How to use the second home calculator
Use the second home calculator by plugging your known income and monthly expenses into the appropriate fields. To get an accurate idea of how much home you can afford, be as exact as possible with your current financial status. Some terms to be familiar with include:- Employment income: This is the amount of money you receive from your primary job each month before taxes are withdrawn.
- Supplemental income: Add any money outside of your primary income that you can reliably depend on from month to month. Rental income is a common form of supplemental money.
- Debt-to-income ratio (DTI): This is found by dividing your monthly bills by your gross monthly income. The lower your DTI, the more favorable you will be seen by lenders.
- Cash on hand: This is the amount of money you have leftover each month after deducting recurring expenses.
- Second home down payment: This is the amount of money you’re willing to pay upfront for the home. A larger down payment (20% or more) usually results in a lower interest rate.
- Second home mortgage interest rate: This is the rate of interest charged by your lender.
- Mortgage loan length: This is the number of years it will take to pay off your loan. The longer the loan, the higher the interest rate.
5 factors to consider when buying a second home
Since lenders make money off of interest rates, they are incentivized to offer the highest amount possible to a home buyer. Just because you may qualify for a large loan doesn’t mean it’s in your best interest to accept it in full. Remember that in addition to monthly mortgage payments, second home owners are still responsible for:- Annual property taxes
- Homeowners insurance
- Utility payments
- Possible homeowners association fees
- Regular maintenance
1. Know your financing options

- Home equity loan: Also known as a second mortgage, this loan allows you to borrow against the current equity you have in your home. It provides a lump sum of cash or line of credit for you to make a purchase. If your property loses value, you may owe more on the loan than the property is worth.
- Conventional loan: You can receive these loans through traditional lenders like banks and credit unions.
- Cash: Paying for a home in full will reduce the overall cost of owning a second home because you won’t be paying interest on a loan.
2. Revisit your current financial status

3. Understand second home mortgage requirements

4. Know your options for second home ownership

5. Learn how to increase your borrowing power

- Offer a larger down payment. Your current income may be fixed for the time being, but if you have enough savings, you can pay a greater percentage of the house price in cash. This will reduce your monthly payment and the riskiness of the loan.
- Improve your credit score. Paying debts on time has the biggest impact on your score, but utilizing 30% or less of your credit line also plays a big role. Or you can try consolidating your debts so that you’re only dealing with a single payment that might have a lower interest rate.
- Improve your DTI. If your current DTI exceeds 43%, focus on paying off some of your debts or finding ways to increase your income. This can produce immediate results, and you won’t have to wait for credit watchdogs to report on your status.
- Reduce unnecessary spending. Small, individual expenses like eating out add up fast. If you’re struggling to save for a down payment, look for affordable alternatives to your current habits.