Second property purchase help
 

Hi. Me and my wife own our own home and it's been about 2 years this coming April. We are also expecting our second child so were looking to make a few changes. The thought of purchasing a second home has always been part of our plans but just been waiting and saving for the right moment and I'm hoping we would be able to accomplish this before our second child is born.

So first. Why? We're planning to house our in laws from Toronto. They are retired and am willing to help with our children. We do not require rent or form of payment from them but our current home is not large enough to accommodate this many ppl and Kids.

Initially 2 years ago we were pre approved and only used about 60% of our approval amount to purchase our home. I was wondering if that 40% approved amount we didn't take advantage is still considered or will we have to re qualify again for a new pre approval?

We are not looking to buy a bigger home just an apartment or townhouse for the in laws that will be abit 30km from our principal home. I've done a bit of reading but this is all still very confusing to me as there seems to be so many options such as vacation home, investment property, co borrowing etc.

Our income and job stability has never been better and we realize that this would be the best timing for a second property. We used a broker and a realtor for our first home but I wanted to do my own research and come equipped with information before I contact them again just so I don't waste mine or their time. I know there's probably a few more information I'm lacking for you guys to give me a solid advise but just ask and I will respond. By the way my mortgage is with TD canada trust if that makes a difference, I know certain banks offer different programs.
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Are you working with a mortgage broker? Best case scenario would be to sit down and speak with one and see what options you have based on your situation. You will need to re-qualify for a mortgage and depending on how you declare the 2nd property (rental vs. 2nd/vacation home) you may require a larger down payment (20%) vs. as little as 5% if purchased as a 2nd home or for a family member however this is more the consequence of having to deal with CMHC/Genworth. I believe there are also interest rate discounts on 2nd homes.

Since I'm in the business personally I would be very careful buying a 2nd property in this local market AND having it not generate any sort of revenue. Unless you have earned a decent amount of equity in your current home you stand to walk away with quite a bit of risk especially since you're entering the strata market. If this a firm plan, treat the 2nd home as a rental and make sure the ROI makes sense when it becomes a rental property or if you need to liquidate down the road.

I agree with what some of Bonka said.

I really think that you shouldn't push it debt wise. It's a huge risk to get a second mortgage in this market.

I would really think about getting your in-laws to put their names on the mortgage. The reason why I think this is "IF" there is any market correction. Your first house is safe from being repossessed by the bank if the value of you "second" mortgage is higher than the value of the property and it significantly reducing you risk.

Having everything under one name is a bad idea asset wise.

This is just my opinion.

A. if you are buying for the inlaws it might be better if they purchase it with your name and their names together

reason?
1. tax grants for seniors
2. in case a person who has interest in the property suffers an incident, the survivor always is the beneficiary unless otherwise stated - will save you $$ for the will and beneficiary system.

B. if that 40% wasnt used, you can still afford a 2nd mortgage as long as nothing has changed to decrease your income or credit. in some points you might be also able to refinance or take equity from your home to have a bigger amount of downpayment for the 2nd mortgage. ONLY, if the rates of the 1st mortgage is lower than the potential 2nd mortgage though, this will save you some interest and principal.

disclosure: while i have stated the (section B) fact to best of my knowledge, i dont guarantee it and you must talk to a mortgage broker or a financial analyst.
I will be happy to redirect you to one and assist you with tax grants of buying your other home.

wow - this will be the riskiest thing you could ever do in your life.

when things get more expensive, they get riskier.

do this at your own peril - and don't get sucked in by the 'vancouver is different' rhetoric, it's not, we're in a time of cheap money, which won't last, if you buy now (2 mortgages, and remember, you can never walk away from a mortgage, and house prices CAN fall by 20% in a matter of months), you could financially ruin yourself and more importantly, stunt your childrens' futures.

i didn't read your whole post, but why can't the inlaws just rent somewhere

and, no, your income and jobs are NEVER stable. if you're an employee, there's always risk your company will downsize.

no matter what, you HAVE to manage your risk.

you're buying a second property to house your in-law for free.
+
a second child incoming.

Those two are insane expenses.

Have you ever thought of a contingency plan? Jobs are never stable unless you are a doctor in Canada. Interest rates go up. You start to hate your in-laws.
Also condos and townhouses lose value the most in Richmond in case of a recession.

I think upgrading to a bigger house is the "safest" course of action unless you want privacy.

these are just opinions. Im sure you have a unique position/ level in life compared to everyone.
talk to your financial advisor, seriously.

and i hope your financial advisor has you on sufficient life insurance. now, i hate life insurance as much as everyone else, but with kids and alllll this debt, you'd better be protected in case you become disabled, dead, or whatever

Its good to buy a new home.I hope your financial advisor will help you a lot in that.first ask him.