Buying a second home is a tempting option for Ontarians looking to make secure investments. With real estate prices spiraling upwards in many Canadian provinces, you may be tempted to invest in purchasing a second home to take advantage of the appreciating value. We have collated some information about buying a second home, essential points to consider, and steps to help you decide.
Reasons to buy a second home in Ontario
There are several reasons why you might want to purchase a second home. Knowing why you are making such a significant commitment is key to keeping an eye on the big picture.
Having a place to get away
Cottages and vacation homes in remote areas are a favorite choice of Ontarians looking to escape the busy city life. Depending on how often you plan to use this property, it might be easier to finance a vacation when you need a getaway instead of investing in a home.
Many Ontarians look into buying a second home because they feel limited by the space of their current home, want to move to a different locale, want to build more real estate equity than what they have now. You can consider upsizing when your first home is almost or entirely paid off. Otherwise, you might be putting yourself in a financially risky situation.
This is one of the top reasons for buying a second home. Owning a second property allows you to rent a portion or even the entire property and add to your monthly income. It may seem like a sensible and practical reason to invest in a second home, but it would be best to consider the challenges. A steady income is not always guaranteed – tenants can leave whenever they want. You might go months without anyone renting your property while still making monthly mortgage payments. You are also responsible for repairs, maintenance, and replacements as a proprietor.
Strategies when buying a second home
Here are the crucial steps to ensure your second home purchase pays off in the end:
Keep some extra savings
While you may be ready to invest your savings to buy a second home, you should keep some funds aside to meet unexpected expenses. It would help if you had enough to cover up to 6 months of costs ranging from insurance and utilities to repairs and taxes.
Pay as much as possible
While this may seem extreme, you should pay as much as you can upfront when you buy a second home. Buying a home carries a degree of risk, and if you pay more now, you can save on interest charges in the end.
Steps to buying a second home
Once you are ready to purchase your second property, you can follow these steps to ensure you are on the right track:
Know what you can afford
It is tempting to fall in love with a larger property with more features, space, and a heftier price tag. While higher-value properties can provide more significant returns, they also require more financial investment and carry considerable risk. Look for homes that cost the same or slightly more than your current home to strike a good balance between investment and safety.
Research the market
It is essential to research the locality, the building, and the rules and regulations in the area before making a purchase decision. An excellent real estate agent can help make this process easier, so consider consulting one for advice and recommendations.
Consult a mortgage specialist
Once you have found the right home, the next step is to find a good mortgage solution. Consulting with a specialist can simplify this process as most lenders consider second mortgages a risky investment. Mortgage specialists have experience financing a second home, and they can help you choose the best mortgage option. Buying a second home can prove a sound investment decision if you prepare and research.