For many people, there is somewhere in the world that you like to retreat to. For a lucky few, that place might be a tropical villa off in some nearly deserted location and for others it's one week away a year to some cottage on a nearby lake. Most people don't live in that perfect place. Their home is a place of necessity, near work and useful amenities and, for increasing numbers, in loud chaotic cities. But what if that vacation paradise could be yours? Affording that cottage or vacation home might be more possible than you think. Maybe next year you'll get to spend more than a week in that vacation home away from it all.
For some people, there is the option of paying cash for that second home. Whether they're looking at a good investment portfolio they'd like to cash in or they've decided to downgrade from their real estate investment to a more modest condo, they can escape the need to finance their second home. This is an excellent option for those who can take it. There are allowances in place for those profiting off the sale of another home to avoid paying capital gain taxes. This means that more of the money from that sale can go to the purchase of that second home. This also means that new piece of real estate instantly goes into the category of an investment, rather than another debt.
But, many people don't have the finances in place to pay cash for a second home. While in the past banks and financing institutions asked for a greater down payment on a second home, that is not the case today. Whether you're looking at a cottage or a standalone, the down payment amounts have now be equalized by the addition of more competition. Years ago, borrowers would have seen up to a half point added. Now the most you will see is an eighth of a point added due to the additional risk with a property that is not being consistently monitored.
Know what you're planning on using the second home for. If it's a vacation home to spend a few weeks in a year or a home you're not planning to occupy until retirement, considering renting it out to supplement a mortgage. Many people look for cottages in the summer months for a week at a time and are willing to pay handsomely for the property. You could make your yearly mortgage payments in a matter of months and still have a few weeks for you to enjoy the property free of charge. If you're someone who has rented in the past, wouldn't it be better for all that income to be coming into your pocket?
If you're looking for financing, look in the town or city where you're planning to purchase real estate. You may get a better deal in the smaller market, as financiers may be happy for the additional business. While there is not as much competition in places like Guelph real estate to bring down the prices, there are also fewer clients available. This means you have the upper hand for negotiations.
Who knows, that vacation home might even be more affordable with your name on the deed. Look into buying a vacation home and you may improve your weeks away from the office and have a sound investment for your future.