For instance, for the higher ratio mortgages where financing above 80% loan to value is required, the insured mortgage programs will allow you to finance a second property as a vacation home and even have two different categories that they will consider.
The first category, or type “A” property can receive financing up to 95% loan to value on property purchase and refinance. This includes properties that would cover off the basic characteristics as a typical residential home such as winterization, all weather roads, and can also accommodate up to two living units.
The second category, or type “B” property can qualify for up to 90% financing, but only on the purchase of a vacation home. The home does not have to be winterized and does not even have to have access by roads, which can be the case with cottages that are on islands found on certain lakes.
There are a number of other qualification requirements for the insurer as well as the mortgage company that will be providing the actual financing. But as long as your credit and cash flow meet the minimum financial thresholds, there is a good chance you can get the higher leveraged financing that is backed by a mortgage insurance program.
For vacation home mortgage requirements where there is no more than 80% leverage or loan to value required, there are both bank and private mortgage options that can be considered.
Being that private mortgage financing is more short term in nature, this can be used for a purchase, refinance, or debt consolidation and provide the time required to arrange long term financing either one or two years down the road when you can meet the qualifying criteria of a bank or institutional lender, or you have upgraded the property to meet an “A” lender’s requirements.
The bottom line here is that there are a large number of options and financing strategies available if you are looking to acquire, upgrade, or refinance a vacation home in Canada.
One way to assure you on the right path to vacation home financing is to work with an experienced mortgage broker who will be able to take your particular situation and quickly provide the most relevant options and cottage financing strategies available to you.
If you require a vacation home mortgage for a primary or secondary residence and would like to better understand your options or different approaches you can take, We suggest that you give us a call and speak directly to a member of our team and get a free assessment performed.
The distinction as to which is easier to finance will depend on the property and the strength of the credit and financial profile of the applicants.
For instance, if you’re wanting to purchase a vacation home in the Muskoka’s North of Toronto, if the property in question is on year round road access and is fully serviced with power, heat, and water, then then it can be financed as an additional mortgage property under most residential home mortgage programs in addition to your primary residence that also has a mortgage in place.
The key for this scenario is going to be the applicants ability to qualify for debt servicing for both mortgages. As long as you’re making a high enough income and your credit meets the minimum requirements, you most likely can get a highly competitive residential mortgage either on an uninsured basis or through programs utilizing insured mortgages for higher loan to value requirements.
When you are looking at properties that could not be considered type “A” cottage or vacation home properties where there may not be year round access or the living unit does not have a heating system, it will be more difficult to find the same exact type of financing that you have on your primary home.
Vacation home financing for “B” type cottage properties can still be procured, but likely at slightly higher rates and potentially not as high loan to value ratios either.
Once again, depending on the property, you may be looking more at home equity loan programs or private mortgage financing options.
If you’re looking into vacation home financing, we suggest that you give us a call and book a time where we can go through your situation and provide vacation home financing options for your consideration.
Whether you want to call it a vacation home loan or a cottage mortgage, this type of financing has become quite common in southwestern Ontario with many times a variety of mortgage options to choose from.
There are basically three main keys to cottage mortgage financing that you need to keep in mind when you’re considering purchasing a summer home or refinancing an existing vacation property mortgage.
First, is the type of cottage and its primary use. The more a cottage property neighborhood resembles an urban neighborhood and is used as a year round or most of the year round residence, the more likely it is that the property will qualify for the full spectrum of available cottage financing and residential financing programs.
When we speak of type of cottage, we’re referring to things such as road access and utilities. As soon as you’re considering a property that does not have year round road access and/or all standard utilities found in a residential home, the cost of financing is going to increase and the number of programs will also diminish. This is not to say that seasonal type properties cannot be financed. Just keep in mind that they may need get a mortgage from a secondary or B lending source.
Second, can the applicant service the debt load. When we’re talking about a second home where the primary residence also has a mortgage in place, the ability to service the debt on both the existing mortgage an a cottage mortgage are going to be key in securing cottage financing. When the cottage or vacation home is the only residence, then debt servicing requirements would be no different than those for any conventional residential mortgage.
Third, credit rate and credit profile can influence the types of cottage mortgage programs you may qualify for. Lower levels of credit can be eliminated from many of the institutional lending programs, leaving only private mortgage financing as an option.
If you’re in need of a cottage mortgage or want more information, we suggest that you speak with an experienced Toronto mortgage broker and go through your options before getting too far into the purchasing or refinancing process.