16 Jan Buying a second home?
Many people dream of owning a second home. Whether it is a cottage for us to enjoy the late Spring and Summer months (and sometimes early Fall as well), or a rental property, the truth is more than ever we are seeing Canadians purchasing a second home as a form of investment. It is also true that rental properties, whether commercial or residential, can be a great source of income over time. When it comes to purchasing a home – whether first or second, or even multiple – there are several options from houses, townhouses to condos or even multi-unit residential buildings.
Although CMHC eliminated the Second Home Program, Genworth and Canada Guaranty still offer it and it will help you borrow up to 95% of the home’s value. Just like every other aspect of the home buying process, it is important you do your homework. There are several questions to consider: can you afford an investment property? What options do you have to finance it? What does the property have to offer? These and other questions should be answered before you make a decision to purchase a second home.
Similar to the process of buying your very first home, you should contact a mortgage broker to discuss your intentions and situation with him/her. In order to purchase an investment home, you must have 35% down payment. You may be able to get a HELOC, refinance your current property or have other income available to you. These are options you should discuss with your mortgage broker.
So, if you are thinking of acquiring a Vacation home, Genworth’s Vacation/Secondary Homes Program will help you purchase that home with an affordable monthly payment with 5% down payment.
In order to qualify for this program, the property value cannot exceed $1,000,000. You should also know that fixed, standard variable, capped variable and adjustable rate mortgages are permitted with a maximum interest rate term of 25 years and an amortization option of up to 25 years. In order to qualify, you must also have a standard income, employment verification requirements will apply, and you must not have prior bankruptcy.
Important to remember
When buying a second property, you become a landlord. You’ll have extra responsibilities and you must become acquainted with the Residential Tenancies Act of Ontario (RTA). While you can hire a property manager to deal with the day-to-day workings of the property, you’ll still need to understand and respect the RTA and updated legislation.