If you’re thinking about taking out a mortgage for an additional property, whether through a HELOC, second mortgage or other second home financing, lenders in the United States and Canada will look closely at your debt-to-income ratio for a second home. 

In this guide, we’ll look closer at debt-to-income (DTI) ratios and lender requirements in the context of buying a second home. 

What is a Debt-to-Income Ratio and Why is it Important?

Your debt-to-income ratio is a measure of your gross monthly income that goes to paying your monthly debt (total monthly debt payments divided by gross monthly income).

The higher your DTI ratio is, the more income you have committed to your monthly debts. A high DTI ratio means you’re a higher risk of default and may not be able to take on another loan. A low DTI ratio means you may be able to take on more debt and pay everything on time.

When you’re shopping around for the right lender to buy a second home, remember this – major banks typically required lower debt-to-income ratios. They have strict guidelines because they have only a few programs to fit borrowers into and they don’t have much leeway. On the other end of the spectrum, private lenders, take larger risks and allow higher DTI ratios in exchange for higher interest rates and fees. 

What is the Maximum Debt-to-Income Ratio for a Second Home?

On the low end, lenders prefer a maximum 36% debt-to-income ratio, but some lenders will go as high as 43%. These are just guidelines set by the government agencies investing or backing the loans. Each lender can make its own decision on a case-by-case basis, allowing them to accept higher DTI ratios if borrowers have compensating factors, such as a high credit score or a large amount of savings (reserves) on hand.

In the United States, many lenders mandate a maximum 43% debt ratio because that’s the highest ratio allowed for a loan to be considered a Qualified Mortgage (QM). A QM is a loan the lender did its due diligence on to ensure you could easily afford it and won’t be subject to financial distress. 

In Canada, some lenders can accept DTI ratios up to 44%, which is the highest debt ratio allowed for CMHC’s Homeowner Mortgage Loan Insurance. This insurance is what allows borrowers to secure financing with less than a 20% down payment.

Whether you’re in the US or Canada, the debt-to-income ratio requirements will vary based on your other qualifying factors including the amount of money you put down on the home and your credit score. For example, Fannie Mae allows a DTI ratio up to 45% if you have at least a 660 credit score and 25% or higher for a down payment. In short, the better your other factors are, the higher the DTI ratio a lender can accept.

How to Calculate Debt-to-Income Ratio For a Second home

To calculate your DTI ratio, use the following formula: total monthly debt payments / gross monthly income = DTI ratio.

Now let’s look at a hypothetical example. Susan is interested in buying a beach house in Palm Beach, Florida but would like to better understand what she can afford. Here is a snapshot of her finances:

• Monthly employment income (before taxes): $8,000
• Monthly mortgage payment on primary residence: $1,300
• Other monthly housing expenses on primary residence (property taxes/insurance): $200
• Monthly car loan payment: $250
• Savings for down payment: $105,000

Using the above figures, Susan currently has a debt to income ratio of 21.875% ($1,300 + $200 + $250 / $8,000). Now let’s see what she can afford using the debt-to-income ratio calculator below.

Be sure to explore the debt-to-income ratio calculator yourself to understand what you can afford in a second home. Simply input the relevant amounts to determine the maximum amount you can afford based on your debt to income ratio.

Assuming an interest rate of 3.0% on a 30 year mortgage, Susan can afford a further monthly mortgage payment of up to $1,690, which means she can afford a second home mortgage in the amount of $400,850.  With a down payment of $105,000, she can afford a vacation home worth approximately $505,000. But now let’s assume that another home has recently come on the market for $575,000, which is in excess of her limit. Yet, by factoring in her anticipated rental income, she can afford it. Here’s how. Let’s assume that she can rent out her vacation home part time through Airbnb while it’s not in use for $1,000/month and that her bank is willing to give her credit for up to 70% of the fair market rents. Using the calculator, she can now afford a second home mortgage of up to $472,244 and a vacation home with a purchase price of approximately $577,000 (after factoring in the down payment). 

Note that mortgages for second homes will typically be associated with stricter lending criteria and higher interest rates than primary residences. For an investment property, such as a vacation rental, you can expect interest rates to be even higher and even higher down payment requirements.

