Consider using your equity for a down payment. Or, if you plan to retire in the vacation home in a few years, minimize your payments with an interest-only second mortgage, says Tucker Watkins, a financial planner based in Irvine, Calif.

Then when you sell your primary home, you can exclude up to $500,000 in capital gains from your taxes and use your profit to pay off or reduce the mortgage on the second home.

Your total housing payments should not exceed 28% of your gross income.