Second home loans have higher base rates than primary residences. Points can reduce those higher rates, and the mortgage interest may be tax deductible depending on how you use the property.
The same break-even analysis applies. Compare the cost of points against the monthly savings over your expected ownership period. Patrick Kevin Fagan helps clients buying vacation homes in the Texas Hill Country evaluate point purchases.
Second Home Rates
Second home loans typically carry a rate premium of 0.25% to 0.75% over primary residence rates. This is because lenders view second homes as slightly higher risk. Because the base rate is higher, the absolute savings from buying points can be larger. Patrick Kevin Fagan explains second home rate pricing for buyers in San Antonio and the Texas Hill Country.
Points on Second Homes
Points work exactly the same way on second homes as on primary residences. One point costs 1% of the loan amount and reduces the rate by about 0.25%. The rate reduction is permanent. Patrick Kevin Fagan helps second home buyers in greater San Antonio determine the optimal point purchase.
Tax Deduction
Mortgage interest on second homes is generally tax deductible, subject to IRS limits. Points paid on a second home mortgage may also be deductible, typically amortized over the life of the loan. Consult your tax advisor for your specific situation. Patrick Kevin Fagan can help you understand the financial implications for your second home purchase.
