A Guide to Buying a Second Home in Ontario

From the down payment required to closing costs, here’s everything you need to know about buying a vacation home.

By Emily Southey | 6 minute read

Dec 22

Interested in buying a second home in Ontario? We’ve put together a guide to help you get started. Below, you’ll learn all about how to buy a second home in Canada, including the 20% down payment and how to obtain the necessary financing.  

Buying a Second Cottage or Vacation Property in Ontario

The first step to buying a second home in Ontario is to consider where you want to buy a home. Most often, homeowners purchasing a second home are doing so for cottage or vacation purposes. Therefore, their criteria might be a little different than for a principal residence. To ensure you find that perfect home-away-from-home, we recommend searching for properties with the following features:


  • General accessibility (can it only be accessed by boat?) 
  • Proximity to a major highway
  • Proximity to grocery stores, retail shops, bars/restaurants, and other amenities
  • Proximity to beaches, hiking trails, parks, and other attractions
  • Adequate seclusion and privacy


Ultimately, you must decide what your priorities are when it comes to a second home — do you want something lakeside or more secluded? How far do you want to be from a major city or your current home? What sorts of amenities are you looking for? Asking yourself these questions can help you determine the best place to purchase a second home or cottage. Of course, the price will also factor in, which leads us to our next question.


Can you afford a second home?

Perhaps the most important consideration when buying a second home in Ontario is whether you can afford one. It’s important to note that second homes are major investments and may require more money upfront than principal residences. This is because there is a minimum 20% down payment requirement for second homes. Plus, mortgage rates tend to be higher. To determine whether you can truly afford a second home, take stock of your current financial health and consider the financing options below. 

“Perhaps the most important consideration when buying a second home in Ontario is whether you can afford one. It’s important to note that second homes are major investments and may require more money upfront than principal residences.”


Your first option if you’re looking for a way to afford a second home is to refinance your current home. To do this, you would pay off your existing mortgage loan in exchange for a new home mortgage loan. Refinancing can make a lot of financial sense, especially if you find a new mortgage with better terms or lower interest rates. For this reason, refinancing can be a great option when you want to buy a second home. If you have a high credit score, your mortgage lender might be able to offer you a lower interest rate on your new mortgage. In turn, the extra money that you will save from refinancing could be put toward the down payment on your second home. 


Taking out a second mortgage

Another way of financing your second home purchase is to take out a second mortgage, also known as a home equity loan. From a lender’s perspective, this is riskier as they are in a second position on the title to your property. Therefore, this may not be an option for every homeowner. Before approving your home equity loan, a lender will assess your income level, credit score, and equity. The more equity you have on your first property, the better your odds of qualifying for a second mortgage. Generally speaking, if you have less equity or a lower credit score, taking out a second mortgage is a more viable option than applying for a home equity line of credit (HELOC), which we cover below. 


Home equity line of credit (HELOC)

If you have a high credit score and over 20% equity in your home, then applying for a home equity line of credit or HELOC might be your best option when it comes to buying a second home. A HELOC functions as a revolving line of credit and is granted at a much lower interest rate than a traditional line of credit. In Canada, borrowers can access 65% of their home’s value so long as their outstanding mortgage loan and HELOC do not equal more than 80% of their home’s value. Unlike refinancing, which requires you to break your existing mortgage or pay a penalty, a HELOC only requires you to make a monthly interest payment. 

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How to Buy a Second Home in Ontario: A Step-by-Step Guide

Ready to buy a second home in Ontario? Follow the step-by-step guide below.

1. Save up for a 20% down payment

The first step to buying a second home in Ontario is to save up for the 20% down payment. As mentioned above, homeowners buying second properties are required to make a minimum down payment of 20%. Depending on the purchase price, this is not a small sum of money, so we recommend adding to your savings as early as possible.


2. Explore your financing options

The next step is to explore your financing options and choose the one that’s right for you. Unless you have the capital to pay for your second home entirely out of pocket, you will need to obtain financing. The most common ways of financing the purchase of a second home in Ontario are by refinancing, taking out a second mortgage, or through a home equity line of credit. However, depending on your creditworthiness, current home equity, and income level, you may not qualify for all three options, which is why it’s important to do your research early on. 


3. Choose a location for your second home

Step #3 is to choose a location for your second home. Develop a list of must-haves to help you narrow down your options. Note that some of the best places to buy second homes in Ontario in 2022 include Prince Edward County, Haliburton, Niagara Falls, Thunder Bay, Muskoka, Parry Sound, Gananoque, Tobermory, Kawartha Lakes, and Grand Bend.


4. Find an experienced realtor

Once you’ve settled on a location for your second property in Ontario, it’s time to find a realtor who knows the local market. Contact multiple realtors in the area in which you wish to buy a property and interview them, asking about their specific experience with vacation homes or cottages and their track record. Having a great realtor can make finding a second home much easier, especially if you are looking to buy a property in a market you are unfamiliar with. 


5. Submit an offer and close the deal

After you choose a realtor, they can help you set up appointments to view properties. From there, you can find a property you like and submit an offer. Your realtor can help you determine an offer strategy and purchase price and can even negotiate on your behalf if the seller makes a counteroffer. Once your offer is accepted, hire a real estate attorney to review the purchase agreement, sign on the dotted line, pay the closing costs, and move into your new Ontario home!

Frequently Asked Questions

Can you buy a second home with a friend?

Yes, you can purchase a second home with a friend. The process is similar to buying a home with a partner or spouse. You will both sign a co-ownership or joint tenant agreement that stipulates both parties are responsible for paying the mortgage interest, property taxes, and mortgage loan principal.  

Are mortgage rates higher when buying a second home?

Yes, mortgage rates are generally higher when buying a second home. In addition, the minimum requirement for a down payment is 20%, regardless of the purchase price. 

Do credit requirements increase when buying a second home?

Yes, credit requirements are typically higher when buying a second home. However, the exact requirements vary by lenders and also depend on which type of loan you aim to acquire. For example, the minimum credit score to qualify for a second mortgage is usually lower than for a home equity line of credit. 

Emily Southey

Wahi Writer

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