Buying a Second Home in Ontario

A second home can be a weekend getaway, a place for family, or the first step into real estate investing. But buying property number two isn't a repeat of buying your first — the down payment rules are stricter, the mortgage math is different, and there are tax implications your principal residence never had. Here's what you need to know before buying a second home in Ontario.

Key takeaways

• A second home usually needs a larger down payment than your first — and you can't insure a mortgage on a property priced at $1.5 million or more.
• Lenders count the new mortgage against your existing debts, so your GDS and TDS ratios still apply.
• Only one property can be your principal residence for tax purposes; the other may face capital gains tax when sold.
• Land transfer tax and closing costs apply again on the second purchase, with no first-time buyer rebate.
• Eligible HOMEH buyers receive the industry's highest Cashback Rebate on their purchase.

Financing a second home

How you finance a second home depends on how you'll use it. A property you'll occupy part of the year (like a vacation home) can sometimes be financed similarly to a principal residence, while a property bought to rent out is treated as an investment with stricter terms. Either way, lenders add the new mortgage payment to your existing debts and re-run your GDS (≤39%) and TDS (≤44%) ratios — so carrying two mortgages requires solid income headroom.

Down payment minimums also matter. While an owner-occupied home under $500,000 can go as low as 5% down, second homes — especially rentals — typically require much more, and any property priced at $1.5 million or more must have at least 20% down and cannot be insured. Check your numbers with the affordability calculator before you shop.

There's also the stress test to clear. Federally regulated lenders make you qualify at the greater of your contract rate plus 2% or 5.25%, and that test now applies to the combined weight of both mortgages. In practice this means you need real income headroom — it's not enough that you can afford the second home in isolation; you have to show you can carry both at the higher qualifying rate. If a rental, factor in that lenders may count only a portion of the expected rent toward your income, so don't assume the tenant covers the whole payment in the eyes of the bank.

The tax side: principal residence vs second home

This is the biggest difference from your first home. In Canada, you can only designate one property as your principal residence for any given year, and that designation shelters its gain from capital gains tax when you sell. Your second home doesn't get that shelter — so when you sell it, the increase in value may be subject to capital gains tax.

Plan the designation carefully

If both properties have grown in value, which one you designate as your principal residence affects how much tax you'll eventually pay. This is worth discussing with an accountant before you buy and again before you sell.

If you'll rent the second home out, the rental income is taxable, though you can deduct eligible expenses against it. And remember land transfer tax applies again on the purchase — with no first-time buyer rebate the second time around.

The principal residence question is genuinely strategic, not just paperwork. Imagine you've owned a city home for years that has appreciated a lot, and you buy a cottage that also climbs in value. When you eventually sell one, you'll want to designate whichever property gained the most as your principal residence for those years, since that's the gain you can shelter. The rules let you make that choice when you sell, but it interacts with which years each property was eligible — which is exactly why a conversation with an accountant before you buy, and again before you sell, pays for itself.

Closing costs the second time around

Every cost from your first purchase returns — and one rebate doesn't. You'll pay land transfer tax (and, in Toronto, the municipal tax on top), legal fees, title insurance and the rest, but you won't qualify for the first-time buyer land transfer tax rebate of up to $4,000 provincial or $4,475 municipal.

Budget roughly 1.5%–4% of the price for closing costs, as with any purchase — see the full breakdown in our guide to closing costs in Ontario.

Beyond the one-time closing costs, build a realistic picture of the ongoing carrying costs before you commit. A second property means a second set of property taxes, a second insurance policy (often pricier for a part-time or rental home), utilities, and a maintenance reserve for the repairs that inevitably come. If it sits empty for stretches, those costs continue with no offsetting use. Buyers who run the full annual carrying number — not just the mortgage payment — are the ones who enjoy a second home rather than feel trapped by it.

Is a second home right for you?

A second home makes sense when your finances comfortably support two mortgages and you're clear on its purpose — lifestyle, family, or income. If your goal is recreation, our guide on buying a cottage in Ontario digs into the specifics. If you're looking further afield for value, see buying a rural property in Ontario. And to refresh the fundamentals, revisit our pillar guide on how to buy a house in Ontario.

Cashback on your second home too

Eligible HOMEH buyers receive the industry's highest Cashback Rebate on their purchase — second home or first. Estimate yours with the cashback calculator, then browse the HOMEH listings page.