Financing the Purchase
The three loan types (July 2026)
Section titled “The three loan types (July 2026)”| Loan type | Rate | Down payment | Notes |
|---|---|---|---|
| 30-yr conforming (baseline) | 6.45% | 3–20% | Reference rate, as of Jul 2, 2026 |
| Second-home / vacation | ~6.7–7.2% | 10% min, 20–25% typical | Best pricing — but requires genuine personal use |
| Investment (conventional) | ~6.95–7.2% | 15% floor, 25%+ typical | Larger rate premium |
| DSCR (STR) | ~6.1–7.5% | 20–30%+ | Qualifies on property rent, not your income |
HIGH baseline · MED spreads
Which one fits
Section titled “Which one fits”- Second-home loan — cheapest, lowest down, but Fannie/Freddie rules require some personal use and forbid full-time renting. Renting it ~300 nights/yr on a second-home loan is mortgage fraud. Fine if you genuinely use it and rent part-year — which also happens to disqualify the tax loophole (see the tax page). The choices interlock.
- Investment-property loan — clean if it’s purely a rental, at a rate premium and 25%+ down.
- DSCR loan — underwrites on the property’s rent, not your W-2/K-1 — attractive for a business owner with variable income. But STR income underwriting has tightened: many lenders now discount projected Airbnb/VRBO income or require a long-term-rent comp appraisal. Model conservatively.
Why the loan can’t save a bad deal
Section titled “Why the loan can’t save a bad deal”Here’s the discipline: no loan type changes the leverage math. All three price around 7%, so all three carry a ~8% mortgage constant. Since OBX yields run 3.5–6.5%, every option is negative leverage. The loan menu changes your rate by fractions of a point; it does not turn a 4%-yield asset into a cost-neutral one. Only more equity or more yield does that.
The realistic equity picture
Section titled “The realistic equity picture”From the head-to-head: reaching true cost-neutral takes roughly ~60% down on a low-ERP Duck oceanfront, ~34% on a mid-ERP Corolla event home, and ~20% on a high-ERP Nags Head oceanfront. At the more common 20–25% down, expect to subsidize a modest-ERP oceanfront by ~$30–50k/year — and to call appreciation, personal use, and tax benefits your return. That’s a legitimate deal; just underwrite it with eyes open.