Obtaining a Cottage Loan for a Vacation Property

May 14, 2012 - PRLog -- Owing a recreation or vacation property is a rewarding experience, and the right mortgage can make your cottage home an affordable investment. Some loan providers offer mortgage loans with prepayment privileges and amortization periods of up to 35 years.

Cottages that are occupied on a year round basis and found in well developed residential areas have more options when it comes to mortgage products. Cottage properties in less developed areas are harder to resell, and the resale value is more difficult to determine. For this reason, financial institutions take a conservative approach toward vacation properties that are not found in active markets.

Some cottage properties are used seasonally for residential purposes and have a residential zoning. They have a road access and working central heating system and are found in rural areas. This type of cottage is built for winter use, and water can be supplied via cistern, well, or the local municipality. If there is an acceptable filtration system, water can be supplied from a river or lake.

Other vacation properties do not meet the above requirements. They can be accessed by water craft or seasonal roads and do not have to be winterized. The foundation may be of a temporary nature, and a central heating system is not required.

The first type requires a 5 percent down payment while with the second type, borrowers are required to put 25 percent down. The amortization periods are up to 35 years and up to 25 years, respectively. The maximum amount to be borrowed also varies for winterized and non-winterized properties. Depending on the property, financial institutions offer private mortgage financing options and home equity loan programs.

When it comes to eligibility criteria, financial institutions look at the applicant’s credit profile. While bad credit mortgage loans are available, borrowers with a compromised credit score are less likely to get favourable terms. Like traditional mortgage loans, there are private mortgage financing options and institutional or bank mortgage programs. The options of borrowers with less-than-perfect credit are usually limited to private mortgage financing options.

For more information please visit: http://www.yourloan.ca/