How to Finance a Vacation Home (Updated 2026)
Last updated 08/27/2025 by
Jessica WalrackDo you dream of buying a vacation home? Whether it’s a beachside cottage or a mountaintop cabin, you can make your dream a reality by learning how to finance a vacation home. Just look at the recent spike in the purchases of vacation homes. In 2014, the National Association of Realtors® (NAR) reported that around 1.13 million units changed ownership. Not only was this figure up by a staggering 57% over the previous year, but it was the highest level recorded since the NAR surveys began in 2003.
How are so many people affording their dream homes?
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Financing Options for a Vacation Home
There are several ways to finance your dream vacation home. The most common routes include:
- A conventional second mortgage loan through a bank or credit union.
- Using the equity in your primary home with a home equity loan or a HELOC.
- Entering into a Home Equity Agreement (HEA), which provides cash in exchange for a share of your home’s future appreciation.
- Choosing a cash-out refinance, which replaces your current mortgage with a larger one and lets you take the difference in cash.
Each option comes with its own requirements, risks, and advantages. Let’s dig deeper into what these routes entail and how they can help you purchase a vacation property.
Conventional loans to finance a vacation home
You can apply for a conventional second mortgage loan from banks and credit unions across the country. The process will be similar to paying a mortgage for a primary residence. You will be asked to put down an initial down payment, and then will set up a payment plan over a span of 15-30 years. These loans can come with either fixed or adjustable interest rates.
If you’d like to calculate how much a specific loan is likely to cost you, head over to this second home mortgage calculator.
What are the differences between a conventional loan for a second home and the mortgage for your primary residence? Second home loans require a larger down payment — typically between 10 and 30%. They are also harder to acquire. If you want a second home loan, you’ll need a high credit score, high income, and a strong debt-to-income ratio. You’ll also need to prove that the residence will be a vacation home and not an investment property. In other words, if you intend to rent it out, you’ll be disqualified from a second home mortgage. If this is your plan, look into investment property financing instead.
Let’s look at an example:
Quicken Loans
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Quicken offers two different second mortgage loans: a 30-year loan with fixed rates of 4.125%, and a 15-year loan with an interest rate of 3.25%. requires a down payment of as little as 10%. It offers pre-approval, which gives you some leverage when negotiating rates. To secure a Quicken loan, you’ll need to make a down payment of as little as 10%.
Curious about your other options? Compare and review providers here.
Home equity to finance a vacation home
Your second option is to borrow from your existing property’s equity. There are a couple of ways to go about this.
The most popular option is to take out a HELOC — a line of credit backed by the equity you have in your home. If you take this route, your primary mortgage will stay the same. The HELOC will count as a separate loan. However, HELOCs usually offer variable interest rates, which can be risky in the long run. They also require good to excellent credit scores.
Home equity loans are another popular option. These loans are also backed by your equity in your home. They provide your funds in a lump sum (rather than providing a line of credit that you can draw from and pay off repeatedly). Home equity loans generally have fixed interest rates.
If your home’s value is on the rise, you could also consider refinancing your existing mortgage into a bigger loan. You can spend the difference on your second property. You may also be able to renegotiate a lower interest rate.
Want an example? Let’s analyze the loans offered by Upstart Mortgage HELOC.
Upstart Mortgage HELOC
Upstart offers a digital-first home equity line of credit designed for speed and flexibility. Unlike traditional banks, Upstart uses its AI-driven underwriting model, which may help qualified borrowers access credit even if they have a thinner credit file.
Loan amounts, interest rates, and terms vary by borrower profile, but the HELOC product provides a revolving credit line secured by your home, allowing you to borrow and repay as needed during the draw period.
It’s a good fit for homeowners who want quick access to funds for major purchases like a vacation home down payment.
Want more options? Compare and review a range of HELOC lenders.
Home equity agreement to finance a vacation home
If you want to unlock equity from your primary residence without taking on new monthly debt, a Home Equity Agreement (HEA) could be worth considering. Instead of borrowing with interest, an HEA provides a lump-sum payout today in exchange for a share of your home’s future appreciation. This can free up cash for a vacation home down payment while preserving your monthly cash flow.
HomeTap HEA
HomeTap is one of the leading HEA providers. It offers homeowners access to a lump sum of cash (typically up to 20% of home value) with no monthly loan payments. Repayment occurs when you sell your home, buy out the agreement, or reach the end of the 10-year term. For buyers exploring ways to finance a vacation home, HomeTap can provide liquidity without impacting your debt-to-income ratio as traditional loans do.
Key advantages:
- No monthly payments, which helps preserve cash flow for property expenses.
- Can be easier to qualify for than a second mortgage or HELOC if income or credit are barriers.
- Repayment adjusts with your home’s future value—potentially lowering costs if property values decline.
Considerations:
- You give up a share of your home’s future appreciation, which may cost more than interest if values rise sharply.