5 Ways to Improve Your Debt-to-Income Ratio

Fortunately, your debt-to-income ratio can change. You are in control of it and can help your DTI ratio with these tips.

• Pay your revolving debt (credit card balances) down as fast as you can. Zero balances are best, but even lowering your balance slightly can reduce your DTI ratio.
• Cut back on expenses. Think of the bills reported to the credit bureaus and see what you can pay off or cut out of your budget.
• Don’t open new credit accounts. No matter how attractive an account looks or how many rewards a new account offers, don’t open a new account. Think of your overall goals of buying a second home and refrain from opening new credit.
• Refinance your loans. If you have high-interest loans and credit cards, see what you can do to consolidate or refinance them. If you have good credit, you may qualify for a 0% annual percentage rate (APR) balance transfer credit card or an installment loan with a low APR.
• Find ways to supplement your income. Rental income, starting a side gig, or even asking for a raise at your job can increase your income and lower your debt-to-income ratio.

Other Second Home Lending Criteria

The debt-to-income ratio for a second home is one of the largest factors lenders consider, but they look at other factors too including:

• Credit scores of at least 640 – Most lenders allow a score of 640, but you’ll get the best terms and lowest rates with a credit score of 700+.
• Down payment of at least 20% – Second homes pose a higher risk of default so most lenders require at least a 20% down payment, sometimes more.
• Rental income – If you’ll rent the home while its not in use, you may be able to get credit for the projected rental income in your qualifying factors to help you get approved.
• Stable income and employment – Lenders need to know you can afford another mortgage. They’ll look closely at your employment and income history to ensure it’s consistent and stable.
• No recent bankruptcies or foreclosures – Lenders look at your past insolvency history and may require a certain amount of time between a bankruptcy or foreclosure before you can apply for a mortgage on a second home.

Final Thoughts – Debt-to-Income Ratio for a Second Home

Next to your credit score, your debt-to-income ratio for a second home is the most important factor. Lenders use your DTI ratio to ensure you can afford another mortgage. Since a second home isn’t your primary residence, there may be less incentive to keep up with the payments if you’re in financial trouble. You won’t lose a place to live, so lenders realize that you may not work as hard to keep it.

Lenders make up for this risk by ensuring you have a low DTI ratio, good credit score and a healthy down payment. Assess your qualifying factors before applying for a mortgage on a second home to ensure you qualify. 

The post Debt to Income Ratio for Second Home: Follow These Important Guidelines appeared first on Vacation Property Online.

Before buying a second home, you will likely ask yourself can I afford a second home and, if so, how much second home can I afford? While everyone’s financial circumstances differ, there are certain guidelines to follow in the United States and Canada when preparing to buy a second home. In this article, we provide an overview of these guidelines in an effort to assist you in determining how much second home you can afford.

Following the success of our earlier article on How Much Vacation Home Can I Afford, we decided to write an article on second home affordability. While a second home and vacation home may be one and the same, there are important characteristics of a secondary residence, as opposed to a vacation rental property for instance, from a lending and tax perspective. For this reason, we explore these specific elements further below.

Summary

When asking yourself how much second home can I afford, you should consider the following:

• Difference between a second home and investment property
• Your credit profile
• Your debt-to-income ratio
• Size of your down payment
• Equity available from primary residence

Second Home vs Investment Property

A second home is an additional property that you plan to live in for part of the year. Often second homes are purchased as vacation homes in sunny locations or other recreational destinations. An investment property, on the other hand, is purchased primarily for investment purposes, often for the purposes of generating rental income. Because of this distinction, lenders and taxation authorities in the United States and Canada will have different treatment for each.

In the United States, the IRS may treat your home as an investment property instead of a second home if you rent out your property for 15 days or more. Similarly, by renting out a second home frequently, the CRA may view your property as a commercial enterprise as opposed to a secondary residence. As a consequence, you will be required to report any rental income to the relevant taxation authorities and otherwise deal with the additional responsibility that comes with operating an investment property. 

