Purchasing a Second Property

Using a Second Mortgage To Buy More Property

There are a lot of benefits to owning a home, such as more privacy, decoration freedom, tax deductions, community involvement, and payment stability. But what if you owned two homes? In Canada, it is very common for homeowners to purchase additional property as a vacation home out by the lake, or up in the mountains. This is an excellent idea if you can financially afford to make another large purchase. But before you sign your name on the dotted line and buy a second home, there are a few things you need to consider.

Things To Consider When Purchasing A Second Home

1. Can You Afford It?
Talk with your local Brampton mortgage broker about your new purchasing plans so they can review your finances and see if this is an obtainable dream. Financial institutions will not feel comfortable lending you more money if you have insufficient funds in your account or have a low credit score.

2. You May Have Higher Interest Rates
When applying for a second mortgage, you could be offered higher interests rates than your first mortgage. Be sure you can financially handle an increase in rates without having to stretch your finances to the highest possible limit.

3. Is Renting Your Property An Option?
If you decide to purchase a second home for vacation purposes, that means you most likely will not be living in that house 24/7. Therefore, you may want to consider putting that house up for rent when you are not occupying it so you can make an additional source of income. If this option interests you, talk with your local broker so they can assist you further.

How To Purchase A Second Home With A Second Mortgage

If you have enough equity in your home you can apply for a second mortgage. This refinancing option gives you access to a lump sum of money by allowing you to access your home equity. The equity in your home grows as your home appreciates in value over time. It also grows every time you make a mortgage payment. Once you have been approved for this loan, you can use this money any way you would like, such as to pay for more real estate.

In order to receive affordable interest rates on your second mortgage, be sure you have at least 20% of the equity in your home.

Using a Second Mortgage to Purchase an Investment or Business Property

Are you thinking about buying an investment or business property but are unsure where you can receive the funds to do so? Well, you can fund additional real estate by obtaining a Brampton second mortgage.

A second mortgage taps into your home equity and gives you a lump sum of money based off of how much you borrow against your home. So, as long as you have been making payments every month towards your mortgage and have been in your home for at least five years, you should have enough equity in your home to qualify for a second mortgage.

How To Build Your Equity

Equity is the difference between your home’s total value and the balance of your mortgage. Therefore, every time you make a payment towards your loan, your balance decreases and your equity increases. Your home’s equity can also build over time. Most homes appreciate, which means that over the years, your home should increase in value. So, just by owning your home for a long period of time, you should have more equity.

Financial Benefits For Purchasing an Investment or Business Property

Buying more real estate for investment purposes is a great way to gain a second income. If you purchase a nice vacation home out by the lake or buy a home in sought after areas, such as Brampton or Toronto, you can put this home up for rent with the guarantee that someone will be interested.

Some financial benefits of purchasing an investment home include an increase in income and a decrease in taxes owed. You can deduct your mortgage interest, property taxes, insurance, property management, and maintenance from your taxes if you own an investment property.

If you decide to purchase a business property, you have the freedom to run your own business, and you can receive fixed costs on your mortgage. You can also receive tax deductions on your mortgage interest and property taxes by running your own business.