I bought our place on Bear Lake in March 2020, using equity from our home rather than savings. That is why cottage financing is the part of this job I like most. I did it before I did it for anyone else.
Type A and Type B
Lenders sort recreational property into two buckets, and which one your cottage lands in changes everything.
Type A is a four season property with year round road access, a permanent heat source, a permanent foundation, and a potable water supply. It is financed much like a regular home, and with default insurance you can get in with as little as five percent down.
Type B is everything else. Water access only, seasonal road, no permanent heat, no foundation. Expect a minimum of ten percent down, fewer lenders at the table, and a rate premium. Bunkies, boathouses, and floating structures generally do not count toward value at all.
The things that quietly kill deals
- Water access only, which knocks out most mainstream lenders
- Shared or unregistered road access with no maintenance agreement
- A well or septic that has never been tested or has no permit on file
- Leased land, particularly on Crown or First Nations land
- Zoning that says seasonal use only
Any one of these is workable. All of them are worth knowing before you make an offer rather than during the conditional period.
The equity route
Most of the cottage buyers I work with are not writing a cheque from savings. They are pulling equity out of a home they already own, using it as the down payment, and financing the balance. It costs less than you would expect and it moves faster, because your own home is a much simpler property for a lender to assess than a lake lot.
Get the financing sorted first
Cottage country moves in bursts. When something comes up on the lake you want, having your financing already understood is the difference between making an offer and watching it sell. That is worth doing in February, not in June.
If a place on the water is somewhere in your plans, would it help to know what you could work with before you start looking?
Lora Fenn, Mortgage Agent Level 1, Lic. #M25003153. Dominion Lending Centres YBM Group, FSRA #11129. 705-881-2780 · lfenn@dominionlending.ca
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