RECREATIONAL PROPERTIES OR SECOND HOMES
Some things you should know.
Secondary, or recreational, homes are increasingly popular for a variety of reasons. Some people want to have a place of their own to get away to, while others want to take care of their parents or children by giving them a place to live.
These kind of purchases are financed much the same as primary residences. Interest rates are generally the same – although some lenders will attach a slightly higher rate – and you can borrow up to 95% of the property value. Beyond this, however, there are a few key differences between financing a primary residence versus a secondary home.
The first main difference has to do with who will be living on the property. If it’s going to be a vacation spot for the purchaser, or simply another place to live, they must simply live there at some point during the year for any length of time. If the home is intended for somebody else to live in, then that person must be a direct relative of the purchaser and must be living in the home rent-free.
Furthermore, since many people who buy secondary homes are doing so to have a place to get away to, the location becomes even more important. Each lender has its own rules about lending areas such as how far from a population centre the home can be, or even which city it’s located in.
If you’re considering a recreational property in a remote location, it’s a good idea to talk to your broker early to make sure there is a lender who will finance homes in that area. The property must also be accessible and suitable for occupation year round, whether by road or by ferry.
If you’re thinking about purchasing a second home, either as a recreational property or as a home for a relative, there are plenty of lenders who will provide financing. Keep in mind, however, that you need to be able to qualify for both the mortgage on the new home as well as the mortgage and any other housing costs associated with your primary residence. A conversation with your mortgage broker can help you see the possibilities and come up with a plan.
