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Are Mortgage Rates Higher For A Second Home?

By Eric Goodwill

Since interest rates are nearly as low as they have ever been, many homeowners are able to take advantage of the low rates and refinance into a new mortgage. While rates for a primary residence are really low, those who want to refinance a mortgage for a second home may have to pay a higher rate. These rates are higher for a few different reasons.

Not Backed by Government

The first reason why mortgage rates are higher for a second home is that they are not backed by the government. The government has created many different programs that help homeowners get low rates for their primary residences. While this has created lower rates for those looking for new mortgages for primary residences, those looking for rates for second homes still have to pay a higher rate.

Riskier Repayment Source

The second reason why mortgage rates are higher for a second home is that they have a riskier repayment source. Most mortgages for primary residences are secured by the borrower’s income. If the borrower has a second home, they may rely on rental income as well. Since rental income is not as reliable, it is considered a riskier source or repayment, and the bank will charge a higher rate to compensate.

Weaker Markets

The third reason why mortgage rates are higher for a second home is that second homes are often vacation homes located in sunbelt states including Florida, Arizona, and California. Since these markets have seen the most turmoil in the housing downturn, they are considered risky to banks. To compensate for the risk, banks have to increase the interest rate regardless of whether it is a first or second home.

Related posts:

1. Are Home Equity Interest Rates Higher Than Regular Mortgage Rates?
2. Are Commercial Interest Rates Higher?
3. Will I Pay A Higher Interest Rate On My First Mortgage Loan?
4. Are Mortgage Rates Different For A First And Second Mortgage?
5. What Are Interest Rates For Home Mortgages Right Now?