What You Need to Know When Buying a Cottage or Cabin in Canada
You may be eyeing a lakefront cottage or perhaps a cabin in the middle of the woods.
Either way, you know that recreational homes are an excellent investment, especially when you're looking forward to spending happy moments with your family in them.
Here, your reliable mortgage broker in Canada lets you take a look at some things you must know before buying a cottage:
What Should You Look for in a Cottage?
If you're thinking about buying a cottage, there are a few things you should keep in mind:
LOCATION
The first thing you should consider is the location of the cottage. Do you want it to be near a lake or in the woods? Do you want it to be in a rural area or close to town? Once you've decided on the location, you can start looking at specific properties.
SIZE
How big do you want the cottage to be? Do you want something small and cozy or large enough to accommodate a group? Keep in mind the cabin's size will also affect the price.
PRICE
Of course, you will also have to consider your budget. Cottages can range from a few thousand dollars to hundreds of thousands. Determining how much you can afford is essential before looking at properties.
AMENITIES
What kind of amenities do you want in a cottage? Do you want a fireplace? A hot tub? A pool? Make a list of the things you need, and then start looking for cottages with those features.
What Do Your Finances Look Like Right Now?
If you're currently carrying any high-interest debt, such as credit card debt, it's a good idea to pay this off before applying for a mortgage. This will improve your chances of being approved for a loan and help you get a lower interest rate.
It's also a good idea to determine your credit score before you start the mortgage process. This will tell you whether or not there's a need to take action to help improve your score before actually applying for a loan.
What Mortgage Requirements Should You Meet When Purchasing a Cottage?
When purchasing a cottage, there are certain mortgage requirements you need to meet. The most important factor for consideration is your debt-to-income ratio. This is the percentage of your income that goes towards your monthly debts. Lenders want to see that you can actually afford your monthly payments, including your mortgage, property taxes, and other associated costs.
You must also ensure you understand if this cottage is classified as a Type A or B property as that affects what lender works with you and on which terms.
Your credit score is also essential as a good credit score will get a lower interest rate on your mortgage. This will save you money in the long run.
Lastly, you will have to show proof of income and assets. This can include pay stubs, bank statements, and investment statements. Lenders will want to make sure you can afford the mortgage payments, both now and in the future.
How Much Downpayment Is Needed for a Cottage?
When it comes to cottages, lenders typically require a down payment of at least 20%. This is because cabins and cottages are considered higher-risk investments than your average home. As such, lenders want to ensure that you have a significant amount of skin in the game.
When's the Best Time to Invest in a Cottage?
The best time to buy a cottage in Canada depends on a few factors, such as the local market conditions, your budget, and your preferred location. Generally speaking, the cottage-buying season runs from May to October, although this can vary depending on the area. In general, larger, more popular lakes and riverside communities will have more listings available during this time. In contrast, more remote areas may have few or no listings available until later in the year.
THE BOTTOM LINE
Buying a cottage is a huge financial decision, and you want to be absolutely sure that you are ready for it before taking the plunge. There are many things to consider, from the initial purchase price to the ongoing costs of upkeep and maintenance. But if you do your homework and ensure you're fully prepared, buying a cottage can be a great investment that will provide you and your family with years of enjoyment.
When you’re all set, you can contact the best mortgage broker in Canada to help you.
Level Up Mortgages is a trusted mortgage broker in Canada that can help you get the cottage of your dreams. Get in touch with us today so we can assist you in your mortgage journey!