- HEAs are available only in certain states and with approved property types.
- They place a lien on your home, which may affect refinancing or future borrowing.
For a deeper dive into how HEAs work, see our guide on Home Equity Agreements vs. Cash-Out Refinances.
Cash-Out refinance for vacation home financing
A cash-out refinance lets you replace your existing mortgage with a larger one, and take the difference in cash—useful for covering a down payment or partial purchase of a vacation home. It’s a smart option when you want a lump sum and predictable monthly payments.
AmeriSave Cash-Out Refinance
AmeriSave is an online lender known for fast approvals, competitive rates, and streamlined digital refinancing. Their cash-out refinance process is especially attractive for vacation home buyers who want efficient access to a lump sum without the delays of traditional refinancing. Approval can occur in minutes, and average closings take around 30 days—faster than many conventional lenders.
Key advantages:
- Access lump-sum cash to use as a down payment or to cover closing costs.
- Potential to lock in lower interest rates and extend loan term, if current rates are favorable.
- Replaces your current mortgage, simplifying monthly bills.
Considerations:
- Closing costs can be substantial—typically 2%–5% of the new loan amount.
- Extends your mortgage length if you reset the amortization, potentially increasing long-term interest costs.
- Reduces your home equity, which may limit future borrowing or refinancing flexibility.
For a full comparison between a cash-out refinance and a HELOC—which offers flexibility but retains your original mortgage—see HELOC vs. Refinance.
Vacation Home Financing Options at a Glance
| Feature | HEA | HELOC | Home Equity Loan (HEL) | Cash-Out Refinance |
|---|---|---|---|---|
| Funding | Lump sum; share of future value | Revolving credit line | Lump sum loan | New, larger mortgage |
| Monthly Payments | None; repayment at sale or term end | Yes; varies with usage | Yes; fixed monthly payments | Yes; new mortgage payments |
| Interest | No traditional interest | Variable rate | Fixed rate | Fixed or variable mortgage rate |
| Cash Flow Impact | Preserves cash flow | Reduces cash flow | Reduces cash flow | Reduces cash flow |
| Equity Impact | Shares appreciation | Keep 100% after payoff | Keep 100% after payoff | Keep 100% after payoff |
| Best For | Homeowners who want cash without new debt | Borrowers who want flexible, on-demand funds | Those preferring predictable fixed payments | Borrowers consolidating debt or lowering mortgage rate |
Note: Terms, eligibility, and availability vary by provider and state. Always compare offers before making a decision.
How to afford your down payment
Many buyers want to buy a second home with no money down. Unfortunately, while there are zero-down payment options for primary residences, these routes are not available in the U.S. for a second home.
So you’ll have to make a down payment. But how can you keep it affordable?
First, shop smart. Compare a wide range of lenders to find the best terms for your situation.
Next, figure out where you’re going to get the money. The National Association of Realtors® confirms that around one-fifth of buyers use equity from their main residence to finance the down payment on their second home. A HELOC can help you put money down without having to draw from your savings.
You can also consider a Purchase Money Second Mortgage, also sometimes called a ‘piggyback’ second mortgage. As the name suggests, this is a HELOC or home equity loan taken out at the same time as your initial mortgage. Interest rates on these loans are generally variable, but they will provide that extra cash you need for your down payment.
Finance a Vacation Home: Loan Requirements
Now that you know what financing options are available, let’s look closer at what you’ll need to secure one.
Loan Requirements at a Glance
| Loan Type | Typical Down Payment | Credit Score Needed | DTI Ratio | Loan Term |
|---|---|---|---|---|
| Conventional Second Mortgage | 10% – 30% | 680+ | ≤ 43% | 15–30 years |
| Home Equity Loan (HEL) | 10% – 20% | 650+ | ≤ 43% | 5–20 years |
| HELOC | Varies by lender | 680+ | ≤ 43% | Draw period + repayment |
| Cash-Out Refinance | 20% equity left in home | 660+ | ≤ 43% | 15–30 years |
| Home Equity Agreement (HEA) | No down payment; requires 20%+ equity in primary home | 600+ (varies by provider) | Does not affect DTI like loans | 10–30 years (repayment triggered at sale, refinance, or term end) |
Note: Requirements vary widely by lender and provider. HEAs are not loans in the traditiona
Good credit
A good credit record is essential. You’ll likely need a score of 650 or higher to qualify. Of course, the higher it is, the better the chance that lenders will approve your loan. A higher credit score can also help to secure better overall terms.
If you are unsure of your credit record, you can always check it before you apply. You can check your credit report and score here for free.
Ability to make a down payment
Be ready to have your down payment of 10%-30% on hand or have a plan for how you can get it. And here’s a tip: the more you can pay down up front, the better interest rates you can secure for your loan. If you put down over 20%, you can avoid paying private mortgage insurance (PMI) premiums. PMI is an insurance that protects the lender if you stop making payments on your loan.
