What Is Cottage
Financing?

More and more families today are seeking a secondary residence, whether to meet special family circumstances or simply to fulfill the desire for a vacation or leisure property. Cottage financing could be just the help you need.

Unlike traditional financing for which a homebuyer uses the equity from their principal residence to purchase a second property, the financing under a cottage financing plan is fully secured by the second property.

If you’ve found your dream property, you’ll likely be asked questions from your financial institution and legal team regarding items such as seasonal access roads, potable water sample, surveys, septic system, etc. Additional considerations include:

• Electrical source
• Heating source
• Year-round access
• Seasonal property
• Rental options
• Island property

If your bank won’t offer the proper financing, you still have options. Lending criteria has changed substantially in the last few years for a cottage mortgage. In the past, borrowers were required to arrange at least 25% of their own funds to put towards the property for the down payment. If 25% was not financially feasible, there was the option of refinancing your principal residence up to 80% to pay for the cottage – or at least come up with the down payment.

Today, lending institutions are allowing clients to finance secondary properties up to 95%. This will allow you to have that waterfront property or secondary home now rather than later. Cottage properties can be financed up to 90%.

What is the difference between secondary homes and vacation/cottage properties? In most cases, they are the same but to a lender there are a few distinct characteristics between the two that will allow the lender to decide if they will lend 95% or 90%.

Secondary Home Characteristics:

• 95% financing available with a maximum amortization of 30 years
• Potable water
• Year-round road access
• Permanent foundation
• Winterized
• Maximum loan amount: $600,000
• Up to a maximum of two units
• Available for purchase and refinance

Vacation/Cottage Property Characteristics:

• 90% financing available with a maximum amortization of 25 years
• Property characteristics same as secondary home except for the following:
  • Water source does not need to be potable
  • Foundation may be floating, i.e. on blocks
  • Property need not be winterized
  • May have seasonal access (road not plowed during winter or only accessible by boat)
  • Maximum loan amount: $350,000 (exceptions will be considered on a case-by-case basis)
  • One unit maximum

At GLM Mortgage Group, we determine your needs and wants before sourcing lenders, including the big banks, to find the right option based on your needs.

For families with good credit, the opportunity to obtain the same rate or better than the bank is high, and our services are free, so you have nothing to lose. When searching for cottage financing, GLM Mortgage Group provides first-class cottage mortgages at the best rates to help your family meet your goals of making your cottage dreams a reality.

Get your financing in place before beginning your search. Don’t fall in love with a property and find out you’re not able to receive the proper loan. Cottage financing may require some additional considerations, but working with a qualified mortgage specialist will ensure you get the expert advice you need.