vs investment property mortgage

5 Replies

Good afternoon everyone,

I have a home that currently has a second home mortgage on it. We rent it on AirBnB and VRBO. With the real estate market going up, we have extra equity in the home now. If I were to refinance this home into an investment property mortgage, would I be able to purchase another home in the same area as a second home, since at that point I have an investment property but no second home in the area? We still meet occupancy requirements for the second home mortgage, so at the least we would refinance to remove PMI and take some cash out.

"We still meet occupancy requirements," hmmm. Underwriter, appraiser and two other background systems check and will see the prior advertisements for STR, what do you show on your IRS return, what do the running reports from the STR apps you use show? An investment type mortgage product is far more expensive than a second home one. If you have PMI on subject I encourage you to apply and see what is possible. I have no idea what you show on IRS in 2020 and what year to date income is so it's hard to help you.

Hi @David Rosengaft - it certainly sounds possible. As long as you meet Second Home requirements, which it sounds like you're already aware of them, I don't see any apparent issues. One thing to consider is that you are going to be restricted to a maximum Loan to Value of 75% on a cash-out refinance of either a second home or investment property. 

I do some business in Virginia and am more than happy to answer any more of your questions if you want to reach out. 

@Caroline Gerardo , my records and everything are all well above board.  My question is can I have an investment property in a certain geographic area and then buy a vacation property in the same area?  Normally, you can't have a vacation home or second home within 50 miles of another that you own.  You also must occupy the property a minimum of 14 days or 10% of the days that you've rented the home to others.  We meet all requirements of occupancy and otherwise for a second home.  I'm not worried about qualifying for the mortgages in relation to income.

@Reid Chauvin , thank you for clarifying the LTV requirements. I'm glad to hear that it's possible. Financially, it may be a wash, depending on the valuation from an appraisal, so the purpose would mostly be to acquire a second home in the area after the refinance. It's easier to acquire a new property with 10% down that will be a second home than the traditional 20 or 25% down for an investment property.

@David Rosengaft ( has to be single family residence) Freddie says you can't rent it for more than 179 days a year, which you have to prove to refinance second home; Fannie a little bit more vague on the half year. Also can't have a management company as that yells investment for it to be refi of second home. 

You could refinance existing second home loan to non owner - rate will jump up as the costs are much higher than second home.

After that was recorded you could buy another second home in same resort/vacation area without mileage restriction. Or buy in another vacation area away from your home.

When you qualified for the second home what was your back end ratio? Is income higher? Since you want cash out and rate will likely be higher is why I mention qualifying, that's always the pickle.

We ended up picking a new market for the time being.  Second home mortgage, and we’ll probably end up getting investment property mortgages in both markets going forward.  Short term rentals have been good to us so far!