Financing a second home can sometimes be an issue. Banks are often not as willing to lend for a second home as they are for a primary residence, and most second home loans require a much larger down payment than mortgages for a primary home.

But, with some creativity, you can often come up with all of your down payment without any real difficulty.

  • Consider using equity in your first home for your down payment. If you own your first home outright and that home is of considerable value, you might even be able to take out a loan for the full purchase price of your second home by leveraging your first home. A major benefit to this is that interest rates are often lower on mortgages for primary residences.
  • Consider downgrading your current vehicle. Do you have a car that you could sell and not have to replace? Or are you willing to drive a less-expensive vehicle and take the additional money from selling a more expensive vehicle as a down-payment? Good used cars can save a lot of money, and good deals can be easily found with a little research (I recently purchased a Range Rover in tip-top condition for only $3K, most people think I paid at least twice that, and a new one would have cost me $70K+. And besides, the older one has a lot more character and pizzazz than a newer one would have).
  • Consider going in on a home with someone else. Then you would each only have to come up with half of the down-payment. My parents did this with my father’s brother and his wife to finance two second homes at different times with great success. Just make sure that you like the people that you’re buying with, and that you’ll still like them 10 years from now.
  • Do you have any antiques or collectibles that you could sell to finance the down-payment? If you have things in storage that might be worth money, wouldn’t you prefer to use their value to purchase something that you’ll actually use and enjoy? And if the items were gifts, don’t you think the givers would prefer you to use their value to do something you want to do?
  • What about any investments that you might have? If you have investments that just don’t seem to be making good returns anymore, and if your other investments are enough for your future plans, it might be more prudent financially to use them for a down-payment on your second home. This is especially true if a larger down-payment on the home would result in lower interest rates. If an investment is only returning a couple percent each year, then using that to cut your interest rates on a mortgage by a couple percent or more might make more financial sense. This makes even more sense if the combined value of the mortgages on your first and second homes is approaching or exceeding the maximum deductible amount for your taxes. Once you exceed the maximum, mortgage interest over that amount is no longer deductible.