Not all vacation properties are considered the same when it comes to mortgage financing. Many lenders will divide properties into two categories. The first being a property that is accessible year-round and has a proper cement foundation. The second being a property that may not be accessible all year. A good example of the second category is a cabin on a lake that you would occupy for summer holidays. Both types of properties may be financed but some will require a larger down payment or perhaps a higher interest rate.
If you are purchasing a Vacation property or Second Home, and the property in question is accessible year-round, most lenders will offer you the same interest rate and terms as they would for a residential purchase. You could choose a fixed or variable rate mortgage, but generally a home equity line of credit would not be available.
If you are wishing to purchase a Vacation Home, often lenders will consider any property that is accessible year-round with a proper cement foundation the same as a residential mortgage, with down payments often 5% of the purchase price. A second home that will be occupied by a family member also can be approved in many cases with a 5% down payment. If you wish to purchase a cabin on a lake to use for summer vacations, many lenders will require a larger down payment. (35%, for example)
Depending on your down payment, default insurance may be required by the lender. It is important to understand that CMHC does not offer default insurance for Vacation or Second Home properties currently. The alternative insurance provider Genworth Canada currently will consider insuring these types of properties.
Yes, there are several options available to refinance an existing property for funds to purchase a Vacation or Second Home. For example: If you wish to purchase a cabin to enjoy during the summer months many lenders will require a minimum down payment of 35% of the purchase price. You could potentially refinance your existing property for these funds, either with a home equity line of credit or a mortgage increase. Speak to your mortgage broker for advice to determine which strategy is best for you.
Our team is devoted to helping you achieve your long term goals. Enjoy options and possibilities that you may not have considered when sticking with traditional banking products. If your goals include paying down your mortgage faster or looking for a rental income to make some headway on your amortization we are happy to discuss all of your options. Your Kelowna Mortgage Broker is able to help you with your first mortgage or renegotiating the terms on an existing property. Call John Antle Mortgages in Kelowna today and let’s get started!