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Cottage & Vacation Homes

Dreaming of buying a vacation property?

Financing a vacation property may be easier than you think!

And owning a vacation property makes sense on various levels; it may dramatically reduce the cost of vacations, bring your family closer together, be a good financial investment, and in some cases even generate rental income.

Vacation properties come in all shapes and sizes. Conventional homes are the easiest type of vacation property to finance.

What qualifies as a conventional home? This is a residential dwelling that follows standard house guidelines and is readily marketable and accessible throughout the year.

Once determined that the property meets these guidelines, the next step is to qualify for the mortgage. There will be new expenses to consider when you finance a vacation property. Banks take into account the new mortgage payment, property taxes, and heating costs, in addition to the expenses you already have. You need to qualify for all of these payments to get a mortgage on any vacation home.

Furthermore, there are down payment rules to follow for different types of vacation properties. Default insurance companies, such as CMHC (Canada Mortgage and Housing Corporation) and Sagen, will allow vacation properties that are conventional homes to be insured. This allows you to take advantage of Canada's minimum down payment rules, assuming you qualify.

What if the property does not meet the conventional home guidelines? Summer homes that are unique can be tougher to put a mortgage on, such as an older cabin with no heat source. Lenders will look at them on a case-by-case basis. If the property is far from meeting the conventional home guidelines, the house's value may not be considered in the mortgage financing. If this is the case, you may be required to get a secured line of credit against the land value alone. A secured line of credit requires a minimum down payment of 35 percent.

What if the property is just raw land? Raw land is the toughest type of vacation property to finance. It means the property has no services and potentially no driveway. This would make the marketability poor because not many people could afford to pay for these expenses. A down payment greater than 35 percent would be required.

You may be in a position to use the equity in your current home to help you purchase a vacation home. Find out what the requirements would be.

Let's discuss your needs and find the right solution for you!