Cottage Financing

STATISTICIANS TELL US that, in the next decade, the Canadian 'baby boom' generation will create an unprecedented demand for vacation/2nd homes in 'cottage country'. Why? Baby boomers, as a group, stand to inherit more wealth than any other generation in history. Being wise investors, they will want to funnel that wealth into pleasure pursuits, while retaining their newly acquired capital. A cottage can satisfy both objectives.

FOR THOSE WHO don't have enough cash to purchase a cottage 'outright', a mortgage may well become part of the financing equation. Unless that cottage is a 4-season home and zoned appropriately as a year-round residence, and is to be your principle residence, the banks & trust companies are not permitted to lend more than 75% of the purchase price. In fact, many banks & trusts are, either not interested in cottage financing at all, or at best, will limit financing to no more than 50 to 65% of value, unless you provide them with additional security. I've never understood that 'logic'. To me, a waterfront vacation retreat is one of the most desirable assets one can possess. I finance many cottages each year, but there are some issues to consider when making such a large financial commitment. Does the property have year round road access? Properties on unopened road allowances or on islands are generally more difficult to finance. Is the access road maintained by the township or by a cottage association or by you? What is the cost? If there is water frontage, is it ideal for swimming & boating, or, is it weedy or shallow? If it does not have water frontage, is there water access available? Is it deeded access? Is the water supply from a well or from the lake? Is the septic in good working order? How large is the cottage? Cottages under 500 square feet are usually tougher to finance. Is there hydro service? The cost of bringing hydro to a remote location can be considerable. Without it, financing is very difficult.

THESE ARE ONLY a few of the issues you need to consider. It doesn't hurt to contact an experienced mortgage broker or realtor before you 'take the plunge'!

Gary Greer, co-owner – Mortgage Plus

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