If you are looking for a vacation property in Maple Ridge, then there is a thing or two you need to know about financing.
If you like to holiday in one specific region, then it might be time to look into the real estate market in Maple Ridge for a vacation property.
Hotels can make for a lovely getaway, providing all the essentials you need when you are traveling away from home, but they aren’t exactly a good home-away-from-home — especially not on the financial front.
Depending on the length of your vacations and the level of variation in your travel destinations, it may be a more than reasonable idea to consider investing that hotel money into a vacation home instead. It’s a much more promising investment in the long run that still allows you a getaway location.
Financing a vacation property — what you need to know before you start:
• Pool your costs
One thing to remember when looking at vacation property in Maple Ridge is that, it is essentially just a second home, and that means you will be responsible for all the home-related things — mortgage payments, insurance, maintenance.
These are all manageable, but it’s important to calculate how those costs are going to add up, combined with the costs of your current home, so you can be certain you aren’t going into debt because of any unforeseen expenses.
• Make sure you know the differences in financing when it comes to qualifying for your loan
If you are thinking you may need to rent out real estate in Maple Ridge for the times when you are not there, then it becomes a rental property instead of a vacation property, and if you qualify for your loan as a rental property, you may end up with higher interest rates and a much more complicated application process.
• Higher down payments
Make sure you look into the differences between buying a primary home and a vacation home. Your vacation home, for instance, will require a higher down payment than you may be expecting, anywhere from 10 to 20 per cent.
• Proof of income
You will be required to provide proof of income when requesting a loan, which means you may also be expected to have and declare assets or reserves. However, most importantly, you will be expected to have a certain debt-to-income (DTI) requirement.
The specifics of your DTI requirement may vary based on your credit score, but most lenders are looking for a DTI of 43 per cent or less — and that’s for both the vacation home and your primary home.
What that means is the total costs of both of your mortgages and the taxes on both of your homes, along with any other cumulative household debt like car or student loans, must equal 43 per cent or less of the household’s total income.
• Make sure you can prove it’s a vacation home
Financing is more challenging for rental homes than it is for vacation homes, so if you can prove that your second investment property is a vacation property and not an income property, then you are on the road to better mortgage rates and loan opportunities for your choice.
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