How To Get a Mortgage For a Cottage

Mortgage Financing for Cottage Ontario

Many Canadians love to get away to the lake or countryside during the long, hot summers and that’s why most of us have dreams of owning our own lakeside cottage one day. There is nothing like escaping the hectic grind of Toronto for a relaxing weekend up in the Muskokas.  Of course, if you aren’t planning on paying cash for the property, you’ll need to know how to get a mortgage for a cottage. It’s recommended that you explore all of your mortgage options before you start searching for your dream cottage.

Which Type of Cottage Will You Be Financing?

There are basically two types of cottages when it comes to obtaining financial assistance. These include year-round properties which come with a foundation below the ground’s frost line, are equipped with a permanent source of heat, and have potable water. This type of cottage is for personal use and is zoned as a residential property. The lender is assured that the home is self-sustainable when it’s uninhabited. Access to the property is also important as lenders prefer paved roads in case of emergencies such as a fire.

The water and heat can be left on during the winter and the permanent foundation helps keep animals from trying to live under the building. This type of year-round cottage is similar to a principle residence and obtaining a mortgage for one works the same way. Even though the cottage won’t be used as a primary residence for most of the year, you shouldn’t have a problem finding mortgage default insurance for it.

The other type of cottage is one which is regarded as a little more primitive since it has no potable water source, doesn’t have a permanent heating system and may not have a foundation. The building is typically heated by a fireplace or woodstove and is used mainly in the summers. For this type of wilderness cottage, the amortization period will be a maximum of 25 years and most lending institutions will be looking for at least a 35 percent down payment. In addition, mortgage insurance is generally harder to find. It’s also no secret that banks aren’t falling over themselves to mortgage these types of cottages.

When Banks Won’t Finance Your Cottage Purchase

However, this doesn’t mean you’re out of luck when it comes to obtaining a mortgage since alternative lenders are there to help you out. It’s possible to find financial assistance for a cottage even if your credit score isn’t the greatest or you’re self-employed. Generally, an alternative lender will look at your situation as being unique and will calculate their risk in lending you the money. The interest rate may be slightly higher, however, or you may be required to come up with a larger down payment.

Since most cottage buyers already own a principle residence, it’s a good idea to contact a professional mortgage broker to make sure you will qualify for a mortgage on a second property. In addition, the property more or less needs to be marketable and if you don’t have a down payment of at least 20 percent then mortgage default insurance will be needed. Just be aware that the Canada Mortgage and Housing Corporation (CMHC) no longer insures mortgages if they’re on second homes so you’ll need to find a private mortgage insurance company.

Some cottage buyers consider using a home equity line of credit or refinancing their home when searching for a second property. But no matter how you plan on financing a cottage, the lender wants to make sure the payments can be made. While buying a cottage may sound like a complicated process, our team of mortgage professionals at Mortgagemeister.com can simplify things for you. We’ll assist you every step of the way and provide assistance and guidance to help make your purchase go as smoothly as possible. We’ll explain the entire process of obtaining a mortgage for a cottage and do all of the legwork for you. Please contact us for more information on how to get the financing you need for your cottage purchase.

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Just finalized my mortgage with @MortgMeister. Took exactly one day, now off to the cottage! #HighFive

Definitely not the same experience I had with the bank, thanks @MortgMeister #ThatWasEasy

Just got my quote from @MortgMeister, my wife gave me a high five when she saw it. Thanks Jeff!

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