Purchasing a Cottage / 2nd Home

Vacation Properties

Buying a vacation property is essentially like purchasing a second home. The minimum down payment remains 5% of the purchase price and will require the same processes as your first mortgage. If you are purchasing a non-winterized vacation home, or will not have year-round access, then you will be required to put down 10%.

It is also important to note that if you plan to use your vacation home to provide rental income as this will have different requirements.

If you are looking for a summer cottage, lenders have some restrictions on the property type to determine the required down payment. If the property meets Type A Criteria then you can put as little as 5% down, however if the property is a Type B property, then 10% down is required. If you are looking to avoid Mortgage Default Insurance, the down payment required ranges from 20 to 50% down depending on the property criteria. We can help you determine the options.

Vacation Homes (Type A)

· Foundation must be permanent and installed beyond the frost line. This includes concrete/concrete block or preserved wood foundations certified by a professional engineer or post/pier foundations on solid bedrock.

· Must be zoned and used as residential, rural or seasonal. Lenders do not accept mixed uses or rental pooling.

· Freehold or condominium title. Lenders do not accept co-ops or ¼ interest ownership.

· At minimum, property must have a kitchen, 3-piece bathroom, bedroom, and common area.

· Remaining economic life must be 25 years.

· Year-round road access on reasonable quality public roads, serviced by the local municipality. Lenders also allow privately serviced roads, provided there is a maintenance contract in place.

· Property must be winterized with a permanent heat source. For example, heating can be baseboard, forced air, water radiator, radiant, coal, propane, geothermal heat pumps, or heat pumps.

· Good quality construction with no signs of deferred maintenance.

· Water source: well, municipal serviced, and cistern. Water source must be drinkable. Lenders accept lake or river water, provided the property has its own filtration system. For example, a reverse osmosis system.

· There must be good market appeal in the area with no adverse influences or neighbourhood nuisances.

Vacation Homes (Type B)

All Type A property requirements apply to Type B, except for the following:

· No permanent heat source is required. For example, a wood stove, fireplace, stove or heat blower is acceptable.

· Foundation may be floating. For example, sitting on blocks.

· Seasonal road use is acceptable. This means the road does not have to be plowed during the winter.

· Water source needn't be drinkable. However, there must be running water in the home.

· Boat access only accepted.