Some Canadians dream of owning a vacation home or buying a vacation condo. They can be used as a consistent location for family gatherings or to get away from the stresses of the world. Buying a vacation home may be easier than first imagined, when current homeowners understand eligibility requirements and general expectations. How easy is it to qualify for a home mortgage loan for a vacation home in Canada?
Understanding Income Requirements
First off, sufficient personal income is needed to buy a vacation home or second Westshore home. Some who buy a vacation home are carrying two mortgages, making it necessary to have enough funds to make necessary payments and afford the expenses that go along with owning and maintaining two properties. Be aware that income requirements for those who are purchasing a vacation home and will live in it may not be the same for those planning to derive an income from renting out a vacation property
A down payment will be necessary and borrowers can pursue conventional loan financing when they put down at least 20 per cent. Those planning to make a smaller down payment may want to look into programs such as the Vacation Home/Secondary Homes Program, while keeping in mind that making a small down payment often requires carrying an insurance premium. There are programs available that make it possible to borrow as much as 95 per cent of a home's value. Know which programs are suited for those looking to buy and occupy a vacation home, as others apply to the potential use of a vacation home/second home as a rental property. Also, keep in mind the possibility of using existing equity in a primary home to help finance the purchase of a vacation home.
Mortgage Loan Requirements
Those who have already purchased a home may not find much surprising when they apply for a home mortgage loan for a vacation home. Vacation home mortgage loan requirements also have expectations when it comes to employment history, credit history and income, with a good credit score often necessary to qualify. Some may be looking into the Vacation/Secondary Homes Program or a similar program. A high LTV of 90 per cent is needed on the purchase transaction. Depending on the program used, different stipulations may apply.
It is relatively easy to find out how much potential payments will be, with mortgage payment calculators from lending institutions, such as Royal Bank, showing estimated mortgage payments based upon typical factors such as interest rate, amount borrowed and mortgage term. In addition, the Credit Selector Tool may be useful for those who need to learn which mortgage products would best suit their needs. It is possible to get recommendations on available mortgage products when looking to take out a mortgage for a vacation home.
Is It Easy to Buy a Vacation Home?
Yes and no. Those who have the funds and cash flow to afford the possibility of paying two potential mortgages may find it easy to be accepted by a Canadian lender. Others may need to work on their credit or cash flow in order to be approved for a mortgage loan for a vacation home. However, the process is less daunting than that for buying a primary home for the first time. As regulations tend to change, it is best to speak with a lender to learn more about eligibility guidelines on a specific mortgage product.
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The Neal Estate Team is your #1 source for all of your Victoria BC real estate needs. Get in touch with us online or by phone at (250) 386-8181 to speak with a Victoria real estate buying or selling expert today. With decades of experience as a top selling Victoria REALTOR® and ranked in top 1% globally with over 4,000 transactions and $1 Billion SOLD, Ron Neal & The Neal Estate Team have the industry experience and market knowledge to help you make smart and informed buying or selling decisions.