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(May 30, 2021)

Intro (pre-amble): up to 7:49 mark of podcast

I often get asked what the minimum down payment requirement is to purchase another home. And by another, I mean residing in your current home as you are and purchasing another home that you or any one of your family members will frequent at one point throughout the year…like a home away from home. For example, it may be a vacation property a couple of hours from where you currently live, or perhaps a downtown condo across the country where your child is attending university. Regardless of the location, as long as the property is intended for family occupancy at one point throughout the year, the minimum down payment requirement is 5%! Yep, that’s it, 5% down payment to purchase another home! The formal name of the mortgage guideline is known as the Second Home Mortgage.
Let me be clear though…notice that I am not referencing the other home as a rental property, but rather another home. Not only does the property have to be intended for family use only, but as it is not a rental property, you are not able to use a monthly rental income to qualify for the mortgage. This is an important distinction as it significantly escalates your debt servicing ratio to qualify for the mortgage. With a rental property you can offset the mortgage payment with the rental income, but not with a Second Home. So heads up, you have to debt service your current mortgage, as well as the mortgage of the Second Home. For some, this might be a deal breaker but for others it may not be an issue at all.

Here is a summary of the key points of a Second Home mortgage:

Eligible Properties: single family homes, town houses, or condo units
Non Eligible Properties: rental/investment, rental pool, or timeshare properties. Duplexes, triplexes and all other multi-unit properties are not eligible.
minimum down payment of 5%
Additional Qualification Features: you can also qualify for an immediate home improvement loan that can be used immediately to upgrade/improve the property (i.e. new kitchen, bathroom, flooring, etc). The amount of the home improvement loan simply gets tacked on to your mortgage upon completion of the home improvement
Maximum Mortgage amount (if down payment is less than 20%): up to $700,000 for Toronto, Calgary and Vancouver
Maximum Mortgage amount (if down payment is 20% or greater): $1.5 Million
Maximum amortization: up to 30 years
Not available for Permanent, Temporary or Non-Residents