Vacation & Rental Property Mortgages
Turn Your Weekend Getaway or Investment Dream Into Reality
Whether you are dreaming of a Muskoka cottage for family memories or a downtown Toronto condo to build your wealth, buying a second property is a different game than buying your primary home.
At HomeLoansCanada, we specialize in navigating the unique rules, down payment requirements, and income calculations for secondary properties. We help you separate the “dream” from the “details” to secure financing that makes sense.
Buying a Vacation Home (Cottage/Second Home)
Your personal retreat.
When buying a property for your own enjoyment (not primarily for rent), lenders categorize it into two specific types. Knowing the difference can save you thousands in down payments.
Type A: The "Second Home" (Year-Round)
These are fully winterized properties with permanent heating, potable water, and year-round road access.
- The Perk: Lenders treat this almost exactly like your primary residence.
- Down Payment: You can buy with as little as 5% down for properties under $500k, and roughly 5-10% down for properties up to $1.5 million (New Rule effective Dec 15, 2024).
- Best For: Winterized cottages, city condos for commuters, or homes for university-bound children.
Type B: The "True Cottage" (Seasonal)
These are properties with seasonal access (unplowed roads), no permanent heat (wood stove only), or lake-water systems.
- The Reality: Because these are harder to resell in winter, lenders are stricter.
- Down Payment: Typically requires a minimum of 10% down (if insured), but many lenders will ask for 20% or more for unheated or remote properties.
- Rates: You may see slightly higher interest rates compared to Type A homes.
TODAY'S RATES
| Team | Posted | MA Rates |
|---|---|---|
| 6 mo. | 7.89 | 7.47 |
| 1.Year | 6.15 | 5.24 |
| 2.Year | 5.15 | 4.24 |
| 3.Year | 4.65 | 4.14 |
| 4 Year | 4.55 | 5.05 |
| 5 Year | 4.49 | 3.99 |
| 8 Year | 5.12 | 6.45 |
| 10 Year | 5.35 | 6.12 |
| Variable | 4.55 | |
|
Subject to change Conditions may apply Updated 10/03/2025 4:15:41PM |
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CALCULATORS
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Buying an Investment Property (Rental)
Building wealth through real estate.
If your primary goal is to generate income (e.g., a duplex, student rental, or dedicated Airbnb), the rules change. Lenders view this as a business transaction.
The "20% Rule"
Unlike a second home for personal use, pure investment properties generally require a minimum down payment of 20%. You cannot use CMHC mortgage insurance to buy a rental property with less than 20% down.
Qualifying with Rental Income
You don’t have to carry the entire mortgage on your own salary.
- The "Offset" Rule: Most lenders allow us to use 50% to 80% of the property's projected rental income to help you qualify for the mortgage.
- New Construction Perk: As of December 2024, if you are buying a brand new build investment property, you may be eligible for a 30-year amortization, which lowers your monthly payments and boosts cash flow.
Vacation Home Mortgages in Ontario – Home Loans Canada
Turn Your Dream Cottage or Vacation Home into Reality
Whether you dream of a cottage by the lake, a ski chalet up north, or a family getaway spot, a vacation home is more than just a property — it’s where memories are made. At HomeLoansCanada, we help Ontario homeowners secure vacation home mortgages that make owning a second property both achievable and affordable.
Our dedicated mortgage specialists work closely with you to find flexible financing options that suit your needs, making the path to your dream retreat simple and stress-free. With access to a wide network of lenders and competitive rates, we ensure you get the best possible terms for your vacation home mortgage. Whether you’re planning to use it as a seasonal escape, a rental investment, or a future retirement haven, HomeLoansCanada is here to make your vision a reality.
Why Choose a Vacation Home Mortgage?
Build a Family Retreat
Enjoy quality time with your loved ones in your own private escape.
Long-Term Investment
Vacation homes in Ontario often appreciate in value, making them a smart financial choice.
Competitive Financing
Access lenders who specialize in second home mortgages with flexible terms.
Lifestyle & Convenience
Say goodbye to hotel bookings and hello to your personal retreat whenever you want.
Key Mortgage Rules for 2025
Stay ahead of the market with these critical updates.
- Insured Cap Increase: You can now purchase a second home (Type A) with less than 20% down for purchase prices up to $1.5 million (previously capped at $1 million).
- Strict "Double Counting" Rules: Lenders are now stricter about how rental income is calculated across multiple properties to prevent over-leveraging. We organize your portfolio to ensure you meet these new "debt coverage" ratios.
- Capital Gains Awareness: While the inclusion rate for capital gains remains at 50% for most individuals in 2024, tax rules for investment properties are complex. We always recommend speaking with an accountant to plan your "Exit Strategy" before you buy.
Pro Tip: Using Equity to Buy
Don’t have the cash for a down payment?
Many of our clients use the equity in their current primary residence to fund their vacation or rental purchase.
- Refinance: Break your current mortgage to pull out cash (up to 80% of your home's value).
- HELOC: Add a Home Equity Line of Credit to your primary home. You only pay interest on the money you withdraw for the down payment.
Frequently Asked Questions
Can I rent out my cottage on Airbnb if I buy it as a "Second Home"?
Lenders expect a “Second Home” (Type A) to be for your personal use or family use. Occasional rental (like a few weeks a year) is usually fine, but if you plan to run it as a full-time short-term rental business, you should declare it as an investment property to avoid violating your mortgage contract.
Are interest rates higher for rental properties?
Yes, typically. Because investment loans are higher risk (borrowers are more likely to default on a rental than their own home during hard times), expect rates to be roughly 0.20% to 0.50% higher than standard residential rates.
What if the cottage has no drinking water?
If a property lacks a potable water source (well or municipal), major lenders may decline financing. You might need a private mortgage or a specialized lender who deals with rustic properties.
Pro Tip: Using Equity to Buy
Don’t have the cash for a down payment?
Many of our clients use the equity in their current primary residence to fund their vacation or rental purchase.
- Refinance: Break your current mortgage to pull out cash (up to 80% of your home's value).
- HELOC: Add a Home Equity Line of Credit to your primary home. You only pay interest on the money you withdraw for the down payment.
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