Down Payment: Typically, you can purchase a primary residence with as little as 3 percent down payment. With a vacation home, you'll need at least 10 percent. You can buy your primary residence with just 3% off in many cases. But you need at least a 10% discount to buy a vacation home and that's if the rest of your application is very strong (high credit score, low debt, etc.).
Compared to prime home loans, vacation home loans tend to have slightly higher interest rates, and lenders may require a higher credit score as well as a higher down payment. For example, a primary residence allows down payments of up to 3% for conventional loans. But for a vacation home, you may need between 10 and 20%. With these types of loans, it's also important to remember that renting a vacation getaway while you're not using it could violate the terms of your loan.
You will be the owner, so even if you rent your vacation home for part of the year, repairs and maintenance are yours. You'll need to be clear about many important distinctions regarding your primary residence and a vacation home. Unlike investment properties, you can't use future rental income to help you qualify for a vacation home. The rise of Airbnb and similar services makes it easier for vacation home buyers to receive occasional rental income.
A holiday home is one in which you will live personally for part of the year, but it will not be your main residence (or it would be, logically, a first and not a second home). But financing a second home or vacation home has different rules than financing a primary residence. According to the NAR Annual Vacation Homebuyer Survey, a home equity line of credit (HELOC) in a primary residence is a favorite source of financing for second-home buyers. Having a vacation property close to your primary residence can be an indicator that the intention of your vacation home is to rent it rather than for personal use, which would qualify the property under a different type of loan.
A vacation home is generally defined as a secondary residence at least 50 miles away from your primary residence. Applying for a mortgage for a second home or holiday home is a lot like applying for a primary mortgage. If you're buying a multi-unit vacation home, lenders will almost always treat your purchase as an investment property, whether you plan to rent it or not. Conventional loans are often available for vacation homes, but mortgages for such properties are often accompanied by higher down payment requirements (at least 20%), higher interest rates, and more conservative lending guidelines.
Since owning a vacation home means you won't be there all the time, you may need to hire someone to look after it during your absences or when you're between guests, if you rent it.