Yes, you can buy discount points on second home mortgages. Second home rates are typically 0.5% to 0.75% higher than primary residence rates because lenders view them as slightly higher risk. Points reduce that higher rate. Points paid on second homes may also be tax deductible.
Second Home Rates
Lenders charge higher rates on second homes because borrowers are more likely to default on a vacation property than a primary residence. The rate premium is typically 0.5% to 0.75% above primary residence rates. Points can help offset this premium and bring the effective rate closer to what you would get on a primary home mortgage.
Points on Second Homes
The math is the same: one point costs 1% of the loan and reduces your rate by roughly 0.25%. On a $400K second home loan at 7.5% (vs 7% for a primary), one point ($4,000) brings the rate to 7.25%, saving about $60 per month. Break-even is roughly 67 months. Two points ($8,000) brings it to 7%, saving about $120 per month with break-even around 67 months.
Tax Deductibility
Mortgage points on a second home are generally tax deductible as mortgage interest, provided the loan is secured by the property and the points are standard for the area. The deduction is typically spread over the life of the loan. Consult a tax professional to confirm your specific situation.