From a lending perspective, mortgage terms for second homes will typically be more favorable than mortgage terms for an investment property. This is due to the increased risk profile of an investment property (a borrower is less likely to default on a second home that they occupy for part of the year than a rental property). For borrowers in the United States, the property must typically be at least 50 miles away from your primary residence in order to enjoy the second home classification that is coupled with a lower interest rate. For borrowers in Canada, the distance between your primary home and second home may similarly be relevant to lenders for the purposes of determining whether you truly intend to use your home for personal use or investment purposes.

For reasons noted above, we have assumed that you will not be renting out your second home to any significant degree in order to offset your carrying costs. If, on the other hand, you do expect to rent out your second home, as a vacation rental for example, then you may be able to stretch your dollar further and increase your borrowing capacity. Some lenders may give you credit for up to 75% of the projected fair market rents determined with an appraisal when buying a second home.

Consider Your Credit History

Second home mortgage lenders require higher credit scores to ensure that you won’t default on the loan. Many lenders require at least a 640-credit score, but others may have even higher requirements. The higher your score, the lower your risk of default and the higher your chance of approval. 

Consider Your Debt-to-Income Ratio

Your debt-to-income ratio is an important financial measure when determining how much second home you can afford. Simply put, your debt-to-income ratio is the percentage of your gross monthly income that goes to paying your monthly debt (total monthly debt payments divided by gross monthly income). The lower the ratio, the less risk there is from a lender’s perspective. Most financial experts recommend that your debt-to-income ratio represent no more than 30% for housing expenses, although that has as much to do with asset diversification as maintaining a comfortable debt level. A good rule of thumb is that your debt-to-income ratio should not exceed 43% overall. Certain lenders may require lower debt levels whereas others may permit a higher level, perhaps as high as 49%. Every borrower’s financial circumstances are different and every lender will have their own lending criteria so be sure to shop around.

Using a debt-to-income ratio of 43% overall, let’s consider an example. If you pay $1,600 a month for your existing mortgage and another $200 a month for the rest of your debts, your monthly debt payments are $1,800 ($1,600 + $200 = $1,800). If your gross monthly income is $7,000, then your debt-to-income ratio is 25.7 percent ($1,800 is 25.7% of $7,000). Using our second home mortgage calculator, you would be able to afford a mortgage of $269,461 using a 30 year loan period and 3.5% interest rate. Assuming you have saved up a 20% down payment of $70,000, you could afford a second home worth $339,461.

Second Home Mortgage Requirements

Second home mortgages will often be accompanied by larger down payment requirements, higher interest rates and stricter lending guidelines. The reason is that second home mortgages are more risky as owners may be more willing to default on their second home mortgage when faced with financial hardship. If you plan on generating rental income, you may be faced with even fewer lenders willing to lend to you. Further, you can expect even higher interest rates and down payment requirements for rental properties.

Assuming again that your second home will be primarily used as a secondary residence, you will likely be required to come up with a down payment of 20% or more of the purchase price. You can also expect to pay interest rates that are 0.25% to 0.5% higher than you would for a primary residence. 

For illustration purposes, if you’ve managed to save $50,000 towards a down payment, then you could afford a second home with a $250,000 purchase price ($50,000 is 20% of $250,000). If you’ve managed to save $100,000, then you could afford a second home worth $500,000 and so on.

Other Sources of Financing

If you don’t qualify for a second home mortgage or otherwise wish to explore other ways to finance the purchase of a second home, consider the following:

• Second mortgage on your principal residence – Not to be confused with a second home mortgage, a second mortgage on your primary residence involves taking out a second mortgage or doing a cash-out refinance on your first mortgage. If you have equity in your existing home, this may be a good option for you. 
• Home equity line of credit – Similar to a second mortgage, if you have equity in your home but want a flexible second mortgage, a HELOC may be a better option. It works like a credit card, giving you a credit line equal to the amount you can borrow. 
• Cash – This one should be obvious but if you have cash available, or can liquidate assets, you can purchase a second home with cash knowing that they make historically safe investments. 

Second Home Calculators

With the above principles in mind, be sure to explore our Can I Afford a Second Home Calculator and Second Home Mortgage Calculator. By inputting the relevant amounts, including your gross monthly income and debt payments, both calculators will help you determine the maximum purchase price and mortgage you can afford in a second home.

