[EXPERT] Think You Can’t Afford a Vacation Home?

Jessica, what exactly is a second home loan?

Yeah, that's a great question.

So a second home loan, I'm going to start by defining what a primary home loan is.

So a primary home loan is something that's owner occupied, meaning that you are going to move into that property yourself and live there as you're you know, six months and a day.

So that's your primary occupancy is defined by that timeline.

A second home loan is something that it can also be called a vacation home loan, something that the main, the highest and best use of it is you are going to personally use it.

However, you can receive rental income on it.

So it's just something that you are going to personally use as well.

And it's not something that you're going to like primarily live in, you know, for six months and a day, if you will.

What types of conventional loans can someone use to finance a second home or a vacation home?

Yeah.

So I would say that like the second home loan, like that's the product of the second, second home loan.

And that, like I mentioned, you can still short-term rent or, you know, rent in any capacity or receive rental income on, but the primary use of it is personal use or vacation home.

I think that's really important what you just clarified because there is so much misinformation out there.

I've heard things about there's only a maximum amount of time that you're allowed to rent that property out or there's a minimum amount of time that you need to make sure you're spending there.

Can you debunk those myths once and for all for us?

Yeah, absolutely.

So in conventional lending guidelines, there's actually no minimum requirement written in the guidelines that says you need to occupy this property for this amount of days.

However, most underwriters will default to what the IRS says.

So the IRS, if you look up IRS guidelines online...

IRS.gov, I'm not a CPA or a tax professional who's still a consultant, but if you just look it up online, anybody can, it says 14 days is what's considered to be, you know, a second home.

So that's what underwriters will default to.

But the thing is, is nobody's really, it's a gray area because when you get a second home loan, nobody's going to come and check like, Did you stay in your property 14 days? And technically, there's actually nothing written in the conventional lending guidelines for that.

So there's no minimum amount of days.

But I do know from my own investor experience that when you go to report to your CPA how many days you personally use the property, that is going to change the tax benefits or advantages that you can use.