Financing a Second Home or Cottage: What to Know

Dreaming of a cottage, vacation home, or second property? The mortgage rules differ from your primary residence, and understanding these differences helps you plan effectively.

Second Home vs. Investment Property

These are treated differently by lenders:

Second Home:

• Personal/family use
• Occasional rental is acceptable
• May qualify for slightly lower rates
• Potentially available with less than 20% down

Investment Property:

• Primarily for rental income
• Minimum 20% down required
• Higher interest rates
• Different qualification rules

Down Payment Requirements

For second homes:

Note: CMHC insurance availability varies for second homes. Many cottages and vacation properties don't qualify.

Qualification Considerations

When you already have a mortgage:

• Both mortgage payments count in your debt ratios
• Lenders stress-test both properties
• Your income needs to support both payments
• Property taxes and costs on both homes count

Dreaming of a Second Property?

Explore your options and find out how much you can qualify for with a second mortgage.

Using Equity from Your Primary Home

Common strategies include:

HELOC

• Borrow against first home for down payment
• Flexible access to funds
• Interest-only payments

Refinancing First Home

• Access larger lump sum
• Combine into one mortgage payment
• May get better rates

Learn more in our HELOC vs. refinance comparison.

Cottage-Specific Considerations

Financing cottages can be tricky:

• Seasonal access: Year-round vs. seasonal road access
• Water source: Well vs. municipal affects value
• Construction: Permanent vs. seasonal structure
• Location: Remote properties have fewer lender options

Some lenders specialize in cottage and recreational properties.

Rental Income Potential

If you plan to rent occasionally:

• Some rental income may count toward qualification
• Requires rental agreements or market rent appraisal
• Changes how property is classified
• May affect insurance requirements

FAQ

Q: Can I use rental income to qualify for a cottage?
A: Sometimes, but typically only 50-80% of projected rental income counts.

Q: Do I need a second home inspection?
A: Highly recommended, especially for older cottages with wells and septic systems.

Q: What about property taxes on a second home?
A: They count against your debt ratios. Research local tax rates before buying.

Q: Can I buy a cottage as my first property?
A: Technically yes, but lenders prefer you have a primary residence first.

What's Next

Explore second home financing with our team. We specialize in vacation property and cottage mortgages.