Obtaining a mortgage for a second property

The fallout from COVID-19 has led many city dwellers to begin exploring their real estate options in more remote areas of the province. For many, living close to the city center was essential for work, but with numerous offices closed for the foreseeable future, homeowners are suddenly opting for more space over proximity to their workplaces. However, just because they want more space doesn’t mean all buyers are ready to give up their prized downtown addresses. The solution? Obtaining a mortgage for a second property.

Buying a second property, whether as an investment or vacation home, is a goal many homeowners work towards. Nevertheless, it’s a big leap from dreaming about it to actually undertaking the transaction. Before you buy that cottage by one of Quebec’s famous lakes or mountains, here are some things to consider:

1. Can you afford a second property: Being able to comfortably afford a second property is the first point to consider before exploring the market. Having a conversation with a mortgage broker will help determine if purchasing a second home is a reasonable financial decision, or if the timing just isn’t right at the moment.
2. Is it a good investment: No one wants to lose money on real estate. Before shopping the market, consider if you’re buying in a rush just to get out of the city amid COVID-19, or if there’s actual value in the area and property type you’re searching for.
3. Does the purchase make sense long-term: It’s unclear at this point if traditional offices will ever resume to 100% capacity, but it’s safe to assume that at some point we’ll all be heading back to work, at least partially. Will you still be able to use a property in a remote area once normal life begins to resume? There are many instances in which the answer will be yes. If the property is within reasonable driving distance from your primary residence, you could easily use it on weekends and for vacation purposes. Moreover, if you’re keen on keeping it long-term, it could serve as your retirement property as well when the time comes.
4. Do you understand the costs: vacation homes have all of the same expenses as primary residences, including property and school taxes, maintenance and upgrades, and of course the mortgage payments. But there are some additional costs as well. For instance, many vacation homes require special insurance such as flood coverage. In order to help cover these carrying costs, many owners opt to rent out their vacation homes from time to time.
5. Can you obtain financing: If you have a decent amount of equity in your current home, it will likely not be complicated to get approved for a second mortgage. That said, there are a number of factors to consider. A mortgage broker can walk you through the process and explore different options and strategies to make your dream of owning a second property come true.