The housing market in early 2020 was negatively impacted with the COVID-19 lockdown. Since restrictions have loosened somewhat, we have currently seen a bounce back to a typical spring-like housing market.
During the pandemic, travel has been limited and people have been forced to cancel their vacations. As restrictions further loosen up, there will likely be an upsurge in interest for vacation properties. Many home buyers are searching for a domestic escape. In addition, people’s work arrangements have also been changing. A portion of the workforce is now working comfortably from home. Many employers are also giving their employees the option to work from home permanently, which has prompted home buyers to reassess their living conditions. The idea of having a home as a place to work and to relax has become more of a reality.
While the idea of owning a vacation home is appealing, it does take a greater amount of time and planning, especially if you require additional financing. However, if you start early enough, you could take advantage of the summer weather this year in your new vacation home.
Here are some factors to consider when you are looking at financing a vacation home:
- Is it a second home, rental, or primary residence? Your down payment will be different depending on the property usage. For example, if the property is used as a primary residence, the down payment can be as low as 5% as long as the property value does not exceed $1 million. For rental properties, down payments can be anywhere between 20-35%.
- Is the property in a remote area? You may be required to have either a higher down payment and/or higher rates. Some lenders will only lend up to a capped amount (i.e. $600,000), regardless of the location of the vacation home.
- Does the property have year-round access? Also known as a four-season property. Access to a public road is generally required.
- Is the zoning of the property residential? It is important that you confirm the zoning. For example, agricultural properties require a different set of approval guidelines and lenders.
- Does the property have a well and/or septic tank? You should ensure that the seller provides you with a well and/or septic tank certification. Properties with wells and septic tanks may also require a higher down payment.
For those buyers that currently own a property, you may also have the opportunity to leverage your current home to either make up any shortfall, or finance it completely.
Buyers should also note that it is difficult to obtain a mortgage on the following types of properties:
- Homes on privately leased land
- First Nations land
- Time shares, fractional interests, and life leases
- Rental pools, hotel-condos, Airbnb-style and rooming houses
- Heritage homes
Looking for a vacation home can be very exciting. However, you should also speak to a mortgage specialist before proceeding to ensure that you can get the financing that you need.
Buying or selling a second home should be a ‘breeze’. By retaining a REALTOR® that is a certified Resort and Second-Home Property Specialist (RSPS), he or she can help you buy, sell or manage second homes in a resort, recreational, and/or vacation destination. Summer will be here before you know it. You don’t want to miss the ‘boat”.