There are many reasons why people I talk to come to see me and look for a mortgage on a second home. Whether looking to invest, purchase a vacation property (cottage or winter getaway) and even help their kids get a home in this new housing market, the most important part of the discussion revolves around whether they’re ready to do so. What does that mean? Well, essentially it boils down to managing risk and security of the lender. A mortgage broker can help you develop this plan.
For example, if you were looking to secure a home for your child attending school, do you know that you can purchase up to 95% loan-to-value ratio (LTV) for your child? The LTV ratio is calculated as the amount of the mortgage lien divided by the appraised value of the property, expressed as a percentage. In this case, your child could live in a home that you deem worthy, help build equity AND attend school in a good area free of renting.
A rental property is another popular reason for a second home mortgage because they offer people the opportunity for additional income and serve as a long-term investment for their family. If you plan to own a rental property, it’s imperative that you understand that it is similar to running a business. In this case, you’d need to understand that after you see a mortgage broker, you should also speak with an accountant to help with tax implications, deductions, etc. Regardless of your financial security, there are factors such as dealing with tenants that you may also want to consider as well.
Finally, if you’re looking at a second home mortgage to secure a vacation property you may also want to consider a few other items. While qualifying for a mortgage may not be an issue, there are other costs associated. Upgrades, maintenance and property taxes (depending on the area) are all expenses you would need to consider. Not to mention the higher down payment and standard insurance costs. The long-term value of owning a vacation home is enormous and your family could have a place that not only serves as a great investment – but also a place that provides great memories to cherish all through your years.
Let me help you. Feel free to get in touch with ME anytime and I’ll be happy to get you on your way to a mortgage/loan that’s right for you and your loved ones.