Buying a cottage as your first home

Use recent completed sales of comparable properties on the same lake or nearby competing lakes. Match road access, waterfront quality, lot size, condition and permitted use. Provincial reports and asking prices cannot establish what one cottage is worth.

What matters is occupancy. If you will live there full time, lenders and the government treat it as your home. If you will only visit, it is a second property, even if it is the only one you own.

When a cottage counts as your home

A cottage you move into and live in as your principal residence is financed like any other home. That opens up:

• Owner-occupied mortgage rules. The same down payment rules as a city home: 5% on the first $500,000 and 10% on the portion above, up to the $1,500,000 insured price cap.
• Longer amortization for first-time buyers. Since December 15, 2024, first-time buyers can get a 30 year amortization on an insured mortgage.
• The FHSA. A qualifying withdrawal from a First Home Savings Account is tax-free if you intend to live in the home as your principal residence within one year of buying it.
• The land transfer tax refund. First-time buyers can get up to $4,000 back on Ontario land transfer tax if they move in within 9 months and have never owned a home anywhere.

When it does not

If you keep renting in the city and use the cottage on weekends, it is a second home, even if you have never owned anything else. The FHSA and the land transfer tax refund do not apply, and the mortgage follows second-home rules. Read the cottage down payment guide for how those work.

What lenders need to see

A cottage you will live in all year has to work as a home all year. Lenders typically look for:

• Year-round road access that is ploughed in winter, ideally a municipal road.
• A permanent heat source. A wood stove alone can be a problem for both lenders and insurers.
• A permanent foundation, not just piers or blocks.
• Safe drinking water from a tested well or a treated lake system.
• An approved septic system that is sized and working.
• Marketability. A property in an area where homes regularly sell.

Three-season cottages on seasonal roads are usually not suitable as a first home, both for financing and for daily life. See four-season vs seasonal cottages and cottage road access.

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Your income and the commute

Lenders will want to see that your income keeps going once you move. If you work remotely, a letter from your employer confirming your arrangement helps. If you will commute, be honest with yourself about winter driving. If you are self-employed, see self-employed cottage mortgages.

An example

Say you buy a year-round cottage for $500,000 as your first home, with 5% down. Your down payment is $25,000. Ontario land transfer tax is $6,475, and as a first-time buyer who moves in, you could get up to $4,000 of that refunded. Mortgage insurance applies with less than 20% down, and its premium is added to the loan. Use our down payment calculator and closing costs calculator to run your own numbers.

Where the down payment can come from

When the cottage will be your home, you have more options than a second-home buyer:

• Your FHSA. Tax-free when it is a qualifying withdrawal for a home you will live in.
• The Home Buyers’ Plan. Lets first-time buyers borrow from their RRSP for a home they will live in, then repay it over time. Check the current limit and repayment rules with the Canada Revenue Agency.
• Savings and investments. Lenders want to see where the money came from, usually 90 days of statements.
• A gift from family. Common for first homes, with a signed gift letter.

Living there in winter

A cottage that is lovely in July can be a different place in February. Before you buy, check how the property is heated and what it costs, whether the water line is buried below the frost line or heated, and how the septic copes with full-time use. Many cottages were built for weekend use, so the septic and well may be smaller than a full-time household needs. Ask the inspector to look at them with year-round living in mind.

Insurance is also different for a home you live in. A full-time residence with a permanent heat source is usually easier to insure than a seasonal cottage that sits empty for weeks. Get a quote early. See cottage insurance in Ontario.

Questions to ask before you commit

• How far is the nearest grocery store, hospital and school?
• Is high-speed internet available at this address?
• Who plows the road, and how early?
• What does heating cost in January?
• Have I spent a winter week there?

If the answers work for you, a cottage can be a wonderful first home. Read our how to buy a cottage guide, then get started and we will help you plan it.

A vacation second property does not qualify for Ontario’s first-time buyer refund. A cottage bought as an eligible first home may qualify for up to $4,000 if the buyer meets all conditions, including principal-residence occupancy within nine months. Owning a home anywhere before, and a spouse’s ownership history, can affect eligibility.