A mortgage for your recreational home

A lender often needs to understand the own contribution (from equity) when purchasing a recreational property. The more equity the applicant can contribute, the lower the risk to the lender. Some mortgage lenders require the contribution of equity. The amount of the equity contribution can vary from lender to lender.

To understand the market value of the recreational home, the mortgage lender will assess the value of the home. This is usually done through an appraisal. Then the lender can assess whether the amount of the loan, is proportional to the value of the home.

The term of the loan can also matter to the mortgage lender. A shorter term may mean higher monthly repayments and less risk for the bank, while a longer term may mean lower monthly repayments and more risk for the bank.

Interest rates can affect recreational home financing. A lender may evaluate interest rates based on market conditions, the financial situation of the applicant, the characteristics of the recreational home and/or the burden of the property relative to security.

To protect the home and investment, a mortgage lender may require certain insurance policies, such as homeowners insurance and liability insurance.

A lender may also want to review the legal aspects surrounding the purchase of a recreational home, such as the purchase agreement, the mortgage deed and the organization's compliance with local laws and regulations.

Finally, a mortgage lender will identify the other, potential risks of financing a recreational home. These include factors such as the location of the home, the purpose of use(personal use or rental) and the general market conditions for recreational homes.

Curious about the alternative forms of financing for your own vacation home? You can read about it on this page.