What conditions change in second-home mortgages compared to those of habitual residence?

Published on June 16th 2017

Second home mortgages do not differ too much from home mortgage loans, but they do have certain special conditions

Second home mortgages do not differ too much from home mortgage loans, but they do have certain special conditions. In fact, the entities commercialize a same mortgage for both services modifying, only, some of its conditions.

Second mortgages have a shorter term. Typically, mortgages for first-time homeowners tend to be able to stretch on average up to 30 years, sometimes reaching 40 years. However, financing for the purchase of homes for second homes limits the term in a few years. Concretely the period of time to amortize a mortgage for second home moves in a fork of between 20 and 25 years.

Another item that differs in mortgages for second home is the amount financed. Regular mortgages grant a maximum of 80% of the appraised value or, in some cases, 80% of the lowest valuation or purchase price.

However, second-home mortgage loans lower the amount financed slightly. Specifically, financing for this type of loan ranges from 60% to 75%.

The demands that the entities demand to grant the credit are a little higher in this type of mortgage loans. The reason is related to that they are operations of greater risk, since before an economic difficulty, the consumer will stop to pay the quotas of the mortgage for second residence before those of his habitual residence. In addition, in case of embargo, the bank will have more difficulties to sell the property since they are usually located in holiday environments or rural areas.

In particular, the hardest conditions are the required savings and income. Since banks grant less funding, the consumer must have a higher amount of savings to access the financing. If for a standard house it should gather approximately 30% of the value of the house, for a second residence this percentage can be raised up to 50%.

Finally, since second-home mortgages have a shorter term, the fees are higher, so that the entities require higher income than for the contracting of a mortgage loan for a habitual residence.

Source: El Mundo