Vacation Homes
Your Guide to Financing Vacation and
Secondary Homes in Canada
Owning a vacation home, such as a cottage by the lake or a retreat in the mountains, is a dream for many Canadians. However, the Vacation Home Mortgage isn’t just about leisure properties—it falls under the broader umbrella of Secondary Home programs, which can also be used to help a family member or support a loved one with a place to live. Whether you’re looking for a seasonal getaway or a second residence for practical reasons, understanding the options available for financing secondary homes is crucial.
What Is a Secondary Home?
A secondary home is defined as a property intended for personal or family use that is not your primary residence. This can include:
- Vacation Homes: Cottages, chalets, or lakefront properties for recreational use.
- Family Member Residences: A home purchased for a family member, such as a parent or a child attending university.
This distinction is vital because it broadens the purpose of the Secondary Home Program, making it a versatile solution
for various needs.
CMHC Secondary Home Program
The CMHC Secondary Home Program provides mortgage loan insurance for secondary homes, making it easier for Canadians to finance these properties with smaller down payments.
Key Features of the CMHC Secondary Home Program:
Down Payment Requirements
• Minimum 5% down payment for homes valued up
to $500,000.
• 10% down payment required for the portion of the home’s price above $500,000.
Eligibility
• The home must be owner-occupied or occupied by
an immediate family member.
• The borrower must have a good credit history.
Types of Properties
• Includes single-family homes, condos, and certain
vacation properties.
Rate Protection
• Interest rate holds of up to 120 days for insured mortgages.
Note: Secondary homes under the CMHC program cannot be used as rental properties.
Insured vs. Conventional Mortgages for Secondary Homes
| Feature | Insured Mortgages | Conventional Mortgages |
| Down Payment | 5% for homes up to $500,000; 10% for the portion above $500,000. | 20% minimum down payment. |
| Interest Rates | Typically lower due to insurance coverage. |
Slightly higher rates as lenders take on more risk. |
| Property Types | Must meet specific criteria (e.g., accessible by road, 4-season). | More flexibility in property types. |
| Amortization | Maximum of 25 years (unless First-time buyer or the home is a new build) | Can extend to 30 years. |
| Usage Restrictions | Must be owner-occupied or family-occupied. | Can be used for rentals in some cases (if allowed by the lender). |
Vacation Homes: Unique Considerations
When purchasing a vacation property, there are several factors to consider:
Accessibility
• Road Access (4-Season): Properties accessible year-round on a main road are generally
easier to finance.
• Island or Water Access (3-Season): These may require larger down payments or only qualify for conventional mortgages.
Seasonal Use
• 4-Season Cottages: Equipped with heating, insulation, and plumbing for year-round use, these are more likely to qualify
for insured mortgages.
• 3-Season Cottages: Often limited in winter access or amenities, these may require conventional financing and are subject to
lender-specific guidelines.
Property Value
• The value of vacation homes can vary significantly depending on location. Properties in high-demand regions, such as Muskoka in Ontario or the Laurentians in Quebec, may require larger down payments or offer more competitive rates due to market stability.
Secondary Homes for Family Members
Secondary homes aren’t just for vacations—they can also provide a practical solution for supporting family members.
Helping a Family Member
• University Housing: Many parents choose to buy a home for their child attending university or college. This can often save money in the long term compared to paying rent for student housing, with the added benefit of potential property appreciation.
• Elderly Parents: A secondary home can provide a comfortable and independent living space for aging family members while keeping them close.
Benefits of a Secondary
Home for Family Use:
• Asset Appreciation: Instead of paying rent, parents can invest in a property that may grow in value.
• Flexibility: The home can later be sold, rented out, or transferred to the family member.
How Better Mortgages Can Help
At Better Mortgages, we specialize in helping clients navigate the complexities of vacation and secondary home financing. Here’s how we stand out:
- Comprehensive Knowledge: We understand the nuances of insured and conventional mortgage programs and work with a wide network of lenders to find the best fit for your needs.
- Tailored Solutions: Whether you’re purchasing a lakeside retreat or a second home for a family member, we provide customized advice to help you achieve your goals.
- Expert Guidance: Our team simplifies the process, ensuring you understand the unique requirements of vacation and secondary home mortgages.
Take the First Step Toward Your Secondary Home
Whether you’re dreaming of a cottage getaway or looking to support a loved one with a second home,
Better Mortgages is here to guide you through every step of the process.
Choose a Better Mortgages representative to work with or contact us today to schedule a consultation.
Turn your dream of owning a secondary home into a reality with expert support and tailored solutions.