As more Canadians look to purchase vacation homes—whether for seasonal escapes, hybrid work flexibility, or future retirement—mortgage professionals are being asked: “Is the financing process the same as buying a primary residence?”

Short answer: not quite. The fundamentals (credit, income, debt ratios) still apply, but the risk profile, insurer policies, and property characteristics force us to take a more nuanced approach.

Here’s how to coach your clients effectively.

1. Don’t Assume a 20% Down Payment Is Required

Most clients believe they need 20% down for a second home. In many cases, you can help them buy with as little as 5% down, if the property qualifies for insurance.

Here’s the criteria to look for:

• Personal-use only (no rental income involved)
  
• Year-round access and winterized
  
• In a marketable, residential area
  
• Occupied part-time by the buyer or a close family member
  

If the file fits, private insurers (not CMHC) may approve a high-ratio deal. That said, many second homes—like remote cabins, short-term rental properties, or seasonal cottages—don’t qualify, and those will still require 20%+ down.

Broker Tip: Flag eligibility early. Don’t burn time pre-qualifying for insured financing if the property won’t meet insurer guidelines.

2. Credit Score Expectations Are Higher

With primary residences, a sub-680 score can often work, especially if insured. Not so with second homes.

Lenders generally want to see 680+ for second-home buyers, even with strong income or larger down payments. Clients with borderline credit should be coached to improve their score before submitting a second-home application.

Broker Tip: Pre-screen credit reports with extra scrutiny. A client who qualified easily for their primary home two years ago might not make the cut on a vacation property today.

3. Can They Carry Two Mortgages? That’s the Real Question

This is where many files fall apart. Most clients underestimate the impact of holding two properties.

Even if the down payment is available, can they truly qualify for both mortgage payments under the stress test? Lenders will apply:

• GDS ≤ 39%
  
• TDS ≤ 44%
  
• And the stress test: contract rate + 2% or BoC benchmark (whichever is higher)
  

Plus, since vacation homes are considered discretionary assets, some lenders apply even more conservative debt servicing metrics.

Broker Tip: Don’t just pre-qualify the property—stress test the client’s entire portfolio. And always check lender-specific guidelines for how they treat discretionary purchases.

4. The Property Itself Can Kill the Deal

Unlike standard urban homes, many vacation properties don’t meet conventional lending standards.

Common disqualifiers:

• Seasonal access only (boat access or private roads not maintained year-round)
  
• No utilities (unserviced land, off-grid cabins)
  
• Poor resale marketability (remote areas or recreational zones)
  

Also, rental income—especially from short-term stays—can’t be used to qualify in most cases.

Broker Tip: Confirm access, servicing, and zoning details before submitting. If the property won’t pass the lender’s or insurer’s guidelines, structure it as a conventional mortgage or private deal upfront.

Smart Structuring Strategies

Leverage Primary Home Equity

Clients with significant equity in their principal residence may not need to liquidate investments or savings. Refinancing, a HELOC, or a second mortgage can unlock funds to cover the down payment or closing costs on the vacation home.

Push Pre-Approvals Early

A second-home pre-approval not only sets expectations—it helps you catch red flags (credit, debt load, qualifying rate pressure) before your client finds a property.

Coach for the Full Cost Picture

Ensure your clients are budgeting for:

• Legal and closing costs
  
• Maintenance and repairs (usually higher on rural or older homes)
  
• Property tax and insurance (often more expensive in remote areas)
  

Broker Tip: A simple “total cost of ownership” worksheet can go a long way in preventing buyer’s remorse—and builds trust.

Final Thought

Financing a vacation property isn’t just a repeat of the primary-home process. It’s a different underwriting mindset. Insurer limits, property risk, and layered affordability concerns all require a sharper, more strategic approach from brokers.

Lead with education. Ask smarter qualifying questions. And when in doubt, triage your file through a vacation-home-friendly lender or BDM before promising the client anything.

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Need a second opinion on a tricky file? I’m happy to collaborate or troubleshoot complex vacation property scenarios. Let’s help more clients buy their “someday home” today, without tripping over preventable issues.