Financing a cottage can be as easy as financing your principal residence or more complicated than you can imagine. This is why we strongly recommend getting advise before making the multiple drives back and forth to cottage country without being properly informed.
When it comes to buying a cottage a lot comes down to marketability. Lenders pay particular attention to the location, proximity to major urban centres, if it is on a large or small lake, if it has year round access as a four season cottage versus a three season "summer cottage" and if the property is on mainland or an island. The lender is trying to figure out marketability and pay a lot of attention to the property. When we have clients notifying us they are considering a cottage property or recreational home, we often ask to obtain listing information so we can vet out potential purchases with lenders so that the client can narrow their focus and ensure that the properties they are considering can obtain financing.
Another aspect to consider for recreational properties or secondary homes is that lenders require a minimum 20% down payment and some lenders, pending the marketability may prefer you to put as much as 35% down towards the down payment. When looking at the client the process is similar to purchasing your primary residence in that the approval will consist of reviewing income and serviceability along with credit and access to the down payment and enough savings for contingencies.
What I love about the broker channel is the access we have to lenders and the choice we provide consumers. Our team specifically, has made relationships with a lot of the lenders we work with in larger urban markets like Toronto and then their local branch in Muskoka for example if there is one. We also have made relationships with local credit unions, appraisers, realtors all whom have local knowledge which we find helps in the approval process. The are unique qualities in cottages, from the way they are built, access to water, disposing waste, proximity to urban centres and fire stations and the list continues that having access to local experts can be the difference between lenders comfortable with the type and scope of property versus not.
Similar principals in lending transcend across all types of purchases and like any other purchase we recommend getting pre approved and discussing how we can ensure you are informed and prepared for what should be a fun purchase!