The fall season is when many people who dream of owning a lake cottage make their purchase because there is less competition. If you’re in the cottage market and need a mortgage, check out these FAQ’s to find answers to the most common mortgage questions.
Can I afford a mortgage?
Assessing whether or not you can afford a down payment and regular payments is an important first step. To determine if you qualify for a mortgage, your gross annual income, credit history, and assets/liabilities are taken into consideration.
Affordability is based on your household income, your personal expenses each month (including any other debt you’re paying off), any home expenses (condo fees, heating costs, taxes), and mortgage insurance (if it’s required). You also need to ensure you have enough money on hand for the down payment, and closing costs associated with making the purchase of a home, like legal fees. Plug your financial details into payment and mortgage affordability calculators to paint a picture of your financial situation.
What’s a variable rate mortgage?
A variable rate mortgage is a type of mortgage where the interest rate can fluctuate due to changes in the prime lending rate. A variable rate will be quoted as prime plus or minus a certain amount, such as prime minus 0.50%. If prime is 2.70%, then your rate will be 2.20%. If your lender’s prime rate goes up or down, your mortgage rate will, too. The prime rate can fluctuate, but your rate’s relationship to prime will remain constant over your term. Variable rate mortgages usually have lower interest rates, but they don’t offer the same stability that a fixed rate mortgage does.
What’s a fixed rate mortgage?

A fixed rate mortgage is a type of mortgage where the interest rate stays the stays the same for the duration of your mortgage term. For example, if you have a five-year fixed rate mortgage at 2.89%, your rate and mortgage payment amount will stay the same for those five years. Fixed rate mortgages are more popular, and offer more stability than variable rate mortgages.

What’s the difference between a closed, convertible, and open mortgage?
A closed mortgage is a great option for those who are planning to take a little longer to pay off their mortgage, and interest rates are typically lower. You can’t negotiate or refinance throughout the mortgage term, nor prepay (making a lump sum payment toward your mortgage) by more than the limit in your terms and conditions without incurring a prepayment penalty (often, you can prepay a certain amount of the original principal amount, once a year). Closed mortgages can be fixed or variable, and interest rates are lower than rates on an open mortgage.

A convertible mortgage offers similar benefits to a closed mortgagebut it allows you to change the type of mortgage you have – either between fixed and variable rates, or from a shorter term to a longer term – before your term is up, without penalty.

An open mortgage is great for those who plan to pay off their mortgage in the short term. They can be prepaid, even in full, at any time throughout the mortgage term, without the borrower having to pay a hefty prepayment penalty. However, the flexibility of an open mortgage comes at a cost – typically in the form of higher mortgage rates.

To find out more, come by for a visit or contact us at CottageClub. We would love to help you buy the cottage home of your dreams!

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CottageClub offers recreational lots and cottages for almost every lifestyle and budget including lake front, mountain view and private retreat lots, and exceptional amenities for you to enjoy.

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The CottageClub at Ghost Lake is located 35 minutes from Calgary and Canmore and 50 minutes from Banff, so homeowners can enjoy even more year-round recreational activities like hiking, rock climbing, skiing, fishing and many other great outdoor pastimes.