The post How Much Second Home Can I Afford? appeared first on Vacation Property Online.

 General Requirements

While certain lenders may require a down payment of only 5% for a primary residence, many lenders in the United States and Canada will require a down payment of at least 20% for a second home. This is because second homes are inherently more risky as borrowers are more likely to default on repaying the mortgage on their second home. After all, borrowers faced with financial hardship will typically prioritize repayment of a mortgage on their primary residence as they need a place to live.

Using 20% as an example, if you’ve managed to save up $50,000, then the maximum vacation home you can afford is $250,000 ($50,000 / 20%) regardless of your overall financial picture. If you’ve managed to save up $100,000, then you can afford a vacation home with a purchase price of up to $500,000.

Yet these are just general rules of thumb and, depending upon the use of the property, there may be certain lenders willing to accept a more modest down payment. In order to provide more specific information, we have included more detailed guidelines for borrowers in the United States and Canada below.

United States Requirements

The size of your down payment will depend, in part, on the type of mortgage you choose. Each mortgage type will have its own guidelines and eligibility criteria to consider. Briefly, the following types of mortgages may be available to you:

• Veterans Affairs (VA) loans – VA direct and VA-backed Veterans home loans are only available to Veterans, service members, and their survivors, typically with no down payment.
• Federal Housing Administration (FHA) Loans – FHA loans are another government sponsored loan program that has been around since 1934, characterized by low down payments (as low as 3.5%), low closing costs and easy credit qualifying. FHA loans, however, are only available for primary residences.
• Conventional Loans – unlike VA and FHA loans, conventional loans are not guaranteed  or insured by a government agency. For conventional loans (and FHA loans), mortgage insurance may be required with a smaller down payment (i.e. less than 20%).

Conventional loans are often available for vacation homes but mortgages for such properties are typically accompanied by larger down payment requirements (at least 20%), higher interest rates and more conservative lending guidelines. If you intend on renting out your vacation home, then a lender may consider it as an “investment property” (as opposed to a “second home”), which tend to have even higher interest rates and down payment requirements (i.e. 25% or more). The reason for this is the risk profile of an investment property as owners may be more willing to walk away from their mortgage payment obligations when faced with financial hardship. To summarize, depending upon how you use your vacation home, expect to save at least 20%-25% of the purchase price as a down payment.

Fore more information on vacation home mortgages from America’s “big four” banks, click on the following:

• JPMorgan Chase
• Bank of America
• Wells Fargo
• Citigroup

Canadian Requirements

In Canada, down payment requirements for primary residences differ depending upon the purchase price of your home. Amounts range from 5% of the purchase price for homes $500,000 or less up to 20% of the purchase price for homes $1 million or more.

The rules also differ for vacation homes, in particular as between vacation homes purchased for personal use versus vacation homes used as a rental property.  As rental properties are often seen as higher risk, more stringent qualifying criteria may apply than if the vacation home is for personal use only. As outlined by National Equity Lending, you may still be able to buy a second home with as little as 5% down with the relevant insurance premium added to the mortgage. With 20% down, most lenders will finance your mortgage as a conventional loan. For rental properties, however, you will likely need at least 20% down and even then you are limited to only a few lenders who are willing to lend to you with no insurance premium added to the mortgage. In order to avoid insurance premiums and open it up to a larger pool of lenders, you will likely need at least 25% down.

Fore more information on vacation home mortgages from Canada’s “big five” banks, click on the following:

• BMO
• CIBC
• RBC
• Scotiabank
• TD

Advantages of a Higher Down Payment

A larger down payment has several advantages, including:

• More borrowing options
• Better interest rates
• Higher initial equity position
• Lower mortgage payments

Simply put, the higher the down payment the more loan options will likely be available to you at more competitive rates. By putting 30% down, for instance, lenders lower their risk profile by allocating some of the risk to you as the borrower. The thinking is that by having more “skin in the game” so to speak, you will be less likely to default on your loan. Also, your mortgage payments will be lower since you will be borrowing less money thereby paying less interest over the life of the loan. Further, if you intend on renting out your property then it will be easier to turn a profit since the cost of servicing your mortgage will be less.

