March 14, 2023 nkad3

How to get a mortgage on a second home?

What is a second home?

I know it sounds like it’s self-explanatory, but the reality is many people have a slight misunderstanding of what a second home is. From the typical borrower’s perspective, a second home is a subsequent property that is being purchased or already owned. However, from a lender’s perspective, a second home is intended to be owner-occupied by the borrowers themselves, OR by their immediate family to an acceptable capacity.

In other words, purchasing a second home is not the same as purchasing a second property, whereby the property is going to be rented out (investment)…

Okay great, so how does it work?

Now that we understand what a second home is (and what it’s not) …getting a mortgage for this type of purchase/refinance is pretty much the same as if it were going to be your first home. There are a few additional things to consider, and they are as follows:

  • You must demonstrate that you can qualify to support the second home, while debt servicing your existing home and any other debts you may have
  • There cannot be any suspicion that the property is an investment property, you must demonstrate that you or your immediate family will be living in the home

Why does it matter – second home vs 2nd property for investment?

The reason the distinction is important is that a home that is “owner-occupied” vs a home that is “tenanted” carry different degrees of risk. When you as the owner live in a home, you tend to do so with a certain level of care and concern for the well-being/upkeep of the home. When you are simply a tenant, you may not have the inherent concern or feeling to do so (at least to the same extent). Therefore, from a lender’s perspective, this distinction matters so that they can mitigate the risk with the appropriate down payment requirements and Interest rates offered under the two scenarios.

If you are interested in learning more about second home mortgages or would like to run your scenario by us, just give us a call today – at (905) 455-5005



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