GMAC Real Estate Investment vs. Residence Second Homes
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Investment vs. Residence Second Homes

There are many ways to finance the purchase of a second home. Most investors take the conventional route of making a down payment and financing the remainder with a mortgage – probably a 30-year, 15-year or an adjustable rate mortgage. Something to consider when going with conventional financing is what type of second home are you buying? Is it a personal second home like vacation or retirement property? Or is your second home investment real estate.

That distinction will make a significant difference in the mortgage offered by the lender. A second home intended for personal use will receive much more favorable lending terms than an investment property.

Lenders and Investment Second Homes

Investment second homes are also known as “non-owner occupied” properties, and lenders want to be assured your investment will generate enough money to pay the mortgage, insurance and taxes. This assurance usually comes in the form of a cash flow statement outlining the home’s rental history.

When reviewing this history banks will hedge their bet and not use the full rental amount indicated by the statement when deciding to approve your loan. Even if your cash flow statement has a long and consistent history, the bank will likely only consider 75 to 80% of the total for the income potential of the second home.

Because of this you should put a condition that your loan will be approved on any offer for an investment second home.

Search for Second Homes for Sale

To search for a selection of second homes for sale, please visit lifestylehomesearch.com, or visit the website of a GMAC Real Estate Office that serves the area where you'd like to buy a second home. To learn more about buying Second Homes or Vacation Homes, explore the rest of this section, or contact a GMAC Real Estate Agent.