Affordability, flexibility are key for first or second mortgages

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Many Canadians dream of owning a recreational property, where they can retreat to enjoy nature or a change of scenery. When it comes to financing those purchases, though, Canadians are split on the best way to turn that dream into a reality.

More than half of those who intend to buy a recreational property in the next five years or so said they would be willing to rent out the property to offset some of the ownership costs, according to a recent survey from Royal LePage Real Estate Services. Other potential methods would-be homebuyers said they would use to afford their dream homes include cutting back on discretionary spending or going in on a purchase with family and friends. One in four indicated they would like to buy land and build a home at a later date.

The story is different among those who actually own recreational properties, the survey found. Despite the willingness of would-be buyers to rent out their homes, only 17 percent of current owners do so. A further 10 percent said they would like to rent out their recreational property, but haven't done so.

"Many Canadians aspire to own a recreational property because of the lifestyle benefit it provides but potential buyers must understand how they plan to finance their purchase to ensure they can afford it," said Phil Soper, president and chief executive of Royal LePage. "While renting out your property is an attractive option to improve affordability, the ability to do so profitably varies by region. Some areas have bylaws that restrict rental activity while other regions have strict noise regulations that might limit your ability to attract renters."

When finding ways to make a second home more affordable, mortgage rates play an integral part. Mortgage brokers can help find and secure home loans on affordable terms and explain the ins and outs of borrowing to first timers and seasoned home buyers alike. But those who have been around the block a few times will know that affordability, though a major factor in the search for a mortgage, isn't the only thing to consider.

It's possible to calculate the overall value of additional flexibility features like refinancing options and prepayment conditions, according to mortgage expert Robert McLister. Writing in The Globe and Mail, he pointed out that up to 70 percent of mortgage holders eventually break or renegotiate their home loans. Trading a few extra interest points up front for future flexibility could wind up being worth it in the long run.

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