“Before buying a second home, you want to find out what you’re trying to achieve — your goals and objectives,” says D’Arcy Henneberry, president of online mortgage brokerage MortgagePal.
Each lender has its own mortgage eligibility criteria, including how they view your income and debt obligations, he says, so your first step should be to talk to a mortgage broker or financial advisor about your needs and financial situation.
That said, when it comes to giving a second home, here are general rules and requirements to keep in mind.
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Before you decide to buy a second home, there are several things to consider. Note that the second home is the one you or a relative will occupy; The rules may be different for rental or investment properties that you will not occupy.
Your income and budget
“It is important that you are able to budget appropriately for the cost of the home. This needs to be understood,” Henberry says. “You need to understand the costs associated with a second home, and if it is related to your income. Depending on what fits your budget.”
A steady income (from a full-time job) can help get approved for a mortgage, says Henberry, but it’s not always necessary.
Individuals who are self-employed or on contract may be eligible for second home mortgage financing as long as they have “confirmed income,” for example, from pay stubs or a notice of appraisal from the Canada Revenue Agency. . For individuals whose incomes fluctuate, some lenders will use their average income from the past two years. What matters is that there must be proof of income sufficient to cover the cost of carrying the mortgage.
“Having a mortgage doesn’t mean you qualify for a mortgage. And qualifying for a mortgage doesn’t mean you can afford a mortgage,” Henberry says. “We have several There are million dollar net-worth clients who do not qualify for mortgages because they have no cash flow that is usable from an income perspective for mortgage financing.”