You can take out a home equity loan or HELOC on a second home, but lenders typically have stricter requirements than they do for primary residences.
Tapping your equity can help fund renovations, consolidate debt, or cover other expenses—but it comes with added risk, including higher costs and the potential to lose the home if you fall behind on payments. Below are the best lenders offering home equity loans and home equity lines of credit (HELOCs) on second homes, and what to consider before moving forward.
Get more recommendations in our best HELOCs and best home equity loan guides.
Table of Contents
- Can you get a HELOC or home equity loan on a second home?
- How much does a second home HELOC cost?
- Risks of a home equity loan or HELOC on a second home
- Should I take out a home equity loan or line of credit on a second home?
- Tax considerations with debt on second homes
- Alternatives to a HELOC or home equity loan on a second home
- FAQ
- Where to get a HELOC or home equity loan on a second home
Can you get a HELOC or home equity loan on a second home?
Yes, but qualifying for a HELOC or home equity loan on a second home is typically more difficult than it is for a primary residence.
Lenders tend to have stricter standards because borrowers are more likely to prioritize payments on the home they live in during financial hardship. As a result, expect more scrutiny around your finances, including:
- Credit score (often at least 700)
- Debt-to-income (DTI) ratio (typically below 43%)
- Ownership history (usually at least one year)
- Cash reserves (often several months of living expenses)
- A home appraisal
- Lower maximum loan-to-value (LTV) limits
How equity release works on a second home
Equity release on a second home works the same way as it does on a primary residence—your borrowing power is based on your loan-to-value (LTV) ratio. The main difference is that lenders usually cap LTV slightly lower for second homes, often around 80% to 85%.
You can calculate your LTV using this formula:
Remaining loan balance ÷ Current home value = LTV
For example, let’s say your second home is worth $450,000 and you owe $310,000 on your mortgage. Your current LTV would be:
$310,000 ÷ $450,000 = 68.9% LTV
If you take out a $50,000 HELOC, your total loan balance increases to $360,000:
$360,000 ÷ $450,000 = 80% LTV
If your lender allows up to 80% LTV, you’d still be within the limit and likely eligible to borrow that amount.
Some lenders may also offer perks like interest rate discounts if you already bank with them, especially if you set up automatic payments.
Other eligibility considerations for a home equity loan or HELOC on a vacation home
When you apply for a HELOC or home equity loan on a second home, lenders take a close look at your overall debt and financial picture.
This includes debts tied to:
- Your primary home
- Vehicles
- Student loans
- Credit cards and other revolving accounts
They’ll evaluate key factors like your credit history, remaining balances, monthly payments, and how much equity you have in both your primary and second home.
If you’re already carrying significant debt—such as a mortgage, auto loans, or other large obligations—it can raise concerns about your ability to take on more. In some cases, this could lead to a lower loan amount or even a denial.
Because second homes are considered riskier, lenders tend to be more cautious during the approval process.
How much does a second home HELOC cost?
Borrowing from the equity on a second home is often more costly than buying a primary home. Most lenders assign higher interest rates for secondary, investment, or vacation homes.
Other fees may be similar to those on a primary home purchase, including:
- Closing costs
- Subordination fees
- Origination fees
- Loan processing fees
- Appraisal fees
This isn’t true for every lender, but you should be aware of fees, including whether the lender will roll them into your loan or you’ll need to pay them upfront. Lenders must disclose rates and fees when providing information about home equity financing.
Borrowing money from a second home is more expensive because it’s at a higher risk of default. In the economic downturn from 2007 to 2009, 35.6% of foreclosures were from strategic defaults, meaning homeowners could afford payments but refused to pay because their home was worth less than they paid.
During financial hardships, people are more likely to default on their second home rather than their primary home. To account for the increased risk, lenders charge extra interest and fees.
Risks of a home equity loan or HELOC on a second home
A HELOC or home equity loan on a second home can provide the finances to take care of home repairs, transform your kitchen, or rid yourself of credit card debt. But it also comes with significant risks, including:
- Your home is collateral, so default results in foreclosure.
- Potential legal action for defaulting in some states
- You risk a negative equity position in the second home if the housing market drops.
- Since a HELOC works like a credit card, you could overspend.
- If you run out of money on a home equity loan, you must apply for another loan.
- Another monthly payment could be excessive.
- Variable rates on the HELOC could mean an unexpected increase in payments.
- Potential prepayment penalties on home equity loans and early closure penalties for HELOCs.
- Lenders can terminate or cancel HELOCs without notice, essentially converting the HELOC to a home equity loan with the current HELOC balance as the balance of the loan. If this happens, you can’t draw additional funds on the HELOC.
