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Financing Recreational Properties: Your Guide to Buying a Cottage


Two chairs on dock

Congratulations! You've made the decision to buy a cottage, and that's fantastic news. Whether you're looking for a peaceful getaway or a place to create lasting memories with your loved ones, owning a cottage is truly something special. Now, before you dive into the exciting process of finding your dream cottage, there's an essential first step you need to take – speaking with a mortgage broker or lender. Financing a recreational property is not necessarily the same as mortgaging a home, and it's crucial to understand the ins and outs before you begin.


When it comes to financing recreational properties, there are generally two types to consider – 'Type A' and 'Type B' cottages. Let's take a closer look at what each of these entails.


Type A cottages are essentially secondary homes that could also serve as primary residences. They typically come with a permanent heat source, such as a furnace, boiler, or in-floor heat. Additionally, Type A cottages have potable running water and a permanent foundation below the frost line. These cottages resemble regular homes and are relatively easier to finance.


On the other hand, Type B cottages are missing one or more of the amenities mentioned above. This category includes homes that may rely on a wood stove for heat, homes resting on a temporary foundation (e.g., piers), and homes that lack safe, running water. Financing a Type B cottage can be more challenging, as lenders often require a higher minimum down payment and may charge a higher interest rate. This distinction can catch many buyers off guard, which is why it's so important to consult with a lender before you start shopping for cottages.


Perhaps a three-season cottage on a seasonal road is precisely what you want or what fits into your present budget. In such cases, your lender can discuss various financing options with you. For example, they might suggest refinancing your primary residence so that you can purchase the cottage using the equity proceeds. By exploring different avenues, you can find the best financing solution that suits your needs and goals.



Aside from the mortgage itself, it's also essential to consider other costs associated with owning a cottage. Insurance and maintenance expenses can significantly impact the affordability of your dream property. It's crucial to have a clear understanding of these additional costs before committing to a purchase. Your lender can help you assess the overall financial implications of owning a cottage, ensuring that you make an informed decision.


Now that we've covered the basics of financing recreational properties let's discuss the importance of knowing what your lender will approve you before you start looking at properties. Understanding your borrowing capacity allows you to focus your search on cottages that fall within your financial range. This knowledge prevents disappointment and helps you make realistic offers when you find a suitable cottage.


cottage overlooking lake

Remember, you don't have to feel stuck with one financing option. Many cottage owners finance their dream homes using a combination of different methods. For instance, you can take out a mortgage to finance part of the home and utilize your existing home equity to finance the rest. This hybrid approach provides flexibility and allows you to structure your financing in a way that best suits your needs.


To navigate the complex world of financing recreational properties, it's essential to work with a mortgage broker who has access to a variety of lending options. A skilled broker can assess your specific situation, help you understand the financing requirements, and guide you toward the most suitable options available. With their expertise and knowledge, you can confidently embark on your journey to owning a cottage.


In conclusion, financing a recreational property, such as a cottage, requires careful consideration and understanding of the different types of properties and financing options available. Speak with a mortgage broker or lender to discuss your plans, budget, and goals. By working with a professional and having a clear understanding of your financial standing, you can navigate the financing process smoothly and make your dream of owning a cottage a reality.




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