Purchasing a Cottage
Vacation Homes Can Be an Affordable Way to Get Away!
Looking to buy a cottage, summer home or a condo in the city as a second home? You may be able to use some equity in your existing home for the down payment or to finance the entire purchase. A minimum of 5% down payment is required for your secondary home. Higher down payments may be required depending on the type of property.
If you are planning on purchasing a second property, there are many factors to consider. Before you start shopping, it’s important to sit down with your mortgage agent/broker, financial planner and realtor. These three advisors will help you determine your purchase budget, discuss the potential tax implications, and ensure you find the right property to suit your needs.
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 (see sidebar) then you can put as little as 5% down, however if the property is a Type B property (see sidebar), 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.
If you are looking to purchase a year round home as a second property, most of these properties would be eligible for a 5% down payment.
If you are living in the country and are looking to purchase a condo in town to use during the week, then you can typically put 5% down on these purchases as well.
Figuring out your second home budget is another thing to think about. Here is a list we have compiled:
- Property taxes
- Utilities (is it 3 season or 4?)
- Maintenance and repairs
- What will your mortgage be?
- Entertainment (TV, Internet, phone, etc.)
Secondary 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. We do not accept mixed uses or rental pooling.
- Freehold or condominium title. We 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. We 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. We 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.
Get Away to Your Own Place
Having a place that is truly a 'home away from home' is a great tradition to build into your family. Get in touch to find out how we can help you make this a reality...and at the best rate!