Buying a second home

An investment property can deliver a nice profit. Sources of income vary:

• Renovate and sell it at a higher price
• Rent it out for a monthly income
• Hold it until it increases in value, then sell and take the profit
   

What to keep in mind

Investing in real estate can give you a regular income, but there are risks involved. You could lose money and increase your debt — not to mention, lose your property if you can't make the payments. 
 

Before investing, consider the following tips:

• Find a good area to invest
• Consider whether you can afford the property
• Think about working with a co-investor
• Calculate the investment cost (for example, down payment and operating expenses)
• Determine how much time you'll need to spend on the property
• Figure out your estimated return on the property and deduct all applicable taxes
  
• Calculate how much income tax you'll pay on the profit
  
  

Extra income can cover housing costs for your primary home and investment property. But investing in real estate comes with responsibilities. 

Rental properties are popular because they bring in a regular income. But this means you deal with tenants regularly. Depending on the rental agreement, some operating costs, maintenance and repairs could be your responsibility. So, if you plan to own a rental property, run it like a business. Get a good accountant who knows the rules. Understand the relationship between landlord and tenant. And know the rules and regulations, like local bylaws. Not all properties can be used as rentals.
 

Buy a vacation getaway

Get a vacation property on the beach, or a cottage by the lake, to escape the stresses of everyday life. There are a few reasons a vacation home may be right for you:

• Use for weekend getaways or family retreats
• Use as a future retirement home
  
  

What to keep in mind

There are several items to consider when buying a vacation home. The following tips can help you get started:

• Decide if you can afford a vacation home
• Ask yourself if a vacation home is a good investment
• Find a good area to buy, so it suits your future lifestyle
• Choose a vacation home close to your primary residence so you can save on transportation costs and time

Owning a vacation home costs money, even if you're not living in it. Help cover costs, like maintenance, upgrades, property taxes or even mortgage payments, by renting the property out for short periods of time. Vacation homes usually require a larger down payment and special insurance. You'll most likely need flood coverage if your vacation home is near the water. Also, if you buy a fixer-upper, you might need funds to renovate the property.

Get the funds you need for a second home

When you're a first-time home buyer, you don't have the luxury of home equityOpens a popup.. But if you're an owner, you can use your equity to help buy your next property. 
 

Apply for a mortgage

Your home equity makes it easier to get approved for a mortgage. But this depends on how much equity you have. Find out how much equity you have with our home equity calculator.

If your housing needs have changed, you may be able to increase or decrease your mortgage. For a bigger home, you might need a new mortgage for a higher amount. And if you're downsizing to a smaller home, you may need a smaller mortgage. You may also be able to move your mortgage on the new home to another lender, though prepayment charges may apply.

Apply for a line of credit

You can combine your existing home equity with a line of credit to finance a new property. This option has several features:

• No prepayment changeOpens a popup.. Payment schedules on lines of credit are more flexible. This means you can pay more or less at any time, without a prepayment charge.
• Reusable credit. On a line of credit, more credit becomes available as you pay down your line of credit, up to your approved credit limit.
  
• Possible tax deductions. You might get a tax break if you invest money from a home line of credit into non-registered investments, like stocks and mutual funds.
  

To qualify for a line of credit, you need at least 35% of your existing home equity available.

Learn about the CIBC Home Power Plan Line of CreditLearn more about prepayment charges..