Buying a vacation home or an investment property is different than buying a primary residence. Buyers who already have a primary residence may be surprised by some of the ways that mortgages, taxes and interest rates vary between these two types of properties.
Down Payment Differences
It's possible to get an FHA loan for a primary residence with as little as 3.5 percent down. Vacation homes are not the same. For a vacation home, the buyer must put down at least 15 percent down payment in order to secure a mortgage. Some lenders may require buyers to put down more.
Higher Interest Rates
Vacation homes are considered to be high risk when compared to primary residences, because home buyers are more likely to walk away from a second home
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Lenders Mortgage Insurance (LMI) is available to Canadian buyers who are unable to meet the suggested minimum down payment of 20% on the purchase of their home. As savings dwindle and home prices rise, LMI is becoming a much more common occurrence, as prospective homeowners are not able to put together the money they need to place 20% down on a property. Yet there are still buyers unsure of exactly how it works and what it means for their future finances. See how this will all play out with your lender if you don't have quite have enough to cover the ideal down payment.