Are you considering buying a vacation home or a cottage? These secondary properties often come with different financing needs than your primary residence. There might also be more stringent requirements and limitations if you plan to rent the property. If you’re just getting started, use this quick guide below to find out what you need to know if you’re looking to finance a vacation home or purchase a secondary property.
Apply for a New Loan
If you have enough funds on hand to afford a down payment on the vacation home, you may want to directly apply for a new mortgage loan secured by the second property. How much will you need? That depends on how you plan to use it. You may be eligible for a high ratio mortgage of up to 95% if you or a family member plans to live in the home. If you plan to rent out the vacation home, a down payment of 20% will be required if you finance with an institutional lender. It’s also important to note that the banks aren’t the only lenders out there that you can use. If you don’t qualify for their rates, there are alternative mortgage lenders and private lenders that have other options available for you.
Equity Take Out
Your primary residence is another good place to look for financing to buy your vacation property. By refinancing your existing mortgage loan, you can access some of the equity that you have built up in your primary residence to use towards the down payment or to even purchase the property outright.
A bundled option allows you to combine your existing home equity with another loan. For instance, with a split mortgage and line of credit, the more mortgage you pay down, the more line of credit you’ll have to use. With this option, you don’t have to refinance to get more available funds, the funds are already there when you need it.
If you’re ready to buy a vacation property, contact us at the Mortgage Advisors. We’ll help find the best financing options available to you. Unlike the banks, we don’t just sell one particular product. As a brokerage, we can offer you a range of products from a wide variety of lenders on the market both institutional and non-deposit taking. If you’ve been declined already, don’t worry. We can still help you find financing as we have access to Canada’s top alternative and private lenders. Reach out today and let’s get the ball rolling.