Financing a second home (a holiday house, a rental investment) doesn't work exactly the same as financing your primary residence. Banks apply stricter criteria, and the applicable tax treatment changes too.
Why the bank finances a lower percentage
Generally, banks finance a lower percentage of the appraised value for a second home (usually around 60-70%, compared to the usual 80% for a primary residence), since they consider the default risk higher: if money gets tight, a borrower is more likely to prioritize paying the mortgage on their primary residence over that of a second home.
The interest rate tends to be somewhat higher
For the same reason of higher perceived risk, the interest rate conditions offered for second-home mortgages tend to be somewhat less favorable than those for a primary-residence mortgage, though the exact difference varies by lender and applicant profile.
Differences in purchase taxation
The tax applicable to the purchase (transfer tax or VAT+stamp duty depending on whether it's a resale or new-build property) applies the same way as for a primary residence, but you don't have access to certain regional tax breaks that some regions reserve specifically for buying a primary residence (for example, reduced rates for young people or large families buying their first home).
If you decide to rent it out: the income tax treatment
If you buy a second home intending to rent it out, the rental income is taxed as income from real estate capital, with the option to deduct associated expenses (including mortgage interest), but without access to the specific reduction reserved for rentals of a tenant's primary residence in certain cases, if the use doesn't fit those requirements.
Don't confuse a second home with a holiday-rental investment
If the property is used for short-term tourist or holiday rentals, specific tax and zoning rules may apply that differ from those of a conventional residential rental, with licensing requirements that vary considerably by municipality, so it's worth researching this thoroughly before buying with that intention.
How it affects your overall debt capacity
When applying for a mortgage on a second home, the bank will take your existing debt into account (including the mortgage on your primary residence), which can limit the amount you're able to obtain for this second transaction, depending on the overall debt-to-income ratio the bank applies.
Simulate your second-mortgage scenario
Our mortgage calculator lets you estimate the resulting payment for a second home, factoring in a more conservative financing percentage in line with the usual criteria for these transactions.