How to Purchase a Second Home?

Once you have taken a mortgage loan it is a matter of fact you need a large amount of funds to pay your debts. However, sometimes it can be a good decision for you to buy a second home. Below it is described how to take a second home with the lowest interest rate.

Improve Your Credit History

Credit rate is the main factor affecting your debt characteristics like term, interest rate, approval chance. Good credit history allows you to improve debt terms significantly. For example, when you are taking FHA mortgage having a credit rate under 580 means that the interest rate starts from 10% annually, while with a credit rate of at least 600 you can get a 3,5% mortgage. Due to the fact mortgage loan can make several tens of thousands of dollars it is a huge difference.

However, if your credit history is lower than 380 you are likely to get rejected when applying for a loan. So in order to improve your debt terms:

  • pay bills on time – overdue bills negatively affect your credit history
  • take loans – loan is the only way for bank to check your credibility so when you take loans and make payments on time bank understands your are reputable person worth to trust
  • get a credit card and apply for increase of credit line – the more credit funds are available for you (if being paid on time) the more likely it is bank will grant you more funds on better terms
  • do not allow your debt payments to exceed 50% of your monthly budget – it really depends on your income amount, but if debt payments make more than a half of your budget bank tends to think you make wrong financial decisions

credit history

If your credit history is already spoiled there is always a chance to improve it with the help of bank consultant – it may take 6-18 months for you (depend on your current credit rating).

Insurance Considerations

If your credit history is fixed there won’t be problems with getting a second loan to purchase a house. Consider mortgage points to decrease interest rate for house purchasing.  And now it comes to insurance bills.

Insurance Considerations


The thing is when you buy the second home your insurance company tends to think that it won’t be properly maintained due to the fact you already have a primary residence. Thus, the insurance rate will be higher for the second house and you should consider that.


Buying a second home could be a good idea if you want to get a separate residence for your kids or relatives, but it can be a bad idea if you want to use it as a summer residence as it may appear that it is much more cheaper to rent house or book a hotel room. Moreover, in order to ground mortgage expenses you will have to visit that house each summer – which may be not kind of liability you want to take.