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.