Refinancing rentals and second homes, answered plainly
Is it a second home or an investment property?
Plain answer
Lenders sort property into three occupancy types: principal residence, second home and investment property. A second home is one you occupy for part of the year, that is suitable for year-round use and is not run as a rental business. A property mainly held to earn rent is an investment property. Fannie Mae's guide spells out the tests.
Last reviewed against the primary sources listed below.
The three types
| Type | Key idea |
|---|---|
| Principal residence | Where you live most of the year |
| Second home | You occupy it some of the year; not controlled by a rental manager |
| Investment property | Held to produce income or for investment |
Why it matters
Guidelines on maximum loan-to-value, reserves and pricing differ by type. The Selling Guide occupancy section is the source most lenders follow for conventional loans.
Landlords also ask
What are the downsides of owning a second home?
Carrying costs, stricter lending terms than a primary home, and limits on renting it out while keeping second-home status.
Is a second home a good tax write-off?
Tax treatment depends on how much you use it and rent it. IRS Publication 527 explains the rules; ask a tax professional.