Thinking about buying a vacation property?

With a growing number of Canadians choosing to vacation at home this year—partly in response to ongoing trade tensions with the U.S. and a desire to support our own economy—interest in local getaways and vacation properties is on the rise.

If you’ve been thinking about buying a cottage, cabin or seasonal retreat, there’s no better time than now to explore your financing options. Here’s what you need to know before you make the leap:

Start with a mortgage pre-approval—Before browsing listings or booking showings, it’s important to get pre-approved for a mortgage. That will help clarify your budget and gives you an edge if you’re ready to make an offer.

There are two types of vacation properties. Vacation homes generally fall into two categories, Type A and B. The category affects how much you can borrow and what the down payment requirements will be.

Type A properties

These are more traditional secondary homes and must meet these criteria:

• Foundation must be permanent and installed beyond the frost line. That includes concrete, concrete block or preserved wood foundations, or post or pier foundations on solid bedrock.

• Must be zoned and used as residential, rural or seasonal. Mixed uses or rental pooling is not accepted.

• Property tenure must be freehold or condominium.

• At minimum, property must have a kitchen, three-piece bathroom, a bedroom, and a common area.

• Remaining economic life must be 25 years.

• Year-round road access on reasonable quality public roads, serviced by the local municipality.

• Privately serviced roads are allowed, provided there is a maintenance contract in place.

• Property must be winterized with a permanent heat source. For example, heating can be baseboard, forced air, water radiator, radiant, coal, propane, geothermal heat pumps, or heat pumps.

• Good quality construction with no signs of deferred maintenance.

• Water source: well, municipal serviced, and cistern. Water source must be drinkable. Lake or river water is acceptable, provided the property has its own filtration system. For example, a reverse osmosis system.

• Property must have electrical power. Alternative energy sources may be considered on a case-by-case basis such as solar power, wind energy and generators.

• There must be good market appeal in the area with no adverse influences or neighborhood nuisances.

Type B properties

• No permanent heat source is required. For example, a wood stove, fireplace, stove or heat blower is acceptable.

• Foundation may be floating. For example, sitting on blocks.

• Seasonal road use is acceptable. This means the road does not have to be ploughed during the winter.

• Water source needn’t be drinkable. However, there must be running water in the home.

• Property may be accessible only by boat.

• Holding tanks may be considered provided it is common for the immediate area and meets all municipal/provincial requirements (e.g., CSA approved holding tank).

Maximum property value

• Greater than 80% loan-to-value ratio. Property value must be less than $1.5 million.

• Less then or equal to 80% loan-to-value ratio. Property value must be less than $1 million.

Note: Mixed uses or rental pooling is not accepted. Co-ops or interest ownership is not accepted. No investment properties.

Financing options beyond the basics

If you already own a home, you might be able to leverage your existing equity to fund your vacation property:

• Refinancing your current mortgage

• Home equity line of credit (HELOC)

• Second mortgage

• Personal savings

• Gifted funds (Type A only)

Even hotel condo units may be eligible for up to 95% financing, provided they are high-ratio insured and owner-occupied.

Every lender has different rules

Lender requirements for vacation properties vary significantly, especially in rural areas where 25% to 50% down may be required. A mortgage broker can help you compare your options and find the best fit for your goals.

So, explore what’s possible. Whether you're looking for a peaceful family retreat or planning a smart real estate investment, a mortgage broker is there to guide you through every step.

You can email me at 1-888-561-2679 or book a time to chat at calendly.com/april-dunn.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.