A cottage property is still a residential home, but typically with a much better view or approximate location to recreational activities.
As such, the mortgage interest rates you can secure for a cottage are not any different that what you can secure for a house in town with a few exceptions.
From an income and credit point of view, cottage properties are assessed as single family residential units when it comes to mortgage applications. And when “A” mortgage rates cannot be secured due to stated income or credit, secondary mortgage options need to be considered just like you would need to do with any residential purchase.
Where things are somewhat different with cottage or vacation homes has to do with how banks and other mortgage lenders view the actual property in terms of amenities and location.
Many of the cottage areas today are year round access locations where the overall market size and activity is comparable or better to what you would find in most urban areas. And under this scenario, there is typically no difference in the mortgage rates you can secure.
But when cottage properties are located in more remote locations or do not have running water or sewer, then the cottage mortgage requirements are going to be more stringent and the cost of financing higher.
Banks and other mortgage lenders also recognize that many families that own a cottage also have a separate primary residence that may have a mortgage already in place. To accommodate these situations, mortgage programs allow for a single family to qualify for more than one mortgage without having to pay a higher interest rate, provided that they can qualify for both mortgages with the same reported income, net worth, and credit profiles.
There are definitely some different strategies that can be employed to get better cottage mortgage rates in certain situations. The key thing to remember is that each vacation property will be somewhat unique and a certain application approach for one cottage may not work for the next one.
If you’re looking to acquire a cottage or refinance an existing cottage mortgage, I suggest you give me a call so I can quickly go over your situation and provide relevant mortgage financing options we can go through together.
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel