Second Home Affordability Calculator
Understanding Your Results
Your Maximum Second Home Price represents the highest purchase price where your combined debt-to-income ratio stays within lender guidelines. This accounts for your existing mortgage payment, other debts, and the new second home PITI.
Combined Monthly Housing shows the total monthly obligation for both properties: your current mortgage payment plus the estimated second home payment. Lenders evaluate your ability to carry both payments simultaneously.
Combined DTI is the ratio lenders use to evaluate your total debt burden. Most conventional lenders cap at 43-45% DTI for second home loans, though some allow up to 50% with strong compensating factors like high reserves or excellent credit.
Reserve Requirement reflects the liquid assets lenders typically require you to hold, generally 2 months of PITI for each property. Some lenders require 6 months or more depending on your overall financial profile.
Note that second home mortgage rates typically carry a 0.25-0.75% premium over primary residence rates, and most lenders require a minimum 10% down payment. These factors are reflected in the default values but can be adjusted to match your specific situation.
Assumptions & Disclaimer
Rate assumptions: The default interest rate of 7.0% reflects the typical second home premium above primary residence rates. Actual rates vary by lender, credit score, down payment, and market conditions.
Property costs: Property tax rates and insurance premiums are based on state averages. Actual costs vary significantly by county, municipality, and property characteristics, particularly for second homes in coastal, mountain, or resort areas where insurance costs may be substantially higher.
PMI: Private mortgage insurance is estimated at 0.5% of the loan amount annually and applies when the loan-to-value ratio exceeds 80%. Actual PMI rates depend on credit score, LTV, and insurer.
DTI limits: While 43% is a common conventional lending guideline, actual DTI limits vary by lender and loan program. Some lenders accept higher DTIs with compensating factors such as substantial reserves, low LTV, or excellent credit history.
Reserve requirements: The 2-month PITI reserve estimate per property is a common baseline. Actual reserve requirements vary by lender and may be higher, particularly when financing multiple properties or when the borrower has a higher overall risk profile.
This calculator is for educational purposes only. It does not constitute a loan offer, pre-qualification, or financial advice. Contact a licensed mortgage professional for personalized guidance based on your complete financial situation.
How Second Home Affordability Differs from Primary Home Affordability
Calculating how much second home you can afford is fundamentally different from a primary home purchase. When buying your first home, lenders evaluate your income against the proposed housing payment and existing debts. With a second home, your current mortgage payment becomes a fixed obligation that directly reduces how much additional housing payment you can support within DTI limits.
The DTI Constraint with Two Mortgages
Lenders use your total debt-to-income ratio to evaluate whether you can carry both mortgage payments. If your gross monthly income is $11,000, your existing mortgage is $2,400, and other debts total $500, you have already committed $2,900 of your monthly income. At a 43% DTI limit, your maximum total debt is $4,730, leaving only $1,830 available for the second home payment. That payment must cover principal, interest, property tax, insurance, and potentially PMI.
Second Home Rate Premiums
Mortgage rates for second homes are typically 0.25% to 0.75% higher than primary residence rates. Fannie Mae and Freddie Mac impose loan-level price adjustments (LLPAs) on second home mortgages, which lenders pass through as higher rates. The exact premium depends on your credit score, loan-to-value ratio, and down payment amount.
Down Payment and Reserve Requirements
Most conventional lenders require a minimum 10% down payment for second homes, compared to as little as 3% for primary residences. Additionally, lenders typically require liquid reserves equal to at least 2 months of PITI for each property you own. With two properties, that means demonstrating sufficient cash reserves to cover 4 months of total housing payments.
FHA and VA Limitations
FHA loans cannot be used to purchase second homes. They are restricted to primary residences. VA loans similarly require owner-occupancy. Second home purchases must be financed through conventional loans, jumbo loans, or portfolio products. This limits the available programs and typically means stricter credit and income requirements.
Second Home vs. Investment Property Classification
How your property is classified significantly affects your mortgage terms. A second home must be at least 50 miles from your primary residence, intended for personal use, and not managed by a rental agency. If you plan to rent the property for more than 14 days per year or use a property management company, lenders may classify it as an investment property, which carries even higher rates (1-2% premium) and down payment requirements (15-25%).