Before deciding on a larger down payment, be sure to use our vacation home mortgage calculator to better understand the monthly costs of servicing your mortgage based on different down payment scenarios. It’s also a good idea to keep some savings left over as you may need funds for necessary maintenance and repairs following your purchase.

For more information on vacation home affordability, be sure you read our article on How Much Vacation Home Can I Afford?

The post Down Payment for Vacation Home: Requirements for Buyers in the United States and Canada appeared first on Vacation Property Online.

If you’re asking yourself: can I afford a vacation home and, if so, how much vacation home can I afford?, you should consider the following:

• Size of your down payment
• Your debt to income ratio
• Rental income
• Equity from primary residence

Be sure to explore our Can I Afford a Vacation Home Calculator to better understand what you can afford. 

Affording a Vacation Home

Many people who enjoy traveling to the same spot year after year will consider purchasing a vacation home. Not only are you able to visit your favorite destination every year, but you can also often enjoy a strong return on investment through appreciation in the value of the home. Financially, however, this isn’t always an easy decision. For homeowners who will need to take out a second mortgage, they often ask themselves how much vacation home can I afford?

There are a few ways to evaluate whether you can afford a vacation home and, if so, how much home you can purchase. The following are some of the primary considerations to keep in mind.

How Down Payment Impacts Affordability

Typically your down payment must be at least 5% of the purchase price, which will limit your affordability. Depending upon the price of your home and your lender’s requirements, a down payment of 20% or more may be required. Using 5% as an example, if you’ve managed to save up $25,000, then the maximum vacation home you can afford is $500,000 ($25,000 / 5%) regardless of your debt to income ratio (see below for further discussion). Assuming 20% is required, then the maximum vacation home you can afford is $125,000 ($25,000 / 20%). Be sure to speak to your lender to determine exactly what level of down payment is required.

Using Debt to Income Ratio

Your debt to income ratio will be a primary factor when deciding how much vacation home you can afford. Your debt to income ratio is the percentage of your gross monthly income that goes to paying your monthly debt payments (total monthly debt payments divided by gross monthly income). When it comes to your total debt to income ratio, most financial experts recommend keeping it at a rate of 30% or less for home expenses and no more than 43% overall. Most lenders also have their own specific criteria on limits. Of course, the lower your debt-to-income ratio is, the better.

Some lenders will allow you to have a higher ratio but the primary determination of your personalized ratio will depend on your own financial situation. For example, if you have a higher down payment available, you’ll be in a better financial situation as you will require less debt to purchase the home. Additionally, a higher credit score may mean that you can borrow with a higher ratio. Most lenders are going to want borrowers with a credit score of at least 640 or higher. Again, speak to your lender to determine their requirements.

So, how does all of this translate into what you can afford? For illustrative purposes let’s use a ratio of 43% overall and assume a gross monthly income of $10,000 (before taxes). This means that your total debts, including mortgage, home insurance and property taxes on your vacation property, can equal up to $4,300 per month (43% of $10,000). If payments for your primary residence total $1,500 each month and other personal loans total $1,300 per month, this means that you can afford to pay $1,500 per month for a vacation home ($1,500 + $1,300 + $1,500 = $4,300). Depending on the size of your down payment, this means that you can likely afford a vacation home with a purchase price of around $350K-450K on a 25 year amortization period based on current interest rates (try our vacation home mortgage calculator here).

How Rental Income Impacts Affordability

Offsetting the costs of owning a vacation home through rental income is a great way to stretch your dollar further and increase your borrowing capacity. Depending upon the lender, they may give you credit for up to 70% to 75% of the projected fair market rents (in Canada and the US, respectively) determined with an appraisal when buying a vacation home.

Using the above example, let’s say you’re looking to purchase a vacation home with an income suite. Your monthly mortgage is $1,500 for your primary residence and you have other monthly debt payments totaling $1,300. Now let’s also assume that your monthly vacation home payments will be $2,500. That would put your debt to income ratio at 53% overall ($5,300 / $10,000), or 10% in excess of what lenders will typically permit. But let’s also assume that you can expect to generate $1,500 per month in rent from the income suite. 70% of $1,500 is $1,050 meaning that, from a lender’s perspective, your debt to income ratio is now a more modest 42.5% overall (($5,300 – $1,050) / $10,000).

