Cottages and Second Homes/Cottages can be broken down into 2 categories:
· Second Homes (Type A)
· Cottage/Vacation Homes (Type B).
What’s a Secondary Homes (Type A) and how much can I borrow?
· Financing: From a borrowing guidelines perspective, the maximum loan amounts are 95% of the purchase price up to a maximum of $600,000.
A Secondary Home (Type A) must have the following:
· The 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.
· It must be zoned and used as residential, rural or seasonal. No mixed uses or rental pooling.
· Freehold or condominium title. No 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 or more as determined by an appraiser.
· Year-round road access on reasonable quality public roads, serviced by the local municipality. Privately serviced roads, provided there is a maintenance contract in place are acceptable.
· 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. Lake or river water are ok, 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/neighbourhood nuisances.
What’s a Vacation Homes (Type B) and how much can I borrow?
· Financing: From a borrowing guidelines perspective, the maximum loan amounts are 90% of the purchase price up to a maximum of $350,000.
A Vacation Home (Type B) must have the following:
· All Type A property requirements apply to Type B, except for the following:
o No permanent heat source is required. For example, a wood stove, fireplace, stove or heat blower is acceptable.
o Foundation may be floating. For example, sitting on blocks.
o Seasonal road use is acceptable. This means the road does not have to be plowed during the winter.
o Water source needn’t be drinkable. However, there must be running water in the home.
o Boat access only accepted.
There is a Type C which is basically anything that doesn’t fall into the above.
For financing there are two options:
· Banks: the actual buildings on the land are deemed of no value to them and so is treated like bare land value only which you would get 50% of the land value only usually with a line of credit.
· Private Lenders: a private lender may include the value of the buildings (typically at this point are bunkies) potentially up to 80% of the value of the property including the cottage.
Naturally, there are some exceptions to all of the above and other financing options using any other real estate that you own as security and happy to chat about that anytime.
