Mortgage Tips for Snowbirds
Snowbird mortgage rules are the same for anyone looking to finance a vacation home, unless the borrower resides outside the U.S. In the latter case, there are more onerous foreign national mortgage regulations, a higher interest rate would apply, and there are several title, estate planning, legal and tax issues which would need to be carefully considered. Given today’s exchange rate [CAD$1.00 = US$0.76], Canadians would do well to obtain a mortgage from a U.S. lender – preferably one affiliated with their Canadian bank (for relationship, credit history and funds transfer purposes).
But here are a few thoughts for those who are able to qualify for a conventional mortgage for the purchase of a property in the sunny South:
- Whether a condo or single-family home, call it a second or vacation home – not an investment property (rent it later, if necessary) - you can borrow up to 90% of value (vs 85% for a rental) and avoid a risk adjustment charge of 2.125% to 4.125% of the loan amount, depending on your credit score.
- Get your credit score to 740. Otherwise, depending on your down payment, another 1.125% to 3.250% risk charge could apply.
- Get a reliable pre-qualification letter. You don’t want to find out just before closing that your debt-to-income ratio (including mortgage obligations of all properties owned) exceeds the maximum lender threshold.
- Understand the costs, and then budget accordingly. There will likely be unexpected repairs, improvements, HOA/property management fees, travel costs, etc.
