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Some may feel there is no a better way to spend a summer weekend than at the cottage. There are no shortages of cottages in Ontario. However, getting a cottage mortgage in Ontario can sometimes seem like a confusing and overwhelming task.
The application process for a cottage mortgage in Ontario is not much different than applying a mortgage on a home that you will live in. The lender will look at your employment, assets, liabilities, credit history and more. They will be following the 5 C's of credit.
Learn more: The five Cs of credit
If you are interested in one day owning a cottage, it’s important to see if you would qualify for a mortgage for cottage.
For a cottage mortgage, lenders will review some of the following.
Quite a few applicants look to get a cottage as a second home. With that, they would need a second mortgage, in addition to their current home's mortgage, for cottage. Typically when buying a cottage you need to have a minimum down payment of 5% to 10% of the value of the cottage.
Learn more: Down payment on a house Ottawa
If you are buying a cottage as a rental, you will need a rental property mortgage. Rental property mortgages are looked at a little differently than an owner occupied mortgage.
Typically the minimum down payment increases to 20% down. Also some lenders charge higher interest rates for rentals than they do for owner occupied properties.
If it is a rental and you will have a lease, the lender may be able to use the rental income in your mortgage application.
Learn more: 10 Tips for Buying Your First Rental Property
If the cottage you are looking at needs to be touched up in a few areas, many lenders will not have a problem with that.
However if the cottage you are looking at currently is inhabitable then a traditional lender may have concerns.
In this situation you may be in need of a construction mortgage or private mortgage until the property meets a traditional bank’s standards.
Learn more: Construction Mortgages Ottawa
Learn more: Private Lender Mortgage Cheat-Sheet
If the drinking water is from the lake or river, most lenders will want to make sure there is a water filtration system in place and that the water is portable. When there is no system in place some lenders will do a hold back with your real estate lawyer until you can confirm that you have installed one.
Some lenders are able to assist with a three season access property however other lenders need the property to have year-round access. Using a mortgage broker can assist in finding the right lender as they have access to dozens of lenders to be sure to find the right one for you.
Cottages vary substantially from one to the next. Each property will have to be reviewed with its own strengths and weaknesses. You can consider the following when looking at cottage properties.
A home inspector is a great idea to help assure that you are purchasing a good quality property.
Learn more: Is a Professional Home Inspector Required?
Learn more: Ontario Association of Home Inspectors
If there are any particular items that you have concerns about such as the foundation or the septic, you can always get a specialist in to review.
Your real estate lawyer will typically do a title search on the property to find out if there are any problems with the title.
Some dated cottages may require substantial work. You may find that an older cottage requires repairs or updates. For example, to improve in the insulation, replace the roof, install a new septic and so on.
There may be certain comforts of home that you are use to. Moving into a cottage that is not well insulated, for example, may cause you discomfort in the hot summer days or cold winter nights. If it has an older heating system or baseboard heat without good insulation you may find the utility bills will be higher.
In you search for the perfect cottage, your search may take you to another country.
Although this may make for quite the adventure, there are many new considerations when looking to purchase a cottage abroad.
A Canadian lawyer will not be able to assist you with an abroad purchase. With that, you will need to find a strong real estate lawyer in the country you are looking in.
It’s important to check for limit on how long you can stay in a country. Also, for any visa restrictions for visiting the country.
Due to the uniqueness of cottages, the mortgage should be completed by a mortgage broker in Ottawa or another financing professional who has experience with them. The best way to finance a cottage is to first talk to a mortgage broker. By having access to dozens of lenders they can find the right solution for you based on the type of cottage, your finances and more.
If you have any questions with regards to a cottage mortgage in Ontario, or any types of mortgages. Please contact me today. There is no cost or obligation for a review.
Then sit back relax and look forward to the beautiful days ahead at your new cottage.
Andrew Thake is a seasoned mortgage broker with over 15 years of industry experience. He’s assisted more than 2,200 clients in finding their ideal mortgage solutions. Recognized for his excellence, Andrew has received high honours and awards, including the National Rookie of the Year from TD Canada Trust and recognition as a Top 10 Ottawa Mortgage Broker in 2023. He has also been inducted into the Hall of Fame at Dominion Lending Centres and has consistently received their Platinum Award during his tenure as a mortgage broker.
Andrew’s dedication lies in serving his clients and prioritizing their needs with an empathetic approach. Throughout the application process, he provides tailored, informed, and efficient services to ensure the best mortgage solutions for his client’s unique circumstances. The best part of Andrew’s job is when he gets to see the joy on his clients’ faces following their mortgage approval.
