or years, a second home was a status symbol. If you owned more than one house, you had reached a financial threshold that others could only envy.

A new middle class is emerging that is relatively affluent, but not necessarily wealthy. They are baby boomers who buying their little "getaways" in record numbers. Thirty-five percent of the nation's households recently surveyed by the American Resort Development Group reported that they would buy a second home within the next 10 years. This is a stunning 26 percent increase over its 1991 survey.

If you are one of the millions of Americans in search of your own private paradise, there are a few down-to-earth financial matters to consider.

Interest rates on a second or vacation home average 0.5 percent to 1 percent higher than for a first mortgage on a home of equivalent value. In other words, you can count on paying an extra one-quarter point to a half-point more on a second home. The reason? The percentage of people who default on second or vacation homes is higher than on primary residences. The finances of a second-home buyer are more complicated and your finances are stretched thinner.

Interest rates may be even higher through a vacation community developer, although the application process is usually easier. A good idea is to buy the first or last house in a development. Selling these homes is more difficult for a developer and may result in a price break as high as 15 percent to 20 percent, or favorable financing terms.

You may have to do some footwork to find a willing lender for a second home. Try local lenders, local real estate agents, mortgage brokers and Internet mortgage search firms.

Some brokers or lenders also may suggest that you consider a home equity line of credit as a way to make your down payment. Home equity loans typically run higher than traditional mortgages, however, so if you can afford to buy it with a traditional mortgage, do so.

To qualify as a second home, rather than as investment real estate, the structure must be suitable for year-round living with cooking, sleeping and bathroom facilities. Heating is optional. The structure can be a co-op, condo or trailer, as well as a villa, beach house, boat or even an RV.

Land taxes on second homes are fully deductible, as is mortgage interest on up to $1 million. You can also have a second mortgage of up to $100,000 on the property that's fully deductible. Like other mortgages, points and many of the closing costs are deductible as well, but unlike first homes, the points are deducted proportionately over the life of the loan rather than fully claimed in the year of purchase.

The new federal exemption of $500,000 from capital gains tax does not apply to second homes.

If you rent your second home for 14 days or less each year, you don't have to report the rental income. (An effort in Congress to rescind that exemption - which had the support of the Internal Revenue Service - failed.) But if you rent for more than 14 days, the income is reportable and the expenses of renting (advertising, costs of extra insurance you carry, heating costs) are deductible.

Second homes traditionally are used as family gathering spots. Each year, family members who are scattered across the country congregate for the annual reunion at the second home. It allows owners of these family retreats a way to pass on the home without it ending up a financial burden to the heirs.

It's called a qualified personal residence trust, or QPRT. A QPRT is a trust that "owns" your second home. It is irrevocable and has a number of benefits. For example, the value of the home is not counted in your estate for tax purposes. So, the beneficiaries of the trust inherit the home without probate. And most useful, you can keep the house in the family through many decades, so that many generations of family members can enjoy its use according to the terms and conditions of the trust. The downside is it prevents you from selling or trading the property as you can if you own it personally.

Many factors make a second home a greater risk than the usual primary residence. Homeowner's insurance is a significant cost issue that you must consider because many owners of second homes find out the hard way that the insurance premiums are much higher.

Why? Because most people have second homes in areas that insurance companies consider high risk. Waterfront property floods and land erodes. Remote and often vacant property is vulnerable to theft. A mountain retreat might be susceptible to slides.

Nevertheless, try to get 100 percent replacement coverage. And ask for discounts if you have a security system and/or use a caretaker.

If you plan to own a historic farm or river home, contact the National Trust for Historic Preservation to learn about the replacement cost. If you're denied flood insurance for beachfront or certain Caribbean properties, try the Federal Emergency Management Association's National Flood Insurance Program, and the Insurance Information Institute.

Since this is a second home, it probably means you'll leave the house unattended for long stretches of time. This means you need someone - or something - that watches your property. The best safety device is a person who regularly checks your property. If that doesn't work, hire a local manager for a monthly fee. Many operate through real estate offices in vacation areas and charge $25 to $50 a month to check on your property. Vacation developments and condominium communities often have on-site security. You also could consider an advanced security system that connects directly with a security service or a local police department.

With some advance planning, a second home won't end up costing you a fortune in unexpected expenses.