All the Numbers

Buying a cottage

From the All the Numbers wiki · Housing

In All the Numbers, a cottage is a home you own as well as the one you live in. You and your family use it, rent-free. Lenders and insurers call this a second home, and they have their own rules for it.

The down payment

With 20% or more down, a cottage is financed like any home and needs no mortgage default insurance. With less, it has to be insured, and what an insurer will cover depends on the building:[1]

  • Usable all year: a permanent foundation, a permanent heat source and road access all year. These are insured on the same terms as the home you live in, so the minimum down payment and premiums are the same.[2]
  • Seasonal: no permanent heat, a floating foundation, or a road that is not ploughed in winter. Only one insurer covers these. The loan can be at most 90% of the price, so the minimum down payment is 10%,[3] and the premium is higher, from 1.45% to 4.35% of the loan.[4]

Either way the cottage must be one unit, used by you or close family, and not rented out. No insurer covers a cottage that is meant for rent, so one needs 20% down, and All the Numbers does not insure a cottage you plan to rent.

What cannot pay for it

A cottage is never your principal residence while you live somewhere else. So there is no first-time buyer land transfer tax rebate, and neither the Home Buyers' Plan nor the FHSA can be used for it.[5]

Land transfer tax

A cottage pays the same land transfer tax as any home in its province. In Ontario, a cottage whose town you have not given is priced outside Toronto, so only the provincial tax applies.[6] A home you live in is priced in Toronto until you say otherwise; almost no cottages are there.

In another province

A cottage can be in another province or territory than the one you live in. Its land transfer tax and property tax are that province's; the income tax on its rent, and on a gain when you sell it, stays your own province's, because you pay provincial income tax where you live on 31 December.[7] Two provinces charge more to a buyer who lives elsewhere. Nova Scotia adds a deed transfer tax of 10% of the price, unless you move there within a year.[8] Prince Edward Island gives its property-tax credit only to its residents and lets towns charge non-residents more: in Charlottetown the rate is 3.03% instead of 1.67%.[9] BC's speculation and vacancy tax is not applied.

Running costs

A cottage starts with the same running-cost defaults as a home: maintenance and insurance together at 1% of its value a year, a figure PWL Capital gives for a principal residence. A seasonal cottage can cost more to insure and to open and close each year, so set your own if you know them.[10] Interest on a cottage mortgage is not tax-deductible, because the cottage earns no income.

When you sell it

Only one home per family can be your principal residence in any year. All the Numbers suggests which home takes which years, by the gain each is expected to make per year, and you can change it. The rest of a cottage's gain is a capital gain when it is sold or given away. See selling or giving a cottage.

Qualifying for the mortgage

A lender qualifies a cottage on both homes: the new mortgage at the qualifying rate, the one you already have at its payment, and both homes' property tax and heat, against the same limits as any purchase.[11]

Not modelled

  • BC's speculation and vacancy tax, Nova Scotia's tax on buyers from outside the province, and city vacant-home taxes.
  • Renting the cottage out is covered in renting out a cottage.

See also

  • A home you already own · A home you own when the plan starts is entered as it stands today — what it is worth, what is left on the mortgage, the rate and payment, when the term ends — and runs from the plan's first month, with no purchase.
  • Capital gains and the adjusted cost base · Selling an investment for more than its adjusted cost base is a capital gain, and half of it is added to taxable income in the year of the sale. Growth that has not been sold is not taxed.
  • Land transfer tax · Ontario charges a tax on the price of a home, rising from 0.5% to 2.5% in brackets, and Toronto adds a second one of its own. A first-time buyer gets a refund of up to $4,000 from Ontario and $4,475 from Toronto.
  • Mortgage default insurance · A buyer putting down less than 20% must buy mortgage default insurance from CMHC or a competitor. The premium is 2.80%, 3.10% or 4.00% of the loan depending on the down payment, is added to the mortgage, and carries 8% Ontario sales tax paid in cash at closing.
  • Renting out a cottage · Rent from a cottage you also use is taxable. Its shared costs and mortgage interest are deductible only for the weeks it is rented, a loss offsets other income only when it is run as a business, and a short-term rental may need a licence where it is.
  • Selling or giving a cottage · Only one home per family can be the principal residence each year, so a family with a home and a cottage chooses which one takes which years. All the Numbers suggests the split that saves most and lets you change it. A cottage given to a child is taxed as if sold at its market value.
  • The First Home Savings Account · $8,000 a year with one year of carryforward and $40,000 for life, deducted from income and withdrawn tax-free for a first home. The refund is credited the following April, and the account winds up into an RRSP if it is never used.
  • The Home Buyers' Plan · Up to $60,000 out of an RRSP, untaxed, for a first home — but it is a loan to yourself, repaid over fifteen years, and a missed repayment is taxed as income that year.
  • What a house costs to hold · Property tax, maintenance, insurance and utilities are estimated as rates against the home's value, with sourced defaults. Property tax then grows with inflation, maintenance and insurance with the home's value, and utilities with inflation.
  • Where you live on 31 December · The province where you live on 31 December sets your provincial income tax for the whole calendar year. The plan uses one province for the household in every year, Ontario until you choose one, and does not model a move part way through the plan.
  • Would a lender write the mortgage? · Lenders test a mortgage against two ratios, GDS at 39% and TDS at 44% of gross income, using a stress-test rate of the contract rate plus 2 points or 5.25%, whichever is higher. All the Numbers runs this screen on the income entered for today.

