Second properties used to be a luxury reserved for the already wealthy, but that privilege is becoming increasingly more accessible to the average Albertan. Another home can be useful as a rental property, vacation house, or a place for your family members to live rent-free. If you are considering a second home, you will notice some key differences from when you purchased your first home.
When purchasing a second home, make sure you budget for all of those costs you were responsible for the first time around. This means inspections, attorney fees, and more. Furthermore, even if you are planning on renting out your new house, you need to consider all the costs of owning it. From utilities to property taxes, ask yourself if you would be able to afford the extra load on your budget on top of your first home’s mortgage and other monthly bills.
You have some options for financing a second home that you didn’t have available before. For example, instead of taking out a second mortgage, you can take out a home equity loan or refinance your first home. On the flip side, there are mortgage programs you won’t be able to access when buying a second home. An example of this is the Canadian Home Buyer’s Plan which is only available to first time home buyers. In any case, you will need to apply for financing and pass the approval process in much the same way you did for your first home.
Second homes come with a whole new set of tax implications. These will shift whether your second home is a rental or a personal-use property. Personal-use properties refer to homes exclusively for your relatives, your beneficiary, or yourself. If the property starts as one and then eventually turns into the other, you will need to account for the increase or decrease of income during tax time. Ensure you account for the taxes on your new property and become familiar with these Canadian regulations.
The process of buying a second home can be deceptively similar to buying your first home, but keep the above points in mind when planning out your budget. If you have questions about the home buying process, call the experts at Source Mortgage today at 403-341-7800!