It is not surprising that many people choose to purchase a vacation property. After all, what could be better than owning your very own piece of paradise? Whether you are looking for a place to get away from the hustle and bustle of everyday life or somewhere to take the family on vacation, a vacation house can be a great investment. Also known as second homes, vacation properties are becoming increasingly popular, especially as the Baby Boomer generation begins to retire. But the unfortunate thing is that not everyone is capable of purchasing a vacation property outright. This is where a vacation property mortgage comes in.
A vacation property mortgage is a type of loan that allows you to finance the purchase of a second home. Just like with your primary residence, when you take out a mortgage for a vacation home, you will be required to make monthly payments until the loan is paid off. This type of investment property brings many key benefits to the borrower. Unlike on a conventional home loan, getting vacation homes can bring financial incentives year-round.
of Second Properties
There are two different types of second properties, each with its own set of rules and regulations:
Recreational propertyThis includes cabins, cottages, and condos that are used for leisure and recreation. These properties can be located near a lake, in the mountains, or even in the city.
Some known restrictions for recreational properties:
Also known as investment properties, these are purchased with the intention of generating income through renting them out when they are not in use. These properties can be located anywhere, although they are often found in popular tourist destinations.
Some known restrictions for second homes
Can be used as a primary residence
Follows conventional mortgages' regular application policy
Must have a year-round access rules
Price ceiling restrictions may apply
of Acquiring Vacation Property
Aside from your primary residences, a second home can provide many other benefits. But this kind of home purchase comes with a big personal and financial responsibility. So before you apply for one, it is important to make sure that you understand what you are getting into.
But, if you are certain that you can handle the responsibilities that come with it, then acquiring a vacation property mortgage can be a great decision. Here are some of the benefits that you can enjoy:
vacation home as a rental property.
1. You can use your vacation home as a rental property.
Buying a vacation house presses the opportunity to tap into rental income. That means you can use them as your rental properties which will be a source of income. This is one way of building equity while enjoying the property as your own vacation home. Moreover, you can deduct the mortgage interest and property taxes you pay from your rental income.
2. Appreciation of value:
Another benefit that you can get from a vacation property is its appreciation in value over time. This happens as the demand for vacation homes in a certain area increases. When this happens, the properties' prices also go up, and so does your vacation home’s value. That is why choosing prime locations as your "home base" is important when planning to buy a vacation home.
3. You can take advantage of tax deductions.
Owning a vacation property gives you the opportunity to take advantage of certain tax deductions, which can help you save money in the long run. For instance, you can deduct the mortgage interest and property taxes you pay on your second home from your taxable income.
4. Great way to prepare for retirement
While some intend to use vacation homes as their income-generating property, others see it as their retirement plan. That’s because a vacation home can serve as your retirement home in the future. When that time comes, you will no longer need to worry about monthly mortgage payments because you would have already paid them off.
5. Simplified getaways
Have a year-round use of a vacation home as it provides you a place to stay whenever you feel the need to get away from your primary residence. This is especially convenient if your vacation home is located in a prime destination where you can easily go for weekend getaways.
Need to Know
While it is exciting to finally have your second home, mortgage requirements for vacation properties are a bit different from regular home loans. Here are some of the things that you need to know:
CMHC-approved lender - Mortgage Insurance:
Genworth Canada and Canada Guaranty are the 2 mortgage default insurers in Canada. Since Canada Mortgage and Housing Corporation - CMHC which is the government's mortgage insurer no longer provides insurance for second home/vacation properties, only these 2 mortgage insurers will do so.
The Interest Rate May Be Higher :
Most lenders will extend mortgages to year-round residents at the best interest rates they offer. You can choose between fixed or variable-rate or variable-rate mortgages. Interest rates for vacation home mortgages will be higher and can get up to 35% which is much higher than the interest for a regular mortgage.
More documents may be required:
ore documents may be required In order to assess your ability to make payments on time, we might ask for additional requirements compared to getting the usual residential mortgage. These may include a larger down payment, asset and liability statements, and proof of income. You can contact us so we can walk you through the necessary documents you need to prepare.
We Give You the Best Mortgage Terms
Here at Winnipeg Mortgages, we are dedicated to providing borrowers with the best vacation property mortgage rates and terms. We understand that each borrower’s financial capacity is different from one another. As one of Winnipeg's top financing options, we offer a wide range of mortgage products to choose from. We also have a team of mortgage experts who will help you with every step.
Discounted Interest Rates
Winnipeg Mortgages has all your second home mortgage needs tailored to your specific circumstances. We know the importance of finding the right vacation property and we want to help you make that dream come true. We offer our clients some of the lowest mortgage rates in Winnipeg to give you peace of mind throughout the entire process.
Flexible Payment TermsAside from our low-interest rates, we also offer flexible payment terms. We understand that each person has a unique financial capacity. That’s why we offer different mortgage products that will suit your budget and needs.
Local Expertise You Can TrustWinnipeg Mortgage is a team of local experts that you can trust. We have been in the business for years and we know the ins and outs of the industry. We will be with you every step of the way to make sure that you are getting the best mortgage possible.
Finance Your Vacation Home
Speaking with us will be your first step towards acquiring that dream vacation property. We will assess your financial capability and help you decide whether you need a home equity loan, fixed-rate mortgage, or a variable rate mortgage to finance your dream property.
Unlike many lenders, Winnipeg Mortgage offers competitive rates for a wide variety of mortgage products. We work with you to find a solution so you can afford the vacation home you’ve always wanted.
Call us today and learn how we can help you finance your dream vacation property!