With today’s busy lifestyle, you might have a need for a second home. That phrase usually brings to mind a cabin for weekend getaways – a vacation home – but a second home could also be a place for your adult child to live while they are at school, for a parent or other family members to live in, or as a pied-a-terre in the city to reduce the daily commute.
What you may not know is that there are financing programs available for purchasers to buy a second home with lower monthly payments and as little as five per cent down payment (with insurance premium added to the mortgage) – or a minimum of 10 per cent down payment for vacation homes (again, with insurance premium added to the mortgage).
In these programs, the property may not be rented, which also means rental income can’t be used to qualify for the mortgage. (And, as an aside, make sure you won’t be liable for Vancouver’s Empty Homes Tax, if you’re leaving the property empty more than six months of the year.)
This means the borrower would be required to have enough personal income (from employment, investments, other rental properties, etc.) to be able to pay for two full mortgages, their primary residence and their second or vacation home.
To qualify for a second/vacation home, the following requirements are needed:
- The down payment can be from the buyer’s own resources or gifted from immediate family member for a second home, but must be entirely from own resources for vacation homes.
- The property must be owner-occupied during the year or by an immediate family member.
- The property can be new construction or purchased resale.
- The property must have year-round access by car or ferry.
- The estimated remaining economic life of the property should be a minimum of 25 years.
- Purchasers can buy a maximum of one home under the program.
- The home must have a purchase price of less than $1,000,000.
- The maximum loan amount is $700,000 in Metro Vancouver, Metro Calgary and Metro Toronto. Rest of Canada is $600,000 for second homes and a maximum of $350,000 for vacation homes.
- No time shares or life leases, and suites in rental pools are excluded.
For purchasers buying a second/vacation home with more than 20 per cent down payment, lending guidelines will depend on each individual lender.
For more information or if you are looking at purchasing a second or vacation home, talk to a mortgage expert to assist you.