There is an increasing number of people today who are taking the leap and buying a second property. Unbelievably though, some of these people are being punished by banks and lenders, and they didn’t understand the differences between a second home and an investment property. In this post, we are going to look at the differences between the two and see which one would suit you best.
A Second Home
The first thing we are going to look at today is purchasing a second home. When it comes to second homes, these are generally popular with people that work away from home, have family in another part of the country, or invest in a holiday home.
One of the most important things to realize if you are considering purchasing a holiday home, you will not be able to rent the property out, and only the purchaser and/or their family may stay in the home.
When it comes to getting a mortgage for a second home, there are mortgage experts like the guys over at https://altrua.ca, and people like this can help guide you through the mortgage process for buying your second home.
Taking out a mortgage on your second home is very similar to the one you would take out on your main home. You will generally be required to place a deposit between 10% &15%, and there will be stipulations that are laid out by the lender for this property to qualify as a second home.
An Investment Property
So, investment properties work in a completely different way to the purchase of a second home, and these properties are generally purchased for the buyer to become a landlord.
When you approach a bank or lender in regard to a mortgage for an investment property, they won’t base the mortgage solely on your income as they would a mortgage or second home mortgage.
A mortgage for an investment property will almost always be based on the amount of money the property can generate. The bank or lender will want to know that the monthly income of the property alone will be enough to cover the cost of the property.
There is one other thing you will need to consider should you be looking for an investment property. Banks and lenders will often look for deposits of around 30%. While this may seem unfair, lenders have a lot to consider when it comes to investment properties, and the owners can often abandon the property and force the bank to repossess. The mentality behind a larger deposit is simple, the more money that is put down, the less chance that a buyer will walk away from the property.
I know that investing in a second home will give you a sense of fulfillment. So why not consider getting the Equity Residence – Investment Fund to make sure that you will get the perfect fit for you. It will always be of the highest importance to seek advice when considering a second property or an investment property. Professional advice will always be the best way to get the best deal whatever option you consider.