Secondary Homes

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Secondary Homes

Whether you’re envisioning a serene retreat by the lake or a convenient second home closer to work, securing a lower interest rate is essential for affordability.

One option to finance your second property is by refinancing your current home to access cash. This strategy allows you to leverage the equity in your existing property to fund the purchase of your second home or vacation property.

Mortgages for Rental Properties

Most buildings with 1-4 units are zoned residential. Buildings with 5 or more units are zoned commercial, so you will need to take out a Commercial Mortgage.

If you are purchasing a multi-unit property, whether you live in one of the units or not, will impact how much down payment you will need to make. If you do live in one of the units, your property is considered owner-occupied, if you don’t, your property is considered non-owner occupied.

The following chart shows the minimum down payment that is required for both owner and non-owner occupied investment properties.

Second Home or Vacation Property Mortgage

A second home is a residence that you intend to occupy for part of the year in addition to having a primary residence. A second home could be a lake-side cottage, a condo in the city, or a home for your child away at school.

Not to be confused with a Second Mortgage, a second home mortgage is a home loan that is used for the purpose of purchasing a second property.

If You Plan to Rent Your Second Property

If you plan to rent your second home or vacation property when you are not using it, it is considered an investment property and will require a minimum 20% down payment. If you or a family member plans to live in the home, on a rent-free basis, you can get a mortgage for less than 20% down payment.

Financing Vacation Homes and Cottages

Rental pool or timeshare properties are not eligible for mortgage financing. Cottages fall into two categories: Type A all-season cottages and Type B seasonal cottages. Most lenders do not finance Type B cottages.

Type A Cottages Financing
  • Must be intended for occupancy at some point during the year by the borrower or relative on a rent-free basis (otherwise it is considered a rental).
  • Winterized home with year-round access.
  • The property is accessible by municipally plowed road.
  • Potable running water, central heating, plumbing and electricity.
  • A permanent foundation below the frost line is a requirement.
  • The property is located in an area with demonstrated, reasonable resale demand.
Type B Cottages Financing
  • Seasonal access is okay.
  • A permanent heat source is not required.
  • Has running water.
  • Sits on the temporary foundation: concrete blocks or pilings.
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