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Financing a cottage
April 17, 2018 @ 1:17 PM by:

A question I often get asked is how much of a downpayment do you need when buying a cottage.   If you have good credit and can debt service the deal, financing can be obtained at good interest rates with as little as 5% down.


Lenders have divided cottages into Type A and Type B properties.  Here is the difference:


Type A Cottages: Type A is a cottage with year-round access, a winterized home with a permanent heat source and potable running water set on a permanent foundation below frost line. Type A cottages can be mortgaged similar to mortgaging a permanent residence, minimum 5% down payment, fixed and variable terms with eligibility to refinance once equity has built up. Interest rates might be 0.10-0.20% higher than a traditional mortgage mainly because its not ‘owner occupied’ year round. If the down payment is less than 20% an insurer’s premium must be added, similar to a standard mortgage.


Type B Cottages: Type B is a cottage with seasonal access, no permanent heat source yet has running water and sits on a floating foundation (concrete blocks or pilings). Type B cottages can be mortgaged with a minimum 10% down payment, fixed and variable terms as well. Type B cottages are not eligible for refinance at any time and the maximum property value can not exceed $350,000. Interest rates will also be 0.10-0.20% higher than standard fixed rate mortgages. And like type A cottages If the down payment is less than 20% an insurer’s premium must be added.


For properties that would be considered more of a 'camp', you are essentially financing the vacant land.   In that case, be prepared to have a downpayment of 40-50% of the purchase price and the willingness to accept higher rates, as many banks and trust companies simply aren't interested in this type of lending


Curious to see what you would qualify for?  Give me a call @ (613)394-5810 or send us a message, as I'd be honored to have the opportunity to earn your business.