Refinance a Vacation Home or Second Home

Looking fo information on refinancing a second home or vacation home?

If you purchased a second home or vacation home and need to refinance, there are still several programs available for qualified borrowers even in today's tighter mortgage financing environment (for the purposes of this article, the term second homes used to include vacation homes).

Second Home Mortgage Options

Fannie Mae and Freddie are still offering refinance loans for second homes as long as they are single family or condominium properties (no multi-family second homes) and the loan to value (LTV) does not exceed 80% of the current value of the property (cash out refinances for second homes are available to 75% LTV). FHA does not offer loans on second homes, and most portfolio jumbo loan lenders have eliminated second home mortgage programs, so Fannie Mae and Freddie Mac are the only current available options. There are no refinance options available for second homes where the LTV is over 80% because mortgage insurance companies are not offering coverage for second homes. However, the Fannie Mae DU Refi Plus program which allows 105% LTV refinances does permit second home refinances.

Fannie Mae and Freddie Mac not only offer their conforming limit program which can refinance loans up to $417,000, but they also are offering high-balance conforming loans up to $625,000 in certain high-cost areas. 30 and 15 year fixed rate as well as 5/1 adjustable rate mortgages are available for second home refinances up to $417,000, but only fixed rates are available between $417,001 and $625,000. Second home refinance loans above $625,000 are available in extremely limited circumstances, but the rates on these programs are extremely high.

Second Home Mortgage Barriers

Underwriters are taking a much closer look at borrowers who are refinancing second homes. First, they are scrutinizing the transaction to see if the property is truly a second home or is in fact an investment property. The property must be "in such a location as to function reasonably as a second home (i.e. remote in distance from the borrower's primary residence)" according to Fannie Mae and Freddie Mac guidelines. Borrowers with second homes close to their primary residence may run into resistance from underwriters unless they can prove it has been and continues to be operating as a second home and not an investment property.

Underwriting requirements for the property itself have also been tightened. If your second home is a condo hotel or time share, you will not be eligible for Fannie Mae or Freddie Mac financing. Also the property cannot be part of any rental pool. The property itself must meet basic standards for square footage and be suitable for year-round occupancy (this usually means it must be heated if it gets cold in the winter). Many second homes are actually condominiums and so on top of second home guidelines borrowers must also meet standard condominium refinance requirements.

Other Second Home Mortgage Issues

If your transaction and your property meet these tighter qualifying requirements, you may still run into an issue due to lower property values and declining market statuses. For properties located in declining markets (which happen to be in the most popular locations for second homes such as Florida, Arizona, Nevada and California), some underwriters may cut your maximum allowable loan-to-value by between 5% and 10% to account for the fact that the markets are still declining. For example, if your home appraises for $100,000, you should be able to refinance 80% or $80,000, but if you are in a declining market then you could be cut back to a maximum of $75,000 or even $70,000. That would be off of what is probably already a much lower appraised value.

For an exact refinance rate quote for your vacation home or second home, complete a free rate quote request now!.

To see the current mortgage rates, visit our Current Mortgage Rates page.

If you have any questions that you would like to get answered by our expert mortgage brokers, please email us or call us at 1-877-868-2503.

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