Second homes typically require a larger down payment than primary residences

Most lenders ask for 10 to 20 percent down on a second home, compared to as little as 3 to 5 percent for a primary residence. Some lenders will go lower — occasionally 10 percent — but the exact amount depends on your credit score, the loan type, and the lender's own rules. A second home is riskier to a lender because you're not living in it, so they protect themselves by asking for more of your own money in the deal.

The down payment is the cash you bring to closing. If a second home costs $300,000 and you put 15 percent down, you pay $45,000 upfront and borrow $255,000. The lender keeps the house as collateral until you pay back the loan.

Key Takeaways

  • Second home down payments range from 10 to 20 percent, with 15 to 20 percent most common, because lenders see investment properties as higher risk than homes you live in.
  • Your credit score, debt-to-income ratio, and cash reserves all affect what down payment percentage a lender will accept.
  • Putting down less than 20 percent usually means paying private mortgage insurance (PMI), which adds to your monthly payment until you reach 20 percent equity.
  • Some loan programs for second homes have stricter rules than others — portfolio lenders and bank-specific programs sometimes allow lower down payments than conventional loans.
  • You will need to show proof that you have enough cash left over after closing to cover property taxes, insurance, and maintenance on both homes.

Why second homes cost more to put down

A lender's main concern is whether you will keep paying if money gets tight. If you own the house you live in and the house you vacation in, the lender knows you will prioritize the one with your family in it. A second home is easier to walk away from, so lenders ask for a bigger cushion of your own money.

The second reason is occupancy. A primary residence is someone's address — the lender can verify you live there and that you have a stake in maintaining it. A second home sits empty part of the year, which means higher insurance costs, more maintenance risk, and less incentive for you to keep it in good condition. Lenders price that risk into the down payment requirement.

How credit score and debt affect your down payment

If your credit score is 740 or higher and your debt-to-income ratio is below 43 percent, you may find lenders willing to accept 10 to 15 percent down. Your debt-to-income ratio is the total of all your monthly debt payments — mortgage, car loans, credit cards, student loans — divided by your gross monthly income. A lender calculates this for both your current home and the new second home combined.

A lower credit score or a higher debt-to-income ratio pushes the down payment requirement up. If your score is below 680 or your ratio is above 50 percent, expect to put down 20 percent or more, or you may not find a lender willing to work with you at all.

Lenders also want to see cash reserves — money left in the bank after you close. If you're putting 15 percent down on a $300,000 second home, a lender typically wants to see that you still have three to six months of mortgage payments, property taxes, insurance, and HOA fees sitting in savings for both homes combined. This shows you can handle the payments if your income drops.

What happens if you put down less than 20 percent

If you put down 15 percent instead of 20 percent, you will pay private mortgage insurance, or PMI. This is an insurance policy that protects the lender if you stop paying. PMI typically costs between 0.5 and 1.5 percent of the loan amount per year, added to your monthly payment. On a $255,000 loan, that could be $100 to $300 extra per month.

PMI stays on your loan until you reach 20 percent equity — meaning you've paid down the loan enough that you own 20 percent of the house outright. On a 30-year mortgage, that takes roughly 10 to 12 years of regular payments, though you can reach it faster by making extra payments or if the home's value rises and you refinance.

Some second home loans do not allow PMI at all. If a lender won't insure a second home mortgage, they will straightforward require 20 percent down. Ask the lender upfront whether PMI is an option before you assume you have to put down more.

Loan types and their down payment rules

Conventional loans — the most common type — usually require 10 to 20 percent down on a second home. These are loans that meet the standards set by Fannie Mae and Freddie Mac, the government-sponsored companies that buy mortgages from lenders.

Portfolio lenders are banks that keep the loans they make instead of selling them. Because they hold the risk themselves, they sometimes have more flexibility. Some portfolio lenders will accept 10 percent down on a second home if your credit and income are strong. Ask your bank whether they keep loans in portfolio or sell them.

FHA loans — insured by the Federal Housing Administration — are rarely used for second homes because the program is designed for primary residences. VA loans and USDA loans also exclude second homes. If you're a veteran or a rural buyer, these programs won't help with a second property.

Saving for a second home down payment

The down payment is only part of the cash you need. You also need to cover closing costs, which typically run 2 to 5 percent of the purchase price. On a $300,000 home, that's $6,000 to $15,000 in appraisal fees, title insurance, inspections, and lender fees.

After closing, you need reserves. If you're putting 15 percent down, a lender will want to see that you have enough cash left to cover several months of payments on both your primary home and the second home. This is where many buyers run into trouble — they have enough for the down payment and closing costs but not enough reserves to satisfy the lender.

A practical approach is to save the down payment first, then keep saving for closing costs and reserves before you start looking. If you're aiming for 15 percent down on a $300,000 home, that's $45,000 down, $9,000 in closing costs, and ideally $15,000 to $25,000 in reserves — roughly $70,000 total.

Second homes in different markets

Down payment requirements don't change much based on location, but the cost of the home does. A second home in a high-cost area like coastal California or the Northeast will require a larger absolute down payment even if the percentage is the same. A 15 percent down payment on a $500,000 beach house is $75,000; on a $200,000 cabin, it's $30,000.

Some areas have seasonal second home markets — ski towns, beach communities, retirement destinations — where lenders have more experience with second home buyers. In those places, you may find lenders slightly more willing to work with lower down payments because they understand the market. But this varies by lender, not by region.

Frequently Asked Questions

Can I use a gift for the down payment on a second home?

Yes, but the lender will require a gift letter from the person giving you the money, stating that it is a gift and not a loan you have to repay. The lender wants to know your actual debt obligations. Some lenders limit how much of your down payment can be a gift — typically you must put at least 5 to 10 percent of your own money in.

What if I have a lot of equity in my primary home?

You can borrow against that equity with a home equity line of credit or a cash-out refinance, then use that cash for the second home down payment. This is common, but be aware that you're now borrowing against both homes. If you can't pay, the lender can foreclose on either one.

Do investment properties have different down payment rules than vacation homes?

Yes. A second home you use personally typically requires 10 to 20 percent down. An investment property you plan to rent out usually requires 20 to 25 percent down because lenders see rental income as less stable than your primary job. Tell the lender upfront how you plan to use the property.

What if I'm buying a second home with someone else?

The lender will look at both of your incomes, debts, and credit scores. If one person has a much lower score or higher debt, it can raise the down payment requirement for both of you. You can also explore with just one person as the borrower, though that person's income alone must support the loan.

Can I put down less if I pay a higher interest rate?

Some lenders will accept a lower down payment in exchange for a higher interest rate, but this is uncommon for second homes. Conventional loans have set rules about down payment minimums. Ask your lender whether a rate adjustment is possible, but don't count on it.