Second Home & Cottage Mortgages: What Buyers Should Expect

Whether you're dreaming of a family cottage, a weekend getaway, or a second home for extended stays, buying a recreational or secondary property in Canada comes with its own set of mortgage rules. Lenders treat second homes differently from primary residences, and understanding these differences is essential before you start shopping for your slice of paradise.

Here’s what buyers should expect when applying for a second home or cottage mortgage in 2025.

What Counts as a Second Home or Cottage?

A second home or cottage is a property you occupy personally for recreation, vacation, or part-time living—not a rental or investment property.

Common examples include:

• Lakeside or waterfront cottages

• Ski-country chalets

• Seasonal cabins

• Urban secondary residences (for work or family use)

Lenders classify them into Type A or Type B properties, which determines the down payment, insurance availability, and qualification rules.

Type A vs. Type B Cottage Properties

Type A (Fully Winterized, Year-Round Access):

• Treated similarly to primary residences

• 5%–20% down payment available

• Mortgage insurance allowed

• Must have road access and all major utilities

Type B (Seasonal, Limited Access, Non-Winterized):

• Higher risk category

• Minimum 10%–20% down payment

• Some lenders may not offer insured options

• May require higher credit scores and stronger financials

Understanding which category your cottage falls under helps determine your financing options.

Down Payment Requirements

Down payments depend heavily on the property type and whether it qualifies for mortgage insurance:

• 5%–10% down: Only available for Type A cottages

• 10%–20% down: Typical for Type B properties

• 20%+ down: Required if the property is non-conforming or for jumbo-priced second homes

The more remote or seasonal the property, the higher the down payment lenders typically require.

Interest Rates & Terms

Mortgage rates for second homes are usually slightly higher than primary residences because lenders view them as higher risk. Rate differences vary by lender but typically fall between:

• 0.10%–0.50% higher depending on credit and property type

• Stricter debt service ratios

• Larger reserve requirements

Borrowers should be prepared for more conservative underwriting.

Qualification Requirements

To qualify for a cottage or second home mortgage, lenders will review:

1. Credit Score

680+ recommended for best rates.

2. Income & Debt Ratios

Your primary home and second home payments must fit within your GDS/TDS limits.

3. Property Condition

Lenders require:

• Year-round access (for Type A)

• Safe heat source

• Potable water

• Functional plumbing and electrical

4. Insurance Eligibility

CMHC, Sagen, and Canada Guaranty may insure Type A cottages but rarely insure Type B.

Can You Rent Out Your Cottage?

Most second home programs require personal use only.
If you plan to use Airbnb, VRBO, or short-term rentals, lenders may classify the property as an investment property, requiring:

• Higher down payments (20%–35%)

• Higher rates

• Additional income documentation

Always confirm the lender’s occupancy rules before applying.

Common Costs Buyers Overlook

Purchasing a second home or cottage often comes with extra costs, including:

• Property maintenance

• Well and septic upkeep

• Road fees for private or seasonal access

• Higher insurance premiums

• Dock, shoreline, or waterfront maintenance

• Heating, winterization, and energy costs

Budgeting for these expenses is crucial for long-term affordability.

Tips for Buying a Second Home or Cottage in 2025

✔ Choose a property with year-round access

This improves financing options dramatically.

✔ Get a detailed home inspection

Especially for older or seasonal cottages.

✔ Work with a lender familiar with recreational properties

Many banks avoid Type B cottages—brokers find lenders who don’t.

✔ Understand the long-term costs

Seasonal cottages can become money pits without proper planning.

✔ Consider resale value

Location, access, and utilities affect future financing and market demand.

Final Thoughts

Purchasing a second home or cottage is a dream for many Canadians, but the financing landscape can be more complex than a standard mortgage. By understanding property types, down payment rules, insurer guidelines, and lender expectations, you can prepare effectively and secure the best terms available.

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