What buyers should know before financing a recreational property

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Vernon-based mortgage specialist Deb White sees many people buying secondary properties in her area. Many of these buyers are from the sprawling city and hoping for a bit of peace, quiet and wide-open spaces. But the rules are a little different when purchasing a second mortgage.

For one thing, a secondary property requires a minimum down payment of 20 per cent, not five, as for a first home.

“Buyers have to qualify for both their primary and secondary residences at two per cent over the posted rate, without any rental income,” White said.

After spending so much time at home the last two years, it’s no surprise that people are looking for relief from the density and noise of the city.

“They want to be close to the lakes and away from the busy-ness of Vancouver, so they’re buying second homes,” White said. Most aren’t straying too far from towns.

“Out in the country, it’s a little bit harder for them. Then it’s too far from the mainstream. We don’t have a lot of people buying secondary homes in Williams Lake and Prince George area. It’s more from Salmon Arm down to Osoyoos.”

People looking to build on bare land face an even steeper obstacle. Bare land requires 50 per cent down.

“It’s super, super hard,” White said. “Five years ago, I was able to get bare land, depending on location, with 25 per cent down. Now the lenders want a building plan in place. They want to see a contract with the builder; they want to see the finished project.”

The more stringent requirements are due to risk, she says.

“With building costs, sometimes it’s cheaper to buy an already-built home than to build a home.”

White also notes that some types of homes are tricky to finance.

“A lot of people think that all they can afford is a mobile home, or a manufactured or modular home. But what happens is that, in our area, in the Interior and up north, CMHC will give a modular or manufactured home a life span of 40 years. As the age of the mobile goes up, your amortization and payments will increase.”

Buyers need to look at the bylaws in the area they’re considering.

“People come up here thinking they are going to renovate their new home and put a suite in the basement and Airbnb it. But then they find out that the bylaws don’t allow for that. I have found in realtor’s documents that they’re adding that as a condition, confirming the bylaws in the area.”

Lenders are hesitant to finance Airbnb dreams. “They are not looking at those favourably. We don’t have a lot of lenders who will use Airbnb income.”

Most of her clients for secondary properties are between 40 to 60 years old and looking for a no-muss, no-fuss investment.

“When they’re buying a second home up here, they want to not have to worry about it. Nine times out of 10, we’re finding people buying in complexes so they can come here, do what they want to do and have some fun and not have to worry about taking care of the yard or hiring someone to take care of the yard.”

White recommends doing due diligence and finding a realtor who knows the area well.

“We had a realtor help clients buy a property up here, and it went for way over asking,” she warned. “Make sure you know the area and talk to the locals. That’s my biggest advice.”

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