Of course, each lender has their own criteria so be sure speak with your lender as to how much credit you can expect from the rental income. You can also expect to pay 25 to 50 basis points higher for these types of mortgages as compared to owner-occupied home mortgages.

Borrowing Against Value of Existing Home

If you have equity built up in your primary residence, you may also be able to borrow against the value of your home to maximize your vacation home borrowing power. This can be achieved in a few different ways (e.g. home equity line of credit, second mortgage etc.) but the principle is the same: extracting value through the difference between the value of your home and the unpaid balance of your current mortgage. Click the video below for a brief description of how a home equity line of credit works.

Let’s say your home is worth $400,000 and you owe $100,000 on your mortgage. You’d have $300,000 in home equity. Assuming you can borrow up to 80% of the value of your home less the amount you owe (which varies by lender), you would have up to $220,000 (80% of $400,000 less outstanding mortgage of $100,000) at your disposal towards an investment in a vacation home. At even 50% of the value, you will still have $100,000 available.

Of course, this option is only available to homeowners that have seen appreciation in the value of their home and/or paid off a large portion of their mortgage. In any case, this may be a viable option for many homeowners.

Owning a Vacation Home

Owning a vacation home is a lifelong dream for many and, with some creative financial planning, it may be more attainable than you think.

Be sure to check out our further resources on buying a vacation home and owning a vacation home, including everything you need to know before buying.

The post How Much Vacation Home Can I Afford? appeared first on Vacation Property Online.

As more and more people look to expand their real estate portfolio, the recreational housing market continues to see strong demand in the United States and Canada. For some, a second home may represent a welcome escape from the busy city life. For others, a second home may represent an opportunity to generate a return on investment as a revenue-producing vacation rental or other investment property. Regardless of the motivation, second home sales are on the rise.

For anyone who is considering taking out a mortgage in order to purchase a second home, the interest rate available to you will be an important consideration. Inevitably, the question will arise: are mortgage rates higher for second homes? As this article will show, typically mortgage rates are higher for second homes given the risk profile associated with such properties. Your personal financial situation, however, will also impact the interest rate available to you.

What Interest Rate Can You Expect on a Second Home?

While the available interest rate can vary based on the property type, your financial profile and the local market, amongst other factors, you can expect to pay rates that are 0.25% to 0.5% higher than you would for a primary residence. Therefore, if a bank is offering a 3.0% interest rate on a primary residence, you can expect to pay between 3.25% to 3.5% on a second home mortgage.  Of course, this is just a general rule of thumb so be sure to shop around for the best rate.

To illustrate the difference this makes on monthly payments using different mortgage amounts, we’ve prepared a few examples (all assuming a 25 year amortization period):

• Mortgage amount: $250,000
  • Monthly payment at 3.0%: $1,185.53
  • Monthly payment at 3.5%: $1,251.56
• Mortgage amount: $500,000
  • Monthly payment at 3.0%: $2,371.06
  • Monthly payment at 3.5%: $2,503.12
• Mortgage amount: $750,000
  • Monthly payment at 3.0%: $3,556.58
  • Monthly payment at 3.5%: $3,754.68
• Mortgage amount: $1,000,000
  • Monthly payment at 3.0%: $4,742.11
  • Monthly payment at 3.5%: $5,006.24

Be sure to use our mortgage calculator for more specific calculations. 

Why Are Mortgage Rates Higher For Second Homes? 

Interest rates are typically higher for mortgages on second homes when compared to primary residences since lenders view these purchases as being inherently riskier. Unlike a primary residence, a second home is not a necessity. If the owner of the property goes into financial distress, chances are that this property will be the first asset to go into default. Lenders realize this and therefore often charge a higher rate given the heightened risk profile.

Due to the increased risk of default, mortgages on second homes typically have stricter lending criteria, higher interest rates and larger down payment requirements. Banks will take a close look at your credit score, income and outstanding debts to ensure you can handle the additional monthly payments (more on this later). For the down payment, while certain lenders may require a down payment of only 5% for a primary residence, many lenders in the United States and Canada will require a down payment of at least 20% for a second home.

