Why Buy a Vacation Home?
A vacation home offers numerous benefits beyond just a getaway destination
Your own private escape whenever you need it, without the hassle of booking hotels
Generate income by renting out your property when you're not using it
Diversify your investment portfolio with real estate in desirable locations
Create lasting memories and pass down a cherished property to future generations
Take advantage of mortgage interest deductions and other tax advantages
Vacation properties in popular areas often appreciate significantly over time
Types of Vacation Properties
Choose the perfect type of vacation home that matches your lifestyle and investment goals
Stunning ocean views and high rental appeal make beachfront properties highly desirable investments
Perfect for ski season rentals with strong year-round appeal for outdoor enthusiasts
Ideal for seasonal getaways with water activities and peaceful natural surroundings
City escapes with high rental demand, perfect for cultural experiences and convenience
Financing Options
Explore flexible financing solutions tailored to your vacation home needs
The most common option for vacation homes with competitive terms
- 10-20% down payment required
- Competitive interest rates
- 15 or 30-year terms available
If you plan to rent frequently, this option may be better suited
- Typically 20-25% down
- Can use rental income to qualify
- Different tax treatment
Use equity from your primary residence to finance your vacation home
- Leverage existing equity
- Potentially lower rates
- Streamlined process
Requirements for Vacation Home Mortgages
Understanding what lenders look for can help you prepare for a successful application
Typically 10-20% of the purchase price, higher than primary residence requirements
Usually 620+ minimum, but 700+ needed for the best interest rates
Maximum 43-50% DTI including all mortgage payments and debts
6-12 months of mortgage payments in savings to cover both properties
Must already own or qualify for a primary residence mortgage
Typically must be 50+ miles from your primary residence to qualify
Vacation Home vs Investment Property
Understanding the difference helps you choose the right financing and tax treatment
| Feature | Vacation Home | Investment Property |
|---|---|---|
| Primary Use | Personal enjoyment | Income generation |
| Usage Limits | 14+ days per year or 10% of rental days | No personal use limits |
| Down Payment | 10-20% | 20-25% |
| Interest Rates | Slightly higher than primary | Higher than vacation homes |
| Rental Income | Limited rental allowed | Unlimited rental |
| Tax Deductions | Mortgage interest, property taxes | All expenses, depreciation |
Popular Vacation Home Locations in Canada
Explore some of the most sought-after vacation destinations across Canada
Rental Income Potential
Turn your vacation home into a revenue-generating asset when you're not using it
Platforms like Airbnb and VRBO make it easy to rent your vacation home to travelers
- Higher nightly rates than long-term rentals
- Flexible rental periods
- Built-in insurance and support
Consider hiring a property manager to handle bookings, maintenance, and guest communications
- Typically 20-30% of rental income
- Handles all guest interactions
- Coordinates cleaning and repairs
Rental income must be reported to the CRA, but you can also deduct related expenses like maintenance, utilities, property management fees, and mortgage interest proportional to rental use. The treatment differs between vacation homes (limited personal use) and investment properties (primarily rental). Consult with a tax professional to optimize your situation.
Costs to Consider
Budget for these ongoing expenses to ensure your vacation home remains affordable
Principal and interest payments on your vacation home loan
Annual property taxes, which vary significantly by location
Home insurance, typically higher for vacation properties
Monthly fees for shared amenities and maintenance if applicable
Electricity, water, gas, internet, and cable services
Regular upkeep, landscaping, and unexpected repairs
20-30% of rental income if you hire a management company
Gas, flights, or other transportation to reach your vacation home
Tax Benefits of Vacation Homes
Understand the potential tax advantages of owning a vacation property
You may be able to deduct mortgage interest on your vacation home, similar to your primary residence
Property taxes paid on your vacation home may be tax-deductible
If you rent out your property, you can deduct expenses proportional to rental use
Potential for favorable capital gains treatment when you sell the property
Investment properties can claim depreciation to offset rental income
If you use part of your vacation home for business, you may qualify for deductions
Important: Tax laws are complex and change frequently. Consult with a qualified tax professional to understand how these benefits apply to your specific situation.
Tips for Vacation Home Success
Make the most of your vacation home investment with these expert tips
Look for areas with strong rental demand, good appreciation potential, and activities you enjoy
- Research rental rates and occupancy in the area
- Consider proximity to attractions and amenities
- Check local regulations on short-term rentals
Don't just budget for the mortgage -- factor in all ownership costs and maintain adequate reserves
- Plan for 1-2% of property value annually for maintenance
- Keep 6-12 months of expenses in reserves
- Don't count on rental income to cover all costs
Know your budget and strengthen your negotiating position by getting pre-approved before shopping
- Shows sellers you're a serious buyer
- Helps you avoid disappointment
- Speeds up the buying process
Decide early whether you'll self-manage or hire a property manager to handle rentals and maintenance
- Property managers handle day-to-day operations
- Self-management saves money but requires time
- Consider your distance from the property
Research zoning laws, rental restrictions, and HOA rules before purchasing
- Some areas restrict short-term rentals
- HOAs may have rental limitations
- License or permit requirements may apply
Balance personal use with rental income goals to optimize both enjoyment and financial return
- Block out your preferred vacation weeks early
- Maximize rental income during peak seasons
- Track personal vs rental use for tax purposes
Vacation Home Mortgage Calculator
Estimate your monthly payments and see how different down payments affect your mortgage
Pros and Cons of Vacation Home Ownership
Consider both sides before making your decision
- Always available for your personal use without booking hassles
- Potential for rental income to offset ownership costs
- Property appreciation in desirable vacation destinations
- Tax deductions for mortgage interest and property taxes
- Create lasting family memories and traditions
- Diversify your investment portfolio with real estate
- Can serve as a retirement home in the future
- Significant upfront costs including larger down payment
- Ongoing maintenance and expenses even when not in use
- Higher interest rates than primary residence mortgages
- Distance makes management and maintenance challenging
- Market volatility in tourist-dependent areas
- Rental income may not be consistent year-round
- Less liquidity compared to other investments
Frequently Asked Questions
Get answers to common questions about vacation home mortgages