Secondary Home Mortgages
Secondary Home Mortgages- Facts
The majority of these mortgages get declined because the property itself does not conform to what is defined as a secondary home. Those who select the right property end up getting their mortgage applications declined anyway!
Secondary Homes are a great idea however the mortgage details tend to be confusing & have lots of inaccurate information. This article is an attempt to clarify the specific details about Secondary Homes & Mortgages.
Is There a Limit on Loan to Value Ratio on Secondary Home Mortgages?
The maximum mortgage you can get on these properties depends upon the location. In Metro Toronto Ontario, the maximum mortgage approval you can have is $600,000 – $700,000.
The max Cottage country vacation home/vacation property requiring winterization or having limited access may only go as high as $350,000 in Ontario Canada. Depending on the location, accessibility & construction type secondary Homes are divided into 2 types. Let’s call them Type A & Type B for now.
We have access to residential mortgage providers who allow you to buy your secondary homes with as low as 5-10% down payment.
Unfortunately, you cannot buy these properties with a gifted down payment. Standard down payment proof of seeding for 90 days applies.
The minimum credit score required is 680 or above for all applicants & you are not allowed to have any 3rd party guarantors to qualify for your Secondary home mortgages.
Documents Required For Home Mortgage Approval
4 FACTS OF SECONDARY HOME MORTGAGES
- Both interest rate options i.e. Fix or Variable rate mortgages are available for these real estate types.
- To qualify for a mortgage on your secondary home you have to pass the mortgage stress test when you seek a Secondary home mortgage with federally regulated financial institutions.
- Your income should serve all the consumer debts including your primary residence mortgage, taxes & utilities
- No Bankruptcy or judgments in past on the credit report
What property qualifies as a Secondary Home?
A second home is a place where you intend to stay regularly in addition to your primary residence. This could be a condo closer to your workplace, a house, or a cottage where you go for weekend getaways. Property requiring winterization is also eligible however unrestricted seasonal access is a must.
These properties could be occupied by a family member i.e. a property closer to your kid’s university or your parents can live there. You are not collecting rent on that property on regular basis.
What is not considered a secondary home?
A secondary home could be occupied by a family member i.e. a property closer to your kid’s university or your parents can live there. You are not collecting rent on that property on regular basis.
Investment properties & rental pool properties, timeshares are not considered Secondary Homes.
What is Secondary Home Type "A"?
Type A secondary homes are the properties located in residential, rural, or seasonal zoned areas with year round road access reasonably maintained by the local municipality. Private Service roads are fine as long as there is a valid private maintenance contract in place.
The permanent foundation has to be made of concrete or concrete blocks or preserved wood which is certified by a professional engineer installed above & beyond the frost lines.
The property has to have a permanent heating source installed. A drinkable water source is required. The least requirement for a property to qualify as a secondary home is a fully functional kitchen, 3 piece bath, a bedroom & a common area.
Acceptable titles are Condominiums & free hold properties. Interest ownerships, co-ops & time shared are not eligible under this program.
Finally, this real estate has to be located in an easily marketable area and in good repair & maintenance order. Whether you buy a vacation home or a condo for a weekend getaway the properties remaining life has to be at least 5 years more than the mortgage amortization period.
What is Secondary Home Type "B"?
Essentially all of the above requirements except the property is only accessible by a boat, the foundation is a floating foundation and does not have a permanent heating system instead has a wood stove fireplace for heating.
The property has access to running water however it’s not drinkable.
To know more about your secondary home mortgage options you are encouraged to speak to your mortgage advisor or can connect with us.
If you are a home buyer or are looking to buy rental properties where the down payment is coming from home equity, we can help you with your mortgage.
We provide customized mortgage solutions that help you pay off your mortgage faster.
By the way, we can also help you with your secured line of credit (HELOC) and pre approvals.