Salmon Arm Shuswap real estate....."Smart financing equals alternative, a second home such as recreational property"
Posted in June's Kelowna Real Estate Blog on June 24, 2007
Buying a recreation property is often seen as something that's attainable only for people with an extensive amount of disposable income.
In fact, a second property is more attainable than many people think, and you don't have to wait until retirement. It's just a matter of getting your financial ducks in a row.
For example, many people might not realize that taking a second mortgage on their home could be an option for financing a holiday home, says Todd Wilcox, vice-president of personal financial services for HSBC Bank Canada.
"Many clients have pretty good equity in their existing property," he says. "There is increased flexibility to draw on that equity and structure it so you can take those funds and buy what you want."
Wilcox says this can be useful in situations where getting financing for a property might be difficult due to income, the site's location or other factors.
How much down payment to expect varies on the lender and what kind of mortgage insurance package you take, says Sherry Jenkins, an agent with Mortgage Intelligence.
"For example, the CMHC [Canada Mortgage and Housing Corp.] has a new second-home product and allows you to purchase for as little as five per cent down," she says.
Different mortgage insurance packages offer different requirements. Some have an income qualifier, while others place limits on what kind of property is eligible. For instance, the "i relax" package from Mortgage Intelligence offers a down payment as low as 15 per cent, and loans as high as $600,000, provided the property is single-family, owner-occupied and in a known vacation area with year-round access. It has no income qualifier and is based on good credit.
"The more remote a property, the more difficult it can be to finance," says Brad Currie, owner and broker with Centum Mortgage Associates in Vancouver.
Currie says the lower the down payment, the stronger your financial house has to be. "It can be more difficult to qualify," he says, adding that using the equity in your existing home can be the "simplest and easiest" way of financing a second home or recreation property.
Jenkins and Currie both recommend working with a mortgage broker who can help you access different financing options.
Adds Wilcox: "My advice, the first step would be to go to the bank and have a view of your entire financial picture. Find out what you're comfortable with and what your future needs are."
(prepared by Alex Frazer-Harrison, Special to the Province)
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