Understanding Your Options for Financing Cabins
Living in Grande Prairie may not be enough for those who truly want to live surrounded by nature. In your hunt for the perfect Grande Prairie cabin or cabin to get away elsewhere, you will likely need the help of a Grand Prairie mortgage broker to secure financing because most mortgage lenders won’t lend you the money.
Since most of us don’t live in the cabin full time, the property is financed as a vacation property or under second home financing. This requires, at a minimum, a 10% down payment.
The lender’s willingness to lend money to buy the property depends on its value, and that value is contingent on how many other people are willing to buy it and the price they will pay for it. For example, properties that are accessible year-round, have verified potable water, come with a foundation and have year-round heat are worth more than properties that lack any of these things. If the property needs a caretaker to remain habitable, it isn’t worth as much.
Does it have a full kitchen and bathroom? You may think that out-house is quaint, but it causes many home buyers to pass it up, limiting the ability of the mortgage company to sell it if you fail to make the payments. Few people want to try to live in a cabin without a full kitchen, either. If the property can’t meet conventional lender’s standards, you may be stuck with a conventional mortgage that requires at a minimum 20% down or more depending on marketability. If the property has a very limited market, such as winter-access only properties or no source of water or heat but what you bring in, expect to pay at least 35% down if you can get a loan at all.
There are some features that may make the property worth more on the market and may cause lenders to forgive a few issues. For example, winter-access only doesn’t matter so much if the cabin is in easy reach of ski slopes or in a known vacation area. If the property is near a resort that can dispatch caretakers, the home has more value than one in the middle of nowhere. Properties on a lakefront may be forgiven the lack of a full kitchen.
There are strict criteria, though, to be able to put just 10% down on the cabin.
- Must have at least a 3 piece bathroom, full kitchen, common area and bedroom
- Must have a heat source but it doesn’t have to be permanent, so a stove, fireplace or blower is acceptable
- Water doesn’t have to be potable but running water on site is required
- Must have indoor plumbing, but it can be via potable water, holding tanks or chemicals
- Foundations necessary but can be a floating foundation if that’s normal for the area
- Must be at least 850 square feet of living space
- Valuation capped at 5 acres
- The loan value itself is capped at $350,000
- Good credit on the part of the borrower such as 680 minimum credit score, sufficient debt to income ratio, no third party guarantor (other than spouse), no gifted down payment, no R3s
- Seasonal access is permitted if other criteria are met.
If you and your dream cabin meet the criteria about, then a Grande Prairie mortgage lender may be willing to let you buy the property with only 10% down and a low interest rate. Call your trusted Grande Prairie mortgage brokers at Whalen Mortgages to get started on your new dream cabin. We work around the clock for our clients!