How to Make a Down Payment for a Second Home

How much do I need for a down payment on a second home?

Unless you’re sitting on a boodle of cash, buying a second home will require you to make a down payment for a mortgage. The same goes for an investment property.

To qualify for a conventional loan on a second home, you’ll likely need to put down at least 10%. Some lenders, though, require more. The down payment requirements will depend on factors like your loan type, credit score, and debt-to-income ratio.

But there are also ways you can purchase a second home without making a down payment. Here’s what to do.

Check your eligibility to buy a second home. Start here (Nov 5th, 2026)

Primary residence vs. second home: down payment and loan rules

Your primary residence is the place you call home for most of the year. With a conventional loan, the minimum down payment on a primary residence can be as low as 3%. Fannie Mae allows that for a first-time home buyer or a HomeReady loan. Fannie Mae allows a debt-to-income (DTI) ratio up to 50% on loans approved by its automated system. The limit is 36% to 45% on manually underwritten loans. In addition, many lenders still require a credit score of 620 or higher. Lenders may set lower limits.

Qualifying for a mortgage for a second home is a whole different story. Why? Because lenders are assuming more risk when they finance a second home mortgage. This makes sense since you’re adding another large, nonessential payment to your household’s expenses.

Lenders typically ask for the following. Fannie Mae and Freddie Mac set the maximum loan-to-value (90% on a second home, so 10% down). However, they set no fixed minimum credit score for loans approved by their automated systems:

• Minimum down payment of 10%
• Lenders set their own minimum credit score. Fannie Mae and Freddie Mac require their automated systems to approve a second-home loan. Those systems set no fixed minimum score. A lower score or smaller down payment raises price adjustments.
• Debt-to-income ratio: Fannie Mae allows up to 50% on loans approved by its automated system. Manually underwritten loans have a limit of 36% to 45%. Lenders may set lower limits, and many prefer lower ratios.
• Cash reserves, often about two months, depending on the automated underwriting findings and the lender

How to finance a second home

Generally speaking, there are two ways to finance the purchase of a second home. You can either get another mortgage or tap the existing home equity in your primary residence. You can access your equity with a cash-out refinance, a home equity loan, or a home equity line of credit (HELOC).

Cash-out refinance

A cash-out refinance entails refinancing the current mortgage on your primary home for more than what you currently owe. You then pocket the difference in cash. In most cases, you can borrow up to 80% of your home’s value.

You’ll be getting a whole new mortgage. That means it will impact the mortgage interest rate you’re currently paying on your home. And you’ll be resetting the clock back to zero on the loan.

Home equity loan

A home equity loan is a second mortgage, borrowing against the equity you have in your home. You receive a lump sum of money upfront, which you begin paying interest on immediately.

Lenders generally let you borrow a percentage of your home’s appraised value, minus what you already owe. For example, say a lender allows 80%. Your house is currently worth $400,000, and you owe $200,000 on your mortgage. That gives you $200,000 in home equity. Eighty percent of $400,000 is $320,000. Subtract the $200,000 you owe, and you could borrow up to $120,000 with a home equity loan.

A home equity loan is a second mortgage, meaning it’s in addition to your current first mortgage. As a result, it won’t impact the terms or duration of your existing loan. You’ll make monthly payments on the home equity loan in addition to your existing monthly mortgage payment.

Home equity line of credit (HELOC)

A HELOC allows you to open a line of credit against your house. Your credit limit is generally a percentage of the home’s appraised value, minus what you owe on your mortgage. It’s a revolving line of credit, which means you withdraw money as needed, up to the limit. After a certain period, you’ll begin repaying the loan in installments.

A HELOC offers more flexibility than a cash-out refinance or home equity loan. This is because you can withdraw money whenever you need it, as opposed to taking one lump sum of cash.

One important factor when choosing between a home equity loan or a HELOC is the type of interest rate. A home equity loan has a fixed interest rate, whereas a HELOC typically has a variable interest rate. That means the interest rate you’re paying could vary over the life of the loan, depending on market conditions.

4 ways to fund a down payment on a second home

There are four ways that you can fund a down payment on a second home. They are savings, a cash-out refinance, a home equity loan and a HELOC. Each funding option has pros and cons.

1. Savings

Using savings to fund a down payment is perhaps the simplest route to take. Plus, you don’t have to pay interest since you’re not borrowing money for a down payment from a bank.

But dipping into your savings also reduces the cash you have on hand. That leaves less to pay for things like emergency expenses and maintenance costs for your second home.

2. Cash-out refinance

A cash-out refinance gives you access to a large chunk of cash at a relatively low interest rate. Still, your overall debt load will increase, and you’ll be changing the terms of your existing mortgage.

Cash-out refinances also have closing costs. Freddie Mac says refinance costs typically run 3% to 6% of the loan principal. These cover refinancing costs like lender fees, appraisal, and other expenses.