Account for these risks before deciding whether to apply for a HELOC on a second home. You can avoid many risks with the right lender, but others require financial prowess to overcome.
Should I take out a home equity loan or line of credit on a second home?
Deciding whether to take out a home equity loan or line of credit on a second home depends on your financial situation. Significant risks are associated with this form of equity financing, so be cautious.
Ask yourself the following questions before making a choice:
- What are other, less expensive ways to finance my goals?
- Do I have an emergency fund to handle financial setbacks?
- Would this interrupt my other money goals?
- Do I have a steady, substantial income to maintain payments?
- Is my credit score high enough to qualify?
- Will I benefit from potential tax deductions? (We recommend consulting a tax pro.)
- What’s my repayment plan?
Reflecting on your financial position can help determine whether this is a wise decision.
Have you racked up a large amount of equity in your second home? Need to finance some home projects without restarting your mortgage term? This could be worth considering.
Tax considerations with debt on second homes
Home equity loan and HELOC interest may be deductible on your taxes if you use the proceeds for substantial home improvements. But if you use the proceeds from the loan for other purposes, such as paying for college, home repairs, or debt consolidation, you can’t deduct the interest.
If you rent out your second home part-time and declare rental income on your taxes, you may be able to deduct the interest on your second home. But you must use the proceeds of the loan for home improvements.
What qualifies as a home improvement?
For example, interest on a loan you used to renovate a kitchen is likely not tax-deductible. This is considered a renovation, not an improvement that “substantially improves” the home.
On the other hand, interest on a loan used to add a bathroom or deck where there wasn’t one before likely would be deductible.
If you rent out your second home and have placed it in a business entity, such as an LLC, the LLC must get the property loan. Lending institutions have different rules regarding entity loans, and interest rates may be higher.
In all cases, we recommend you consult a qualified tax advisor.
Alternatives to a HELOC or home equity loan on a second home
If you’ve worked through this guide and determined a HELOC isn’t right for you, we’ve researched other options to finance your upcoming projects.
HELOC or home equity loan on primary home
If you have sufficient LTV on your primary home, you may be able to take out additional credit against your primary home. This is true even if the purpose of the loan is repairs or renovation on your second home. Interest rates are often lower with loans on your primary residence, so this may be preferable.
Personal loans
Personal loans are unsecured installment debt. They work best for goals such as paying credit card debt, starting a business, or covering emergencies.
Cash-out refinance
Refinancing your second home could mean a lower interest rate if your credit score has jumped since you bought it. This lengthy process pays off your old mortgage with a new one.
During this process, you can request cash from the new loan, which is added to your mortgage. Many lenders will allow you to borrow up to 80% of your home’s value during a cash-out refinance.
A loan from family
If you ask a family member you trust to loan you the money to accomplish your goal, you can sign a contract with them laying out the terms of your loan and when you expect to repay it.
0% introductory APR credit cards
Many credit cards offer 0% APR on purchases for a limited time. This might be an appealing option if it’s feasible to pay off your purchase within 12 to 18 months. Be cautious because the APR after the introductory period is often high.
FAQ
Will second-home HELOC rates be higher?
Yes—HELOC rates on a second home are typically higher than those on a primary residence.
Lenders charge more because second homes are considered riskier. If a borrower faces financial trouble, they’re more likely to prioritize payments on their primary home, increasing the chance of default on a second property.
As a result, second-home HELOCs often come with a rate premium, meaning you may pay slightly more in interest compared to a similar HELOC on your primary residence.
The exact difference depends on your credit, equity, and lender, but the bottom line is simple: expect higher rates—and fewer lender options—when borrowing against a second home.
Can you have two HELOCs on the same property?
Yes, but it’s uncommon and harder to qualify for. Most lenders are hesitant because a second HELOC is riskier.
You’ll typically need strong credit, plenty of equity, and a low combined loan-to-value (CLTV) ratio to get approved.
Where to get a HELOC or home equity loan on a second home
Several of our top-rated lenders offer home equity products on second residences.
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About our contributors
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Written by Seychelle ThomasSeychelle is a financial professional of seven years turned personal finance writer. She's a Nav-certified credit and lending expert who enjoys exploring debt consolidation, budgeting, credit, and lending topics.
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Edited by Amanda HankelAmanda Hankel is a managing editor at LendEDU. She has more than seven years of experience covering various finance-related topics and has worked for more than 15 years overall in writing, editing, and publishing.
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Reviewed by David Haas, CFP®David Haas, CFP®, advises families, professionals, executives, and business owners on how to build better financial futures. His expertise includes financial planning, investment management, and insurance. David is a board member of the Financial Planning Association of New Jersey.