What factors should you consider when applying for a cottage mortgage? First of all, cottage properties in well-developed areas that are occupied all year round (resembling traditional homes), have more options for financing than other types of cottages. Applicants who seek to finance the purchase of such a property will be offered more mortgage products, with different rates and terms to choose from. The options are not as many with a cottage home that moves away from what financial institutions consider a year-round type of cottage. This is because lenders value less the underlying security such properties offer.
The location of the cottage is, of course, important. If the location is not attractive, the property will be more difficult to resell. It may not be easy for financial institutions to determine the property's resale value. Mortgage lenders are not willing to extend financing for properties that are found in less developed areas.
Another aspect of cottage mortgages is the borrower's ability to pay off the debt, particularly in case of an existing mortgage. In many cases, a cottage mortgage represents an additional mortgage, which is held by the same person or family. The borrower's income may not be sufficient to repay a second mortgage while making payments toward the first mortgage.
Some financial institutions offer mortgage loans only for owner-occupied, single unit cottages. Depending on the LTV, you may be offered fixed or variable rate. Mortgages are available for refinance and purchase, advertised with low mortgage rates. The amount of financing depends on whether the property is classified as a secondary home, or it is a vacation property intended for seasonal access. You may be offered up to 100 percent financing for a secondary home. Mortgages of the second variety will require a minimum of 10 percent down payment. Properties with seasonal access do not have to be winterized. Second homes are classified as type A for the purpose of financing while vacation homes are type B. While applicants can obtain a mortgage loan for refinance and purchase with type A, mortgage providers may provide financing for purchase only with type B homes. The maximum mortgage financing for type A properties is usually 95 percent of the value for purchases and 90 percent for refinance. The same is between 75 and 90 percent with type B properties. The loan amount depends on the location of the property. If the cottage is located in Metro Vancouver, Metro Toronto, or Metro Calgary, the loan amount will be up to $700,000. If the property is situated anywhere else (rest of Canada), it will be $600,000. Up to $350,000 is offered for type B properties. However, exceptions can be made, depending on different factors.
Qualifying rates and terms differ from one lender to another. Mortgages with a term from 6 months to 25 years are offered with capped variable, standard variable, and fixed interest rate, as well as adjustable mortgage rate. The greater of the 3-year posted rate and contract rate applies to mortgage loans with a term of less than three years.
The location of the cottage is, of course, important. If the location is not attractive, the property will be more difficult to resell. It may not be easy for financial institutions to determine the property's resale value. Mortgage lenders are not willing to extend financing for properties that are found in less developed areas.
Another aspect of cottage mortgages is the borrower's ability to pay off the debt, particularly in case of an existing mortgage. In many cases, a cottage mortgage represents an additional mortgage, which is held by the same person or family. The borrower's income may not be sufficient to repay a second mortgage while making payments toward the first mortgage.
Some financial institutions offer mortgage loans only for owner-occupied, single unit cottages. Depending on the LTV, you may be offered fixed or variable rate. Mortgages are available for refinance and purchase, advertised with low mortgage rates. The amount of financing depends on whether the property is classified as a secondary home, or it is a vacation property intended for seasonal access. You may be offered up to 100 percent financing for a secondary home. Mortgages of the second variety will require a minimum of 10 percent down payment. Properties with seasonal access do not have to be winterized. Second homes are classified as type A for the purpose of financing while vacation homes are type B. While applicants can obtain a mortgage loan for refinance and purchase with type A, mortgage providers may provide financing for purchase only with type B homes. The maximum mortgage financing for type A properties is usually 95 percent of the value for purchases and 90 percent for refinance. The same is between 75 and 90 percent with type B properties. The loan amount depends on the location of the property. If the cottage is located in Metro Vancouver, Metro Toronto, or Metro Calgary, the loan amount will be up to $700,000. If the property is situated anywhere else (rest of Canada), it will be $600,000. Up to $350,000 is offered for type B properties. However, exceptions can be made, depending on different factors.
Qualifying rates and terms differ from one lender to another. Mortgages with a term from 6 months to 25 years are offered with capped variable, standard variable, and fixed interest rate, as well as adjustable mortgage rate. The greater of the 3-year posted rate and contract rate applies to mortgage loans with a term of less than three years.
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