How Do Personal Finances Impact Mortgage Rates for Second Homes?

Depending on your lender, credit history and current financial state, you may be able to secure a reasonable second home mortgage rate. You may, however, end up paying a higher rate if you have a poor credit score or your debt to income ratio is less than desirable. Your debt-to-income ratio is the percentage of your gross monthly income that goes to paying your monthly debt payments (total monthly debt payments divided by gross monthly income). 

So what credit score and debt to income ratio should you strive for? A credit score of 700 or more is where you can expect to pay the lowest rates both in the United States and Canada. It’s recommended that homeowners avoid going over 36% of their gross income when factoring in total debt payments, although some lenders may permit a borrower to have a ratio of up to 43%. Keep in mind that rental income can be used to offset the costs of servicing the mortgage and certain lenders may give you credit for up to 70% to 75% of the fair market rents. 

How Can You Secure the Best Rate

The initial second home mortgage rate quoted by your bank may not necessarily be the best rate. Rather, working with multiple lenders or a reputable mortgage broker will help secure the best possible rate. It’s also important to get your finances in order by having a strong credit history and maintaining a serviceable debt to income ratio.

So are mortgage rates higher for second homes? Typically yes but as this article illustrates there are certain things a homebuyer can do to secure the best rate.

The post Are Mortgage Rates Higher for Second Homes? appeared first on Vacation Property Online.

Featured markets include:

• Tofino, BC
• Whistler, BC
• Kelowna, BC
• Banff, AB
• Muskoka Lakes, ON
• Niagara on the Lake, ON
• Mont Tremblant, QC
• Cape Breton Island, NS

To launch the map, click here. Scroll through the map and the associated illustrative listings to obtain sample information at each price point, including property type, square footage, number of bedrooms and bathrooms and special features such as waterfront. Note that the information is based on data as of the date specified and is provided for illustrative purposes only. As data is derived from listing prices it may not be indicative of sales prices.

Be sure to also check out our detailed overview of the above markets here.

So How Much Do Vacation Homes Cost Across Canada? 

The Tofino and Whistler regions are among the most expensive recreational real estate markets in the country. For $500,000, you can purchase an 860 sq ft condo in Tofino or 450 sq ft studio in Whistler. By contrast, $500,000 will get you almost 2,000 sq ft or prime waterfront living in the Cape Breton region or a three bedroom, two-and-a half bathroom townhouse in Kelowna. $500,000 will also get you a three bedroom, one-and-a-half bathroom waterfront cottage in the Muskoka Lakes region. A more modest two bedroom condo is available at this price point in Banff. 

At the $750,000 price point, condos and townhouses are the norm out West, although you can purchase a four bedroom, three-and-a-half bathroom house in Kelowna. In Whistler, a one bedroom, one bathroom condo is available while a larger two bedroom and two bathroom condo is available in Tofino. In Banff, a three bedroom, 2 bathroom townhouse covering over 1,300 sq ft is available. Further east, three and four bedroom homes are available in Niagara-on-the-Lake and Mont-Tremblant, respectively. Finishing out East is the Cape Breton region where a three bedroom, four bathroom home on the lake is available at this price point.

For $1 million, houses are still out of reach in Whistler and Banff although two and three bedroom condos are available, respectively. Otherwise, houses and waterfront cottages are the norm in all other markets, including a three bedroom and four bathroom house in Niagara-on-the-Lake and almost 1,800 sq ft of waterfront living in the Muskoka Lakes region. $1 million will also get you over 3,000 sq ft of house in Mont-Tremblant. And finally out in Cape Breton, $1 million will get you a four bedroom house (on the lake).

Finally, if you have money at your disposal then consider buying your own island in Muskoka Lakes, Ontario for a cool $3.5 million. At $2.5 million, Tofino waterfront is within reach and, at a modest $1.5 million, relatively speaking, almost 4,000 sq ft of luxury waterfront awaits on Cape Breton island.

Here is a more detailed overview of how much vacation homes costs throughout Canada’s most popular vacation and recreational destinations:

Thanks for reading and be sure to contact us if you have any questions or feedback.

The post How Much Do Vacation Homes Cost Across Canada? appeared first on Vacation Property Online.