Can I Really Buy a Second Home with Just 5% Down?

Can I Really Buy a Second Home with Just 5% Down? I get asked this all the time—so let’s clear it up!

Short answer: YES, you can buy a second home with 5% down - but there are some important rules to know.

Here's the rules and how it all works:

Property has to be owner-occupied (the owner or their family is going to live in it at least part of the time). So for example, you could buy a vacation property, a home for a grown up child, or they could flip their current house into a rental, and purchase a new house to live in.

You would have to pay the mortgage insurance premium (which gets rolled into the mortgage).

Remember 5% down is only for homes less than $500k. If the price of the next property is above $500,000, the minimum down payment is 5% of the first $500,000, and then 10% of the difference. For example, on a $600,000 house the minimum down payment is $35,000.

You cannot buy a rental with 5% down payment. A rental needs to be 20% minimum.

The deal needs to make sense to the insurer and the lender to avoid mortgage fraud. For example, if someone owns a million dollar home in Waterloo and they want to buy a $500k condo in downtown Kitchener, the insurer/lender is going to assume it's going to be a rental and turn down the deal. 

Questions? As always please reach out, and have a terrific May!

Credits and thank you to Jim Steffler for this information. If you’re looking for a great mortgage agent, consider reaching out to Jim!

Jim Steffler

Mortgage Agent Level 2

Dominion Lending Centres National Ltd.

TEL: 226-338-5136

EMAIL: jim@jimstefflermortgages.com

https://jimstefflermortgages.com