References

  1. ↑Sagen — Vacation/Secondary Homes, Property Type Requirements · Type A secondary home: permanent foundation below the frost line, winterized with a permanent heat source, year-round road access. Type B vacation home: no permanent heat, floating foundation, seasonal or boat-only access allowed, running water · effective 2026-10-09
  2. ↑CMHC — CMHC Second Home ("must be suitable and available for full time and year-round occupancy"; "available for 2 properties per borrower/co-borrower") · Insured second home: one unit, occupied rent-free by the owner or close family (never rented), Canadian citizen or PR; CMHC and Canada Guaranty require year-round occupancy and access; CMHC allows 2 insured properties per borrower · effective 2025-08-27
  3. ↑Sagen — Vacation/Secondary Homes ("Vacation Homes (Type B) 90% LTV") · Seasonal (Type B) vacation home: highest insured loan-to-value (Sagen only) · 90% · effective 2026-10-09
  4. ↑Sagen — Vacation/Secondary Homes, Premium Rate table · Sagen Type B vacation-home premium by LTV: ≤65% 1.45%; ≤75% 2.55%; ≤80% 3.15%; ≤85% 3.50%; ≤90% 4.35%; +0.20% over 25-year amortization · See the source · effective 2026-10-09
  5. ↑CRA — Withdrawals from your FHSAs ("You must occupy or intend to occupy the qualifying home as your principal place of residence" … "within one year after buying or building it"); CRA — How to participate in the HBP · HBP and FHSA qualifying withdrawals require intending to occupy the home as the principal place of residence within one year; a cottage kept alongside the principal home never qualifies (an FHSA withdrawal for one is taxable) · effective 2023-04-01
  6. ↑Ontario — Calculating land transfer tax; our convention · An Ontario cottage whose municipality is not given is priced outside Toronto — the provincial land transfer tax only — until told otherwise; reported on the run · effective 2026-10-09
  7. ↑CRA — Your province or territory of residence ("enter the province or territory where you lived, or were considered to be a factual resident, on December 31") · A cottage can be in another province or territory than the one the household lives in: its land transfer tax, any tax on buyers from outside the province and its property tax are that province's; income tax on its rent and on a gain on its sale stays the household's province's, since provincial income tax is due where the person lives on 31 December; a home the household lives in is always in its own province (moving is its own event) · effective 2026-10-26
  8. ↑Nova Scotia — Non-resident Provincial Deed Transfer Tax ("PDTT = 10% x Total Ownership Interest being Transferred to Non-Residents x Purchase Price or the Assessed Value of Property (whichever is higher)"); news release 2026-08-07, Changes to Non-Resident Deed Transfer Tax · Nova Scotia non-resident deed transfer tax: a share of the higher of price and assessed value × the share transferred to buyers who do not live in Nova Scotia (Canadians from other provinces included); exempt if the buyer moves to Nova Scotia within a year · 10% · effective 2025-04-01
  9. ↑Government of Prince Edward Island — Property Charge Rates, City of Charlottetown, 2026 non-commercial: Provincial Tax Rate $1.70, Provincial Tax Credit $0.70, Municipal Resident Tax Rate $0.67, Municipal Non-Resident Tax Rate $1.33, Non-Resident of PEI Tax Rate $3.03 · Charlottetown residential property tax rate on the assessed value for an owner who is not a resident of PEI: the provincial rate with no provincial tax credit, plus the City's non-resident municipal rate · 3.03% · effective 2026-01-01
  10. ↑PWL Capital — Financial Planning Assumptions, §3; our convention · A cottage starts with the same running-cost defaults as a home — maintenance and insurance together at PWL's 1% of value a year (a figure for a primary residence), property tax and utilities as for a home — until changed · effective 2026-10-09
  11. ↑Canada Guaranty — Lifestyle Advantage ("Total Debt Service ratio calculation must include the servicing of both properties, including taxes and 50% of condo fees") · Buying a cottage is qualified on both homes — the new mortgage at the qualifying rate, the existing one at its payment, both property taxes, both heat costs and half of any condo fees — against the same debt-service limits as any purchase · effective 2025-11-01
  12. Government of Prince Edward Island — Property Taxes and Charges (2026-10-07); Property Charge Rates, City of Charlottetown, 2026 non-commercial: Provincial Tax Rate $1.70, Provincial Tax Credit $0.70, Municipal Resident Tax Rate $0.67 · Charlottetown residential property tax rate on the assessed value for an owner-occupied home: municipal rate plus the provincial rate after the provincial tax credit · 1.67% · effective 2026-01-01