There are hundreds of articles out there targeting first-time home buyers and telling them exactly what they need to know in order to buy their first place. But being a second-time home buyer isn\u2019t easy either.<\/p>\n
While you\u2019re likely going into your search of all the condos and townhouses for sale in Toronto or Winnipeg or Vancouver with a lot more information about the pitfalls and the costs of buying real estate, there is also new ground to cover.<\/p>\n
That new ground includes things like having to figure out how to sell your first home and the fact that you need to get a down payment together without qualifying for the rebates or programs that were available last time.<\/p>\n
Here\u2019s a rundown of just a few of the things that you might find different the second time around.<\/p>\n
You\u2019ll Have Equity to Use<\/strong><\/p>\n When you were buying your current home, you might have had to scrounge to find the money for a down payment. When buying a second home, that might not be necessary. That\u2019s because you won\u2019t just have equity in your home from your first down payment but, depending on how long you\u2019ve owned your home and the market, you could also have paid off a significant chunk of your mortgage or your home might have increased in value.<\/p>\n That could be enough to pay a 20 per cent deposit on your next place \u2013 which would mean that you could forgo costly mortgage insurance and save money. Of course, if you are buying a home that\u2019s significantly more expensive then you might still need to scrounge a little and pay for the mortgage insurance. It just depends on what kind of home you\u2019re looking for and what your current mortgage and financial situation looks like.<\/p>\n You\u2019ll Have a Home to Sell<\/strong><\/p>\n Making a down payment on your next place could be more difficult if you haven\u2019t already sold your first house. In fact, coordinating selling and buying property might feel a bit like being an air traffic controller. While in the past, many people would make an offer on a house that was contingent on selling their current home, that\u2019s not always possible to do anymore with hot real estate markets that give those who are able to make unconditional offers an advantage.<\/p>\n In addition, negotiating for a conditional offer could mean that you have to pay a bit of a premium when it comes to price. For that reason, many real estate agents suggest that you sell your first home before you purchase your second.<\/p>\n That way, you won\u2019t have to worry about potentially having two homes if your place takes a little longer to sell. While some agents promise a guaranteed price for your home even if it fails to sell, that price could be less than you would get on the open market.<\/p>\n Whether to sell or buy first is a decision that you\u2019ll have to make depending on how motivated you are to leave your current place, your financial situation, and what the market in your neighbourhood looks like. If you don\u2019t want to wait to sell your place in order to purchase your home, you might want to do everything you need to do to get it ready for sale such as staging or making repairs, or even put it up on the market while you\u2019re shopping for your second home. Bridge financing could potentially help you if you end up owning two homes. Just make sure that you qualify for it before you plan to use it as a solution.<\/p>\n You\u2019ll Still Need to Get Pre-Qualified for a Mortgage<\/strong><\/p>\n While you might think that you know how much of a mortgage you\u2019ll be able to qualify for and what kind of rates you\u2019ll be eligible for based on your current mortgage, the lending environment, your credit or your income could have changed significantly. Interest rates could have gone up in the interim or you might have changed jobs.<\/p>\n Changing jobs could affect how much of a mortgage you can qualify for, especially if you\u2019ve decided to start a business or freelance full-time. In that case, you\u2019ll have to prove your income through several years of tax returns. If you don\u2019t have returns because you\u2019ve recently left your full-time gig, you could find it difficult to qualify for a mortgage or end up paying significantly more in interest.<\/p>\n Another reason why it\u2019s critical to get pre-qualified for a mortgage before you set out searching for a home is that it\u2019s good to know exactly what you qualify for before you get your sights set on something that\u2019s above your price range.<\/p>\n You Won\u2019t Get Any Extra Help<\/strong><\/p>\n If you benefitted from things like the Home Buyer\u2019s Plan, which allows you to withdraw funds from your RRSP to purchase a home, the land transfer tax rebate for first-time buyers, or the Home Buyer\u2019s Tax Credit when you bought your first place, unfortunately they won\u2019t be available to you for the purchase of your second home. That means buying your new place will be more expensive and it could be more difficult to get the money together for your purchase.<\/p>\n You\u2019ll Know What You Want<\/strong><\/p>\n One of the advantages of buying a second home is that you are already aware of the process and all of the costs involved. You also will know better what you want in the house. Did the last seller convince you to skip the house inspection because there were multiple offers and then you later found issues? You\u2019ll be more likely to check everything out to make sure that the roof isn\u2019t going to give out three months after you move in like it did with your first home. You also might already know some realtors that you will want to work with for your home sale and home search.<\/p>\n Buying a second home is different but also the same as buying your first. Use the wisdom you gained from your first experience and take advantage of this experience to gain some more. It will come in handy if you ever find yourself a third-time home buyer.<\/p>\n