It is that time of year again- many of us are thinking about purchasing a second home, for one reason or another. You may be dreaming about owning a lake front cottage or a condominium in one of your favorite local holiday spots. Others have children heading off to University in the fall – and those tuition and residence fees are adding up fast!

As a qualified buyer, you may purchase a second home as a recreational property for yourself or as a home for an immediate family member (university student child, elderly parent etc) with as little as a 5% down payment.

These types of properties are considered ‘owner occupied’ by the lender and insurance companies. As such, the mortgages are subject to standard insurance premiums, minimum down payment requirements, and the very best rates on the market.  On the down side, because any future potential rental income cannot be included in the application process for qualifying purposes, applicants must be strong financially and have unblemished credit. Properties valued over $1 Million will not be default insurable and require a larger down payment.

Second homes for a family member are most commonly properties purchased for children, perhaps while in university.  Some other families will purchase a second home for one spouse to live in while away from the primary residence for work or personal reasons. It is also a common program for purchasing a home for a senior parent who may be retired on minimal pension income and unable to secure a mortgage.

For a vacation or recreational property, there must be reasonable security for the mortgage lender. The property must be located in Canada and this program cannot be used for time shares or in a complex with rental pools. If the property is not fully serviced, winterized, or does not offer year round access, larger down payment requirements will apply. Bare or vacant land will also be looked at much differently, and these loans come with higher rates and down payment requirements.

If you don’t quite qualify on your own for a second home, you may consider co -purchasing with friends or family. For example, siblings can pitch in together to buy a home for mom and dad with 5% down.  Good friends can pool their resources to purchase a property with 5% down for their kids who attend University together to save on residence fees.  These are just some of the many possible scenarios that would apply to this program.

As always, do not hesitate to call or email me with any questions or concerns, and I am always grateful whenever you recommend me to your family and friends.

Sarah

PS: Many thanks to my wonderfully smart and talented colleague, Cory Lewis, for the original idea and many materials in this blog!