When the weather in Canada turns cold and winter sets in, a lot of us think about a blue sky vacation, others think about buying a vacation property in the U.S. sunbelt or even in British Columbia where the weather is milder. Still others enjoy winter and look for a winter vacation property here or in the US. While the allure of long beach walks, and the idea of hitting the ski hills just outside your chalet is attractive, the question is how to finance the dream. First do your research.
There are other considerations if buying in the U.S.
- Your purchase could be subject to estate tax. That means, when you die, your heirs will not only have to shell out U.S. estate tax on the fair market value of that home, they would also be hit with Canadian income taxes.
- Also, if you plan to rent out that property, then you’re subject to a whole host of issues.
- Use a Realtor who is experienced with US property sales.
If the vacation property is in Canada, you still can refinance your existing home and purchase the property outright if you have the equity or you can use what you have as a down payment. The basic process of applying for and qualifying for a mortgage is the same as for your principle residence; however, lenders will look at many more variables when assessing a property.
Your strength as a borrower is important but equally as important is the property. Lenders will look at the location, its proximity to a major market, year-round access to the property, paved roads, etc. Most lenders require at least 20% down. The rules changed in 2014 and they have just changed again. But don’t let that deter you if your dream is a vacation home.
Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta) and can be contacted at WWW.GUYTHEMORTGAGEGUY.COM