Source: Lindsay Blair, Mortgage Agent
There have been a lot of inquiries about second homes and the guidelines for lending over the past few weeks, so I though I would answer that “what’s” of second home properties today!
What is a second home?
Are there a maximum amount of second homes you can have?
Well yes, a second home is suppose to only be your secondary residence. Now you can own more then one property prior to buying a second home, we just have to classify it as a different use such as rental property.
What is the maximum LTV ( Loan to value)?
The great thing about second homes is that you can put as low as 5% down. Normally if you go to your bank they will not allow this however using a broker we can secure mortgages on second homes just as we do for first homes and the rates are relatively the same. I good rule of thumb for the rate on these homes would to add 0.25% to it.
What is the maximum amortization?
As it does for first homes, the amortization length depends on the amount you put down towards the property. For a downpayment less then 20% amortization is 25 years. A downpayment of 20% or more you can get a 30 year amortization with all lenders and even go to a 35 year amortization if needed with selected lenders.
What do lenders use to qualify?
Same requirements for when you are buying your first home. Your TDS ( total debt service ratio) and GDS ( gross debt service ratio) must be in line, 40% and 38% respectively.
Things to watch out for!
•If it is a cottage lending and water source is NOT year round then lending requirements drop to 65%ltv
•If it cannot be access year round lending requirements drop to 65%ltv
•Downpayment cannot be gifted equity.
•Downpayment can be gifted from family members if year round access and water supply
•Cottage lending guidelines DO change when property is in Quebec
If you are interested in purchasing a cottage or other type of second home, give me a call at 613-259-3033. I can help you with the purchase and put you in touch with Lindsay for great financing options.