Vacation Property Mortgage
Having a vacation home makes for a great escape. A vacation home or cottage is a property that is not your primary residence but is also not a full time rental or investment property. Due to current regulations and stricter requirements for owning a second home or vacation property, obtaining mortgage financing for these properties can be a little tricky.
Sometimes vacation properties are considered seasonal which means that the properties are only used for part of the year. When obtaining mortgage financing for a vacation property, a lender will want to know if the property you are purchasing can be used all year round or only during certain parts of the year.
A few different factors that would determine whether or not a property is considered "Year Round" (Type A Property) are as follows:
If the property you are interested in does not meet the above criteria, it would be classified as a "Type B" property and qualifying for a mortgage may require a slightly higher down payment.
Sometimes vacation properties are considered seasonal which means that the properties are only used for part of the year. When obtaining mortgage financing for a vacation property, a lender will want to know if the property you are purchasing can be used all year round or only during certain parts of the year.
A few different factors that would determine whether or not a property is considered "Year Round" (Type A Property) are as follows:
- Foundation must be permanent and installed beyond the frost line. This includes concrete / concrete block or preserved wood foundations, or post / pier foundations on solid bedrock.
- Must be zoned and used as residential, rural, or seasonal. Mixed uses or rental pooling is not accepted.
- Property tenure must be freehold or condominium.
- Co-ops or interest ownership is not accepted.
- At minimum, property must have a kitchen, 3-piece bathroom, bedroom, and common area.
- Remaining economic life must be 25 years.
- Year-round road access on reasonable quality public roads, serviced by the local municipality.
- Privately serviced roads are allowed, provided there is a maintenance contract in place.
- Property must be winterized with a permanent heat source. For example, heating can be baseboard, forced air, water radiator, radiant, coal, propane, geothermal heat pumps, or heat pumps.
- Good quality construction with no signs of deferred maintenance.
- Water source: well, municipal serviced, and cistern. Water source must be drinkable. Lake or river water is acceptable, provided the property has its own filtration system. For example, a reverse osmosis system.
- Property must have electrical power. Alternative energy sources may be considered on a case-by-case basis such as solar power, wind energy and generators.
- There must be good market appeal in the area with no adverse influences / neighbourhood nuisances.
If the property you are interested in does not meet the above criteria, it would be classified as a "Type B" property and qualifying for a mortgage may require a slightly higher down payment.
Leased Land
In Manitoba, it is common for many vacation homes/cottages to be located on leased land due to the large amount of provincial parks located in our province.
Properties that are located on leased land can be difficult to finance, but not impossible. The main challenge with properties located on leased land is the possibility of the leaseholder not renewing the lease at end of the term. Although it is very uncommon for this to happen, lenders are still very cautious of this fact since a denied renewal would mean that the property is worth little to no value at that point.
Generally speaking, the longer the amount of time left on the lease of the property that you are wishing to purchase, the easier it will be to arrange financing.
If you would like more information about vacation properties or would like to discuss the different options available to you, give me a call today!
Properties that are located on leased land can be difficult to finance, but not impossible. The main challenge with properties located on leased land is the possibility of the leaseholder not renewing the lease at end of the term. Although it is very uncommon for this to happen, lenders are still very cautious of this fact since a denied renewal would mean that the property is worth little to no value at that point.
Generally speaking, the longer the amount of time left on the lease of the property that you are wishing to purchase, the easier it will be to arrange financing.
If you would like more information about vacation properties or would like to discuss the different options available to you, give me a call today!
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Castle Mortgage Group
100-1345 Waverley Street
Winnipeg, MB, Canada
R3T 5Y7
100-1345 Waverley Street
Winnipeg, MB, Canada
R3T 5Y7