If your idea of the best vacation each year is going someplace new, this article isn’t for you. However, if you have fallen in love with one location and frequently go there, not only for vacations but every long weekend opportunity you get, read on to learn about the benefits of vacation and second homes, as well as how to finance one.
Vacation and second homes give you the freedom to do what you want when you are on vacation. No rules about what time to check in or check out, no booking hassles, and you have complete control about who goes with you, including your pets. You’ll rest well because you chose the mattress and you don’t have to think about who else slept there before you. Another benefit is that you have an investment rather than expense. With the way home prices are increasing each year and the potential for renting out vacation and second homes when you won’t be there, it could be a smart addition to your financial portfolio.
Once you’ve decided that these benefits make purchasing a vacation or second home something you want to do, the next step is financing one. It won’t be the same as purchasing your primary residence, but it will also be different than buying an investment property.
There are three methods that you could use to finance your vacation or second home. The first is refinancing your primary home to use the equity to purchase the second home. The second is to get a HELOC (home equity line of credit) on your primary home. The third is to get a loan with the vacation home as collateral. For this third option, be sure you work with your insurance broker to understand any terms involved, as some mortgages for vacation and second homes do not allow you to rent out the home or will use the anticipated rents when calculating your debt-to-income ratio without changing the loan to an investment loan at a higher mortgage interest rate.
If you are considering moving forward with the process of purchasing a vacation or second home and would like to learn more about financing one, contact us at Centum Mortgage Store, Ltd. We would be happy to explain the advantages and challenges involved with the various mortgage options available for this type of purchase. We work with over 20 lenders to provide the most favourable lending solution for your needs.