How to finance a cottage in Ontario

A cottage mortgage is not approved the same way as a mortgage on a house in the city. The lender looks at you, and then looks hard at the property. Road access, the foundation, the heat source and the water supply can change the down payment, the rate and the list of lenders willing to say yes.

Type A and Type B properties

Lenders and mortgage insurers commonly sort recreational property into two groups, called Type A and Type B. The published rules of Sagen, one of Canada's mortgage default insurers, give a good picture of where the line sits.

Feature	Type A	Type B
Road access	Year-round, on a municipally maintained road. A private road can qualify with a maintenance contract.	Seasonal road is acceptable. Boat-only access may be accepted.
Foundation	Permanent, below the frost line or on solid bedrock	Floating foundation, such as blocks, is acceptable
Heat	Permanent heat source, such as a furnace, baseboards or a heat pump	Not required. A wood stove or fireplace is acceptable.
Water	Drinkable. Lake or river water needs its own filtration system.	Running water, which does not have to be drinkable

One missing item can move a cottage from Type A to Type B. A well-built, insulated cottage on a road that is not plowed is still Type B to most lenders. Our guide to seasonal vs four-season cottages explains each feature.

Down payment and the mortgage insurers

With a down payment of 20% or more, the mortgage does not need default insurance and the lender applies its own rules. Many lenders are comfortable at 20% for a Type A cottage. For Type B, seasonal or unusual properties, some ask for more, and some will not lend at all.

With less than 20% down, the mortgage must be insured by CMHC, Sagen or Canada Guaranty. Each has its own second-home rules. As published in 2026:

• Sagen has a Vacation/Secondary Homes program. For Type A, the minimum is 5% down on the first $500,000 of value and 10% on the portion above that, with the property valued under $1.5 million. For Type B, the minimum is 10% down from your own resources, and all applicants need a credit score of at least 680.
• CMHC offers a Second Home product. A borrower can have CMHC-insured financing on up to two properties at a time. The home must be suitable and available for full-time, year-round occupancy and have year-round vehicle access. The minimum is 5% of the first $500,000 and 10% of the rest, with a price under $1.5 million.
• Canada Guaranty has a second-home program called Lifestyle Advantage, with the same 5% and 10% minimums. The property must be winterized with year-round access. Island properties without a bridge are not eligible.

In all three, the home has to be for your own or your immediate family's use. Rental and investment properties are not eligible under these programs. You must also pass the mortgage stress test, and the insurance premium is added to the mortgage.

These are insurer minimums. Your lender can be stricter, and programs change. Ask a mortgage broker who arranges cottage financing to confirm current rules for the exact property.

Using equity from your home

Many buyers pay for the cottage partly or fully with equity from their primary residence. There are two usual routes.

• A home equity line of credit (HELOC). You borrow against your house and pay interest only on what you use.
• A refinance. You replace your current mortgage with a larger one and take the difference in cash. Check for a prepayment penalty if you break a term early.

The advantage is that the lender is looking at your house, not the cottage. That makes this a common route for Type B cottages, water-access properties and anything a lender finds unusual. The trade-off is that your home is the security for the cottage debt.

Vacant land and water-access property

Raw land is harder to finance. Fewer lenders offer land loans, down payments are much higher than for a building and terms are shorter.

Water-access cottages are similar. Some insurers and lenders will consider boat-access property as Type B, and many will not.

Buying with family or friends

Sharing a cottage can make the numbers work. Lenders usually want every owner on the mortgage, and each of you is responsible for the whole debt, not just a share.

Before you buy, have a lawyer write a co-ownership agreement. It should cover who pays what, how weeks are divided, how repairs are decided and what happens when someone wants out, separates or dies. Decide with your lawyer how title will be held, since joint tenancy and tenancy in common work very differently on death.

Closing costs

Set aside cash for costs on top of the down payment.

• Ontario land transfer tax. Paid on closing, on a sliding scale. Only the City of Toronto adds a municipal land transfer tax, so cottage-country purchases pay the provincial tax only.
• Legal fees and title insurance.
• HST. A used residential cottage sold by an individual is generally exempt. HST can apply to a newly built cottage, to vacant land in some cases, and to a property that was used mainly for short-term rentals. Ask your lawyer to confirm before you sign.

The full list, with the tax brackets, is in our calculators and the closing costs guide.

Rules for non-Canadian buyers

Two separate sets of rules can apply to a buyer who is not a Canadian citizen or permanent resident.

The federal purchase ban. The Prohibition on the Purchase of Residential Property by Non-Canadians Act has been extended to January 1, 2027. As of this writing no decision on what happens after that date has been announced. The ban applies only to residential property inside a census metropolitan area or census agglomeration. Property outside those areas is not covered, and that includes much of rural cottage country. Vacant land is also excluded. Some cottage-area towns do fall inside a census agglomeration, so have a lawyer check the exact address.

Ontario's Non-Resident Speculation Tax. This is a 25% tax on the purchase price, on top of land transfer tax. It applies across the whole province, cottage country included, when a foreign national, foreign corporation or taxable trustee buys residential property with one to six single family residences. There are limited exemptions and a rebate for some buyers who later become permanent residents.

The two rules are independent. A property can be exempt from the federal ban and still be subject to the Ontario tax.

Before you shop

1. Get pre-approved, and tell the broker it is for a cottage.
2. Ask what your lender needs for Type A, and what changes for Type B.
3. For each listing, check the road, foundation, heat and water before you book a showing.
4. Make every offer conditional on financing.

The Ontario Cottage Buyers Guide walks through the rest of the purchase.

This is general information, not financial, tax or legal advice. Lender and insurer rules change, so confirm the details with a mortgage professional and a lawyer.