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MORTGAGE ARTICLES
Cabin fever? Mortgaging for recreation properties
All across Canada we’re seeing the recreational
property market continue to go through the cedarshingled roof. Industry
experts predict another year in which buyers seeking a property
may outnumber the recreational properties available. The boomers
are in their peak income years and have benefited from an unprecedented
climb in the valuations on their primary homes. And across the country,
they’re scouring every lake, ocean beach and ski slope – looking for the perfect getaway.
When cottages first became the vogue around the
turn of the last century, those getaways were generally charmingly
rustic structures designed to give their owners a taste of a simpler
way of life for the summer season. But today, recreational property
markets are reporting a stunning increase in teardowns and renovations
– as rustic simplicity gives way to luxury accommodations.
Today’s recreational property mix covers the gamut from
luxury waterfront homes, resort-style condominiums, ski chalets
and timeshare properties. Many of the traditional-style cottages
are still standing, of course… and they sell for top dollar
on the rare occasions that they actually come on the market.
But more and more average Canadians have cabin
fever: they’re looking for a recreational property both
as an investment and an enhancement to their own lifestyles. And
for many, the goal is achievable: we’ve seen historically
low mortgage rates over the last few years – and greater
affordability for ordinary Canadians. But financing a recreational
property is more challenging than funding a principal residence.
Traditional lending institutions typically find second homes a
much less desirable investment. Purchasers are often advised to
take out an equity loan or a second mortgage on their principal
residence in order to buy the recreation property.
But the lending landscape has been changing in the past
few years. We are beginning to see that some lenders have developed
flexible new mortgage products and policies that are specifically
designed for the recreational property market. The upshot is that
Canadians who are longing for that cottage or condo may now be able
to bypass conventional lending criteria – opening the door
to ownership much sooner than they imagined. Recreational property
mortgages are available for owner-occupied second properties, including
winterized and nonwinterized, with as little as 15 per cent down
for purchasers with good credit. And in some cases, 10 per cent
down could get you into the recreational property market if you
qualify. Typically, the vacation property needs to be located in
a known vacation area, have approved plumbing, and year round access.
And do your homework. In today’s heated recreational
property market, some purchasers have an edge in the marketplace
because they are cash buyers. To level the playing field, buyers
who are financing their purchase may want to consider talking to
a professional to determine approximately how much they qualify
for before launching their search.
For some, recreational property is an attractive
investment, with rentals providing an extra income stream. But
the allure is usually more emotional: a cottage or condo often
becomes a symbolic centre for family life, where families come
together at all ages and stages in their lives to share common
activities and traditions.
If you’re dreaming of your own beach sunset
or the perfect ski slope at your door, begin with a conversation
with a mortgage professional. Your own getaway
could be closer than you think!
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