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The Challenges That Come With The Joys Of Buying A Cottage

The Challenges That Come With The Joys Of Buying A Cottage

As life gets busier with kids, work, and long highway commutes, we find ourselves daydreaming more and more of having a quiet Muskoka cottage to escape to. Waking up to the loons cooing on the lake, teaching your son to sit patiently enough to catch a fish and relaxing on the deck after a great family dinner. What you might not be aware of, is the fact that buying a cottage can be a lot tougher than sorting out a mangled fishing line on your reel. Reason being is that depending on where your dream cottage is located, how rustic it is when you buy it and many other strange conditions… The bank might not be interested in financing a mortgage on it for you. It’s not that you have poor credit, or that the bank doesn’t want to you to have a peaceful second home. It’s that it could be too risky of an investment for the bank opposed to easier investments, like financing a mortgage for the first-time home buyer. Don’t get disappointed, though, with the right advice and options provided by your mortgage broker, you can still obtain that cottage you’ve been daydreaming about. There’s just a few things to keep in mind before you get your heart set on any one cottage in particular, which is why we’ve put together this quick checklist for you to refer to.

Muskoka Cottage

Does is have a permanent foundation?

If your cottage doesn’t have a permanent foundation, it will be tough to get a mortgage on it simply because there is a risk that the foundation could breakdown, sink, be washed away or heave causing serious structural issues with the building itself. As the bank sees it, if the foundation washes away, the house could fall down and become a liability – Worth less than what they have given you a mortgage for to support your purchase.

Does it have year round access or is it water-only access?

Having a water-only access cottage can be a lovely idea, but what happens if there is a fire and you need emergency assistance to put the fire out – so that your cottage isn’t destroyed. It’s not a happy thought, but it’s really something you should keep in mind when you’re looking to buy. If ever there was a fire, it might be very difficult to get the assistance you need, when you need it and your mortgage lender is going to be concerned that if something were to happen is their investment going to be protected? If the lender thinks there’s too much chance of losing their investment (AKA your mortgage loan) they’ll bail on the idea before you can put a stopper in the bucket.

Does it have a permanent heat source?

Having a permanent heat source is another thing that your lender will like to see in your potential new cottage. Why? Because if you only visit your cottage in the summer months, they want to make sure the building can sustain itself without the pipes bursting in the winter when no one is around to notice. With a permanent heat source, you can program it to maintain a minimal level of heat throughout the cottage in the winter months so that bursting pipes is less of a possibility. In fact, your insurance company will also be a big fan of there being a permanent heat source as bursting pipes can lead to your insurance having to pay out big dollars to repair any damage.

Is the road it is on well maintained?

Road maintenance is a big deal! Even though you might not be going to the cottage in the winter months or you may have a sweet snowmobile to get to your cottage once the snow flies – you’ll want to ensure the road that the cottage is on is well maintained. Again, although it’s not something you like to think about, if an emergency were to occur, if help has a hard time getting to you, your lender is going to see that as a liability. Whether it’s a fire truck, police, or perhaps ambulatory care – making sure that the home is easily accessible, should be a high priority on your list.

Does it have a potable water source?

You might question, why your lender cares if you have a potable water supply or not… But, having a potable water source is needed whether you’re looking to get a mortgage on a home in town or on a cottage in the middle of nowhere. Since your lender technically owns the home until you’ve paid every cent back to the bank, the lender wants to be sure that you’re healthy but also that their investment is in good health as well. If the ground water is contaminated by chemicals or other dangerous substances, it’s possible that the new owner or the lender could be on the hook to clean up the issue or remove the home from where it stands in order to deal with the environmental ordeal happening underground. If you were to buy the cottage and then find out there is a bigger issue, later on, having the remove the cottage from the property makes the investment (the value of the mortgage they have given you) obsolete if you were ever to default on your payments.

Is it fully insulated?

Having your home fully insulated is going to matter to your lender. If it’s not fully insulated there is more risk that nature’s wonderful side effects (like wind and water) could have a more dramatic effect on the home during a storm or in the winter months. Similar to the reason for needing a permanent heat source, your lender will want the property to be properly insulated to help keep any wandering animals out, in addition to protecting your pipes from bursting in the winter and possibly depreciating the value of their investment.

Do you have 20% down put aside to purchase?

Lastly and most importantly, you’ll need to make sure you have a solid 20% down payment to purchase your new cottage. Unlike with a residential house, where CMHC will give you mortgage insurance to help protect your lender’s investment – CMHC no longer insurances second home mortgages and unless you have a ton of cash stuffed in your mattress… This alone can be a potential wall you could run into when looking to buy that relaxing oasis you long for. To prevent this issue, be sure that the price points that you are looking at are realistic for your budget.

Whether you’re looking to escape the buzz of the city or are looking for a peaceful gem to sink your dollars into as a retirement cottage there are many things to keep in mind. With your trusty mortgage broker on speed dial, though, I can help you review all of your options and overcome the hurdles that might pop up along the way. In fact in working with an experienced mortgage broker, you’ll not only benefit from their knowledge but you’ll also benefit in this case from their extensive Rolodex of contacts – Just because the banks might not be interested in backing your mortgage doesn’t mean that there aren’t private mortgage investment companies that your broker can talk to help get you the keys to the kingdom you so greatly deserve.

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