Buying a Vacation Property or Rental? Here’s What Lenders Look For

Jeff Johnson • February 11, 2026

Owning a vacation home or an investment rental property is a dream for many Canadians. Whether it’s a cottage on the lake for family getaways or a rental unit to generate extra income, real estate can be both a lifestyle choice and a smart financial move. But before you dive in, it’s important to know what lenders look for when financing these types of properties.


1. Down Payment Requirements

The biggest difference between buying a primary residence and a vacation or rental property is the down payment.

  • Vacation property (owner-occupied, seasonal, or secondary home): Typically requires at least 5–10% down, depending on the lender and whether the property is winterized and accessible year-round.
  • Rental property: Usually requires a minimum of 20% down. This is because rental income can fluctuate, and lenders want extra security before approving financing.


2. Property Type & Location

Not all properties qualify for traditional mortgage financing. Lenders consider:

  • Accessibility: Is the property accessible year-round (roads maintained, utilities available)?
  • Condition: Seasonal or non-winterized cottages may not meet standard lending criteria.
  • Zoning & Use: If it’s a rental, lenders want to ensure it complies with municipal bylaws and zoning regulations.

Properties that fall outside these norms may require financing through alternative lenders, often with higher rates but more flexibility.


3. Rental Income Considerations

If you’re buying a property with the intent to rent it out, lenders may factor the rental income into your mortgage application.

  • Long-term rentals: Lenders typically accept 50–80% of the expected rental income when calculating your debt-service ratios.
  • Short-term rentals (Airbnb, VRBO, etc.): Many traditional lenders are cautious about using projected income from short-term rentals. Alternative lenders may be more flexible, depending on the property’s location and your financial profile.


4. Debt-Service Ratios

Lenders use your Gross Debt Service (GDS) and Total Debt Service (TDS) ratios to determine if you can handle the mortgage payments alongside your other obligations. With investment or vacation properties, lenders may apply stricter guidelines, especially if your primary residence already carries a large mortgage.


5. Credit & Financial Stability

Your credit score, employment history, and overall financial health still matter. Since vacation and rental properties are considered higher risk, lenders want reassurance that you can handle the additional debt—even if rental income fluctuates or the property sits vacant.


6. Insurance Requirements

Rental properties often require specialized landlord insurance, and vacation homes may need coverage tailored to seasonal or secondary use. Lenders will want proof of adequate insurance before releasing mortgage funds.


The Bottom Line

Buying a vacation property or rental can be exciting, but financing these purchases comes with extra rules and considerations. From higher down payments to stricter property requirements, lenders want to be confident that you can handle the responsibility.


If you’re considering a second property, the best step is to work with a mortgage professional who can compare lender requirements, outline your options, and find the financing that works best for you.


Thinking about making your dream of a vacation or rental property a reality? Connect with us today.


Jeff Johnson

Mortgage Expert

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Breaking Down the Real Costs of Homeownership

By Jeff Johnson • March 25, 2026
Don’t Forget About Closing Costs When planning to buy a home, most people focus on saving for the down payment. But the truth is, that’s only part of the equation. To actually finalize the purchase, you’ll also need to budget for closing costs —the out-of-pocket expenses that come up before you get the keys. Closing costs can add up quickly, which is why they should be part of your pre-approval conversation right from the start. Lenders will even require proof that you’ve got enough funds set aside. For example, if you’re getting an insured (high-ratio) mortgage, you’ll need at least 1.5% of the purchase price available in addition to your down payment. That means a 10% down payment actually requires 11.5% of the purchase price in cash to make everything work. Let’s break down some of the most common expenses you should prepare for: 1. Home Inspection & Appraisal Inspection : Paid by you, this gives peace of mind that the property is in good shape and doesn’t have hidden problems. Appraisal : Required by the lender to confirm value. Sometimes this is covered by mortgage insurance, sometimes by you. 2. Legal Fees A lawyer or notary is required to handle the title transfer and make sure the mortgage is properly registered. Legal fees are often one of the larger closing costs—unless you’re also responsible for property transfer tax. 3. Taxes Many provinces charge a property or land transfer tax based on the home’s purchase price. These fees can range from hundreds to thousands of dollars, so you’ll want to factor them in early. 4. Insurance Property insurance is mandatory—lenders won’t release funds without proof that the home is insured on closing day. Optional coverage like mortgage life, disability, or critical illness insurance may also be worth considering depending on your financial plan. 5. Moving Costs Whether you’re renting a truck, hiring movers, or bribing friends with pizza and gas money, moving comes with expenses. Cross-country moves especially can be surprisingly pricey. 6. Utilities & Deposits Setting up new services (electricity, water, internet) can involve connection fees or deposits, particularly if you don’t already have a payment history with the utility provider. Plan Ahead, Stress Less This list covers the big-ticket items, but every purchase is unique. That’s why it pays to have an accurate estimate of your personal closing costs before you make an offer. If you’d like help planning ahead—or want a breakdown tailored to your situation—let’s connect. I’d be happy to walk you through the numbers and make sure you’re fully prepared.

Bank of Canada Holds Rate at 2.25% — March 18, 2026

By Jeff Johnson • March 18, 2026
The Bank of Canada announced today that it is holding its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. For anyone watching the mortgage market — whether you're renewing, purchasing, or simply keeping an eye on borrowing costs — here's a breakdown of what was announced and what it may mean for you.