Ahhhh, the lake the trees, the call of the loon.  It is all so wonderful and Canadian isn’t it?  It’s cottage life and most of us love it!

To own your own little piece of paradise is a dream come true for many but let’s face the music for a moment.  Unless you have extra cash on hand to slap down on some cottage property, you are going to have to borrow the funds and while the basic process of applying for and qualifying for a mortgage are the same, there are a lot of different things mortgage lenders will look at  before lending money to buy a cottage.

First up, banks will take a close look at the property you want to figure out how much they are willing to lend you.  Factors like location, closeness to cities. lake access, surrounding infastructure.  Is it on a big lake or a small lake, is there a paved road to the property?


Also, lenders like to know there is a safe and regular water flow because that is an IMPORTANT and necessary factor for cottage life year round!

Seasonally speaking, lenders like to see properties that are usable year round as well as it really helps the value opf the cottage generally speaking year round.  So a four season property is ideal if you need financing.

And don’t forget, if you aren’t putting down at least 20 per cent, you’ll need mortgage default insurance just like an ordinary home purchase.

Now just in case you forgot,  CMHC (Canadian Mortgage and Housing Corporation), changed its rules last year so that it would no longer insure mortgages on second homes. That means you’ll have to go with a private mortgage insurance company which can provide the necessary coverage if your lender requires it due to the size of your down payment.

The world is not your oyster in this situation of cvacation property buying either because there may be more restrictions on how much money you can get depending on the property.

Depending on your situation, you could also consider refinancing your home or using a home equity line of credit if you have paid off enough of it to use it to borrow the cash you need. Think about getting creative, folks often use different forms of financing to make their cottage purchase.

However, if you only made a small down payment on your home when you bought it and haven’t owned it for very long, you may not have the room you need to finance your new purchase.

Ultimately what it comes down to is that your mortgage lender wants to make sure you can pay back what you borrow.  So make sure you do some thinking about the actual costs of owning a property and evaluate all your financial goals and see if it weighs in accordingly.  Because cottages aren’t cheap to maintain (or buy in some areas for that matter).


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