Qualifying savings
You don’t only need enough cash to make a down payment — you’ll also need savings to show lenders that you are financially stable. They may look for reserves to cover 2-6 months worth of rent on both your primary and secondary residence. This will vary based on the lender and your profession.
Low income-to-debt ratio
Lenders will also check your debt-to-income ratio. They’re looking for a ratio of 43% or lower, both for your main home as well as the vacation home you intend to buy. This means that the cost of your total expenses (your mortgages, taxes, car payments, any other loans or household debt) must not exceed more than 43% of your total income.
Be ready to show at least two months of bank statements, two years of tax returns, two years of W-2’s, one month of pay stubs and investment properties owned, records for retirement accounts, social security, pension award letters, and two years of 1099s.
Proof it’s a vacation home
If you intend to rent out your second home, even for a small percentage of the time, many lenders will not give you a vacation home loan. This is because mortgage rates for a second home differ from those for investment properties. If you plan to vacation in your property over the summer but rent it out at other times, most financial institutions will insist on an investment property loan.
So always make sure you understand the terminology and make it clear to the lender how you intend to use the property. This will ensure that you receive the correct loan and will avoid further trouble down the line.
Finance a Vacation Home: Compare Your Options
Ready for your dream vacation home? You’ve got plenty of options to finance its purchase — just be sure to do your research. Compare and contrast HELOC lenders, home equity loans, traditional mortgage loans, piggyback second loans, or some combination of the above. With the right financing option, you can make that dream a reality!
Key Takeaways
- Vacation home loans typically require higher down payments (10%–30%) and stricter credit standards than primary residence mortgages.
- You can finance a vacation home through conventional loans, home equity loans, HELOCs, or cash-out refinances.
- Lenders often require 2–6 months of reserves to cover both your primary and vacation home payments.
- Alternatives like timeshares, fractional ownership, or short-term rental strategies may offer lower costs or flexibility if a full mortgage isn’t ideal.
Alternatives to Financing a Vacation Home
If a traditional mortgage, HELOC, or home equity loan isn’t the right fit, there are other ways to achieve your dream of owning a getaway property. Here are some alternatives to consider:
- What Is a Cash-Out Refinance? – Learn how refinancing your primary mortgage into a larger loan can free up cash for a vacation home purchase.
- Home Equity Loan Guide – Understand how fixed-rate, lump-sum loans backed by your home equity can help fund a second property.
- Reverse Mortgage Explained – Explore how retirees can tap into home equity without monthly payments, sometimes freeing funds for a second home.
- How Leaseback Agreements Work – See how selling your property and leasing it back can unlock liquidity that might be used for a vacation home.
Read more related content:
- Timeshare Ownership – Purchase the right to use a vacation property for a set period each year. This option requires less upfront investment but comes with usage limits and annual fees.
- Fractional / Co-Ownership – Share the property, expenses, and time with a small group of owners. This lowers costs and responsibilities compared to full ownership.
- Short-Term Rental Strategy (e.g., Airbnb) – Buy a property with the intent to rent it out when you’re not using it, helping offset costs. Keep in mind that local rental regulations and occupancy rates affect profitability.
- Second Home vs. Investment Property – Understand how lenders classify your property. This distinction impacts mortgage rates, down payment requirements, and tax treatment.
Frequently Asked Questions
Can I rent out my vacation home if I finance it with a second-home mortgage?
Usually not. Second-home loans are designed for personal use, not rental income. If you plan to rent the property—even occasionally—lenders may require you to apply as an investment property instead. Learn how classification works here: Second Home vs. Investment Property.
What is the minimum down payment for a vacation home loan?
Expect a down payment between 10% and 30%, depending on your credit profile, lender, and property type. Stronger credit and larger down payments can improve your rate and help you avoid PMI.
Can I use equity from my primary residence to help finance a vacation home?
Yes. Many buyers tap equity via a home equity loan or line of credit to fund part (or all) of the down payment. Remember that this adds another payment obligation and, for HELOCs, the rate is often variable.
Are vacation home mortgage rates higher than those for primary residences?
Generally, yes. Lenders view second homes as higher risk, so rates tend to be slightly higher and underwriting is stricter (higher credit scores, stronger DTI, and more months of reserves).
How many months of reserves do I need to qualify?
Lenders commonly require 2–6 months of cash reserves (sometimes more) to cover payments on both your primary residence and the vacation home. Exact amounts vary by lender and loan type.
Jessica Walrack is a personal finance writer at SuperMoney, The Simple Dollar, Interest.com, Commonbond, Bankrate, NextAdvisor, Guardian, Personalloans.org and many others. She specializes in taking personal finance topics like loans, credit cards, and budgeting, and making them accessible and fun.
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