Can You Get a Reverse Mortgage on a Second Home?

A reverse mortgage serves as a financial tool for homeowners, primarily those aged 62 or older, to convert a portion of their home equity into cash. This process allows them to receive funds without making monthly mortgage payments. These mortgages require the property to be the borrower’s principal residence. This requirement impacts whether a second home can be used for such a loan.

Primary Residence Requirement

A reverse mortgage, specifically the Home Equity Conversion Mortgage (HECM) insured by the Federal Housing Administration (FHA), requires the property to be the borrower’s principal residence. This means the homeowner must live in the home for most of the year, typically at least 183 days annually. Borrowers must certify yearly that the home remains their primary residence.

This requirement helps seniors age in place and provides financial support for their primary dwelling. If a borrower is absent from the home for over six months for non-medical reasons, or over 12 consecutive months for medical reasons, the loan may become due. This occupancy rule directly prevents second homes or vacation properties from qualifying, as they do not meet the primary residence definition.

The FHA insures HECMs to support homeowners in their main living space, not to facilitate equity access from investment or vacation properties. HUD conducts property inspections to determine occupancy status and ensure compliance. Failure to meet this standard can lead to default and potential foreclosure.

Qualifying Property Types

While the primary residence rule is key, specific property types are eligible for reverse mortgages if they meet occupancy criteria. Single-family homes, such as detached houses and townhouses, are the most common type accepted for HECM loans.

Multi-unit properties (two to four units) can qualify if the borrower occupies one unit as their principal residence. FHA-approved condominiums are also eligible, though the complex must typically be approved by HUD or be eligible for single-unit approval. Manufactured homes meeting specific HUD guidelines and FHA requirements are also eligible.

Conversely, certain property types are not eligible for a reverse mortgage. These include cooperative housing units (co-ops), commercial properties, and homes on income-producing land like farms. A property must conform to structural and FHA/HUD eligibility standards, even if it could serve as a primary residence.

Circumstances for Consideration and Alternatives

A second home does not qualify for a reverse mortgage due to the principal residence requirement. However, if a second home becomes the borrower’s primary residence, it could then meet eligibility criteria, provided all other loan requirements are satisfied. This means the borrower must physically move into the home, live there most of the year, update their address, and make it their permanent home.

For properties that remain second homes, other financial avenues exist to access their equity. A traditional home equity loan allows a homeowner to borrow a lump sum against the property’s equity, repaid through fixed monthly installments over a set term. Interest rates are typically fixed, providing predictable payments. These loans can be secured by a second home, though lenders may have stricter requirements than for primary residences.

Another option is a home equity line of credit (HELOC), which functions as a revolving line of credit. It allows borrowers to draw funds as needed up to an approved limit, similar to a credit card. HELOCs often have variable interest rates and typically involve an interest-only payment period during the draw phase, usually lasting five to ten years. While HELOCs can be obtained on second homes, they may come with higher interest rates than those on primary residences.

A cash-out refinance provides a way to access equity by replacing an existing mortgage with a new, larger one. The difference between the new and old loan amounts is given to the borrower as cash at closing. This option allows homeowners to leverage the appreciation in their second home’s value. For a cash-out refinance on a second home, lenders require at least 25% equity, translating to a maximum loan-to-value (LTV) ratio of 75%. These alternatives require regular monthly payments, differing from a reverse mortgage’s non-payment structure.