3. Home equity loan

A home equity loan provides predictable monthly payments since this type of loan comes with a fixed rate. However, you may have to pay closing costs.

4. HELOC

With a HELOC, you pay interest only on the amount that you borrow or “draw” from the credit line. This can potentially save you a lot of money in interest. HELOCs also offer the option of interest-only payments.

But HELOC rates are typically variable. This means you could face higher monthly payments in some months as the rate adjusts based on market conditions.

Can you buy a second home with no down payment?

It is technically possible to purchase a second home without putting any money down. Even so, the reality is that it’s complicated.

Government-backed zero-down loan programs are designed to help buyers purchase primary residences. As a result, you can’t use them to buy investment properties or vacation homes.

Say you already own a home and want a second home to move into as your new primary residence. In that case, you may be able to qualify for a zero down payment loan. One example is a USDA loan, backed by the United States Department of Agriculture. Another is a VA loan, backed by the Department of Veterans Affairs. For a USDA loan, you must show your current home no longer meets your needs, such as after a job relocation. For a VA loan, you must certify that you intend to live in the home.

Qualifying for a second home mortgage

If you intend to apply for a second home mortgage, you’ll need to meet certain eligibility requirements. These borrower requirements can vary depending on what type of loan you’re applying for. Typically, though, you’ll need at least 10% down, and your lender will set its own minimum credit score.

In addition, the property that you plan to purchase as a second home has to meet certain requirements. Fannie Mae and Freddie Mac set no mile distance. However, the property must be a one-unit home that you occupy for part of the year. It has to be suitable for year-round use and not be a rental or timeshare.

For mortgage interest, the IRS lets you treat a second home that you rent out as a qualified home. You must use it for more than 14 days or more than 10% of the days you rent it at a fair price, whichever is longer. A second home that you do not rent out has no minimum use.

If you plan to rent out your new property full-time, it’s considered an “investment property” rather than a “second home.” Investment property loans are subject to higher interest rates and stricter requirements than second home loans. For example, Fannie Mae requires at least 15% down on a one-unit investment property and 25% on two to four units.

Down payment for a second home FAQ

Do you need a down payment for a second home?

Typically yes. In almost all cases, you will need to make a down payment to purchase a second home. It will be larger than the down payment needed to purchase a primary residence. Zero-down VA, USDA, and physician loans work only if the new home becomes your primary residence. Assumable mortgages don’t remove the down payment either. For example, FHA caps the assumption of a HUD-approved secondary residence at 85% of the property value.

How much down payment is needed for a second home?

Typically, you need to make at least a 10% down payment to qualify for a second home mortgage. Fannie Mae caps a second home loan at 90% of the value. That cap also counts any second mortgage, so a second loan can’t shrink the down payment.

Can you put 5% down on a second home?

Generally, no. For a conventional second home, 10% down is the usual minimum, with rare lender exceptions. VA, USDA, FHA, and physician’s loans are for a primary residence. So they apply only if the new home becomes your primary residence, such as after a new job or military re-assignment.

Do I have to put down 20% on a second home?

No. Most lenders allow borrowers to put as little as 10% down on a second home with a conventional loan.

Can you use a HELOC for a down payment on a vacation home?

Yes, a HELOC is one of the most common ways homeowners fund a down payment for a second home purchase. To use a HELOC for a second home down payment, you’ll need sufficient equity in a property you already own.

Using home equity to buy a second home: FAQ

How much equity should you have before buying a second home?

It depends on how you plan to finance your second home. Typically, you can borrow up to 80% of your home’s value with a cash-out refinance. With a home equity loan or a HELOC, lenders generally set the limit as a percentage of your home’s appraised value, minus what you owe.

Can I use my home equity to buy a second house?

Yes, tapping your home equity is a popular way to fund the purchase of a second home. But you must have a certain amount of equity to do so.

How can I use equity to buy a second home?

Using equity to purchase a second home allows you to pull out cash from your current home. You can do this with a cash-out refinance, a home equity loan, or a HELOC. Each option lets you borrow a certain amount of equity against your home.

HELOC requirements and home equity loan risks

Can I take out a HELOC to buy a second home?

It is possible to use a HELOC on your primary home to buy a second home. In most cases, your debt-to-income ratio must fall within the lender’s limit. You’ll also need a credit score that meets the lender’s minimum and enough equity in your primary home.

What are the risks of using a home equity loan to buy another house?

If you use a home equity loan to buy another house, you’re putting your primary home up as collateral. That puts both your primary home and the second home at risk of foreclosure if you default on either loan. Also, home values can rise and fall. If your home’s value plummets, you could owe more than what it’s worth and become upside-down (or underwater) on your mortgage.

Choosing how to fund your second home down payment

There are many financing options and down payment options for purchasing a second home. You may want a vacation home for your family or a rental property for income. Lenders treat a full-time rental as an investment property rather than a second home. Either way, you can look for a loan option that fits your plans.

Check your eligibility to buy a second home. Start here (Nov 5th, 2026)