Buying a Second Property
A cottage, a rental or a home for family. Here is how to plan it.
The quick version
Start with your why. It shapes everything else.
Qualifying for your first mortgage does not mean you will automatically qualify for a second.
Your down payment depends on how the property will be used.
Rentals usually need at least 20% down.
Your home equity may help fund the down payment.
Dreaming of a second property? Book a call and let us put a plan together.
Start with your why
People buy second properties for all kinds of reasons:
A vacation property or cabin at the lake
A rental to build long-term wealth
A home for a family member, like a student or an aging parent
Being clear on your goal helps us choose the right financing and make sure the purchase fits your overall financial health.
How much down?
Second home you or your family use (not rented out): may be possible with as little as 5% to 10% down, depending on the property and lender.
Rental property: usually at least 20% down, sometimes more depending on the property and lender.
Rental income can often help you qualify, but lenders each count it differently. This is where comparing lenders really matters.
Using your equity
Your current home may be the key to your next one. Ways to access your equity include:
A new mortgage on a home you own outright
Refinancing your current mortgage
A home equity line of credit (HELOC)
A second mortgage behind your current one
A reverse mortgage, for homeowners 55 and older
Remember: if you borrow your down payment against your home, that payment counts in your debt ratios when you qualify.
Other things to consider
Carrying costs: property taxes, insurance, utilities, maintenance and condo fees
Vacancy: can you cover the payments if the rental sits empty?
Taxes: rental income and future capital gains have tax implications. Talk to your accountant.
Seasonal properties: cabins without year-round access may have different rules
Let us make a plan
Every second-property purchase is different. I will look at your full financial picture, use your existing assets wisely and help you choose the best way to reach your goal. Book a call anytime.
Want new articles like this one first?