“I knew this was going to be our forever place,” says Shantel Clark. Ian had been vacationing at his family’s Georgian Bay island cottage his whole life, and Shantel had fallen in love with the spot as well. They’d visited the island next door for summer cocktail hours and Monopoly games—and now they had the chance to own it. “We didn’t plan for it, but we couldn’t resist it,” says Shantel.
The couple had been saving for a house, but diverted the funds to the cottage down payment instead. Still, the financing didn’t go smoothly. As they made their offer, they thought they had a pre-approved mortgage sorted out, but when the bank realized that the purchase was a seasonal island property, the terms shifted dramatically: “They asked us for a 50 per cent down payment.” Their realtor quickly connected them to a mortgage broker in cottage country, and they ended up getting a mortgage with 15 per cent down.
That kind of last-minute scramble isn’t uncommon, especially if communication between the lender and borrower hasn’t been crystal clear, says Michelle Drover, the vice-president for Atlantic Canada of Verico Premiere Mortgage Centre in Halifax, N.S. “Mortgage rules have changed a lot in the last couple of years, and there are more factors than ever that can affect what you can get, and what interest rate you’ll pay,” says Drover. There are essentially two levels of mortgage classification: Type A properties, which could be cottage or residential properties, and which have central heating and year-round road access; and Type B properties, which may or may not have central heating and may only have seasonal road access. With a Type A property, you can get a 95 per cent mortgage with a five per cent down payment; Type B properties may be financed up to 90 per cent with as little as 10 per cent down payment. But other factors can come into play in determining the required down payment and your interest rate: a prime location and good future marketability could net you a better interest rate, while needing cottage rental income to help make ends meet could boost your rate. “The lender needs to truly understand what the client is looking to do to give them the best mortgage product,” says Drover. “You want to do it in advance and be absolutely clear.” >>