second homes & vacation properties
DESCRIPTION
Thinking of buying a second home or vacation property? Read this first and find out how the financing is different than buying a primary residence.TRANSCRIPT
Second Homes &
Vacation Properties
Jackie Woodward // Mortgage Broker // TMG 780.433.8412 // [email protected]
Second Homes & Vacation Properties
The economy is improving and recreational property purchases seem to be on the rise. Low interest rates, employment confidence and a rising Canadian dollar
are what’s driving the interest to buy additional properties.
Before you go cottage shopping, let’s chat about mortgage financing as it’s a little different than
getting the mortgage for your primary residence.
Jackie Woodward // Mortgage Broker // TMG 780.433.8412 // [email protected]
Second Homes & Vacation Properties
These types of properties have been affected by the mortgage insurance rule changes so now is a great time to review
the basics of financing a vacation property or second home.
Jackie Woodward // Mortgage Broker // TMG 780.433.8412 // [email protected]
Second Homes & Vacation Properties
Definition Depending on the lender, these types of properties can be
referred to as vacation homes, second or secondary homes, or recreational properties, among a few others.
While the term might be different, they are all used to
describe a property that is not your primary residence and not a rental property, it’s somewhere in between.
If you’re buying a cottage, a home for a family member to
live in or a second home to live in while working away from home, they all fit into this middle area.
Jackie Woodward // Mortgage Broker // TMG 780.433.8412 // [email protected]
Second Homes & Vacation Properties
Definition The best way to determine what type of property you’re trying to finance is to speak to a mortgage
professional and they will determine how a lender will define your property for financing purposes and what
polices and guidelines your application will be reviewed under.
Jackie Woodward // Mortgage Broker // TMG 780.433.8412 // [email protected]
Second Homes & Vacation Properties
Qualifying The lender will require you to show you can qualify to purchase a second property while still owning your
principal residence.
They will be analyzing your credit application as they did when you purchased your residence to determine if you can carry 2 mortgages with a low likelihood of default.
You will be asked to provide property details, income
documents and downpayment confirmation.
Jackie Woodward // Mortgage Broker // TMG 780.433.8412 // [email protected]
Second Homes & Vacation Properties
Qualifying If you’re self-employed and trying to buy a
second home under a stated-income program, be prepared to provide a larger downpayment
than the required minimum.
Jackie Woodward // Mortgage Broker // TMG 780.433.8412 // [email protected]
Second Homes & Vacation Properties
Qualifying Mortgage qualifying is one of those grey areas
where it’s best to contact an experienced professional to get a straight answer on
whether you can get approved for a second home or not.
Jackie Woodward // Mortgage Broker // TMG 780.433.8412 // [email protected]
Second Homes & Vacation Properties
Downpayment The minimum downpayment to buy a second
home is 5% of the purchase price, providing you have verifiable income, downpayment from your
own resources and a strong credit history.
If you’re trying to buy with the minimum downpayment you will need to obtain mortgage default insurance through either Genworth or
Canada Guaranty.
Jackie Woodward // Mortgage Broker // TMG 780.433.8412 // [email protected]
Second Homes & Vacation Properties
Downpayment If you’re dealing with a lender that only works with CMHC for insurance, you will require at
least a 20% minimum downpayment.
The higher minimum is the result of the CMHC mortgage insurance rule changes that came
into effect on May 30th of this year.
Jackie Woodward // Mortgage Broker // TMG 780.433.8412 // [email protected]
Second Homes & Vacation Properties
Downpayment When you’re putting down a larger amount, there are more allowances for the source of the funds.
Speak to your favorite mortgage professional to locate a lender whose guidelines align with your
borrowing profile to find a financing match.
Jackie Woodward // Mortgage Broker // TMG 780.433.8412 // [email protected]
Second Homes & Vacation Properties
Documents When it comes to supporting documents
relating to income and credit, the requirements are the same as if you were
getting a mortgage on your primary residence.
Jackie Woodward // Mortgage Broker // TMG 780.433.8412 // [email protected]
Second Homes & Vacation Properties
Documents Your lender will be looking for paperwork to prove your income or self-employment status, a credit
pull will usually satisfy the repayment history requirements and downpayment documents will
vary depending on where you’re getting the funds from.
The documentation differences are noticeable
when confirming property details.
Jackie Woodward // Mortgage Broker // TMG 780.433.8412 // [email protected]
Second Homes & Vacation Properties
Documents Your potential lender will be looking to confirm the
usual details like condition and location of the property.
They may also require proof the property has year-round access and service hook-ups or if a water
potability test is required due to the property being on well water.
Jackie Woodward // Mortgage Broker // TMG 780.433.8412 // [email protected]
Second Homes & Vacation Properties
Documents Depending on how those results look, your mortgage professional will work to find a lender who likes the
property as much as you do.
If they’re not super keen on the home, they will be looking for added strength from the borrower to support the application for mortgage approval.
Jackie Woodward // Mortgage Broker // TMG 780.433.8412 // [email protected]
Second Homes & Vacation Properties
Purchasing a recreational property is a lot like getting a mortgage on your primary residence in that you can
usually get best rates, and the qualifying process is quite similar other than some extra property
requirements.
Just as you did your research before you bought your first home, the same due diligence should be used when buying a vacation property or second home.
Jackie Woodward // Mortgage Broker // TMG 780.433.8412 // [email protected]
Second Homes & Vacation Properties
Mortgage Questions? Let’s Chat! Phone: 780.433.8412 Email: [email protected] Visit: www.mortgagegirl.ca Follow @mortgagegirlca