Here are the minimum down payment requirements for an owner-occupied second home in Canada.
| Number of units in second home | Home | Minimum deposit required |
|---|---|---|
| 1 or 2 units | Yes | 5% of the acquisition price (for homes under $500,000) |
| 3 or 4 units | Yes | 10% of the acquisition price |
| 5 or more units | N/A (Commercial constructing) |
20 to 35% of the acquisition price (varies by lender) |
What is an owner-occupied property?
Lenders and mortgage insurance providers have their very own criteria for what counts as an owner-occupied residence. For example, a lender may require you to list the house as your primary residence. The Canada Housing and Mortgage Corporation (CMHC), Canada’s public mortgage insurance provider, defines owner-occupied residence as at the very least one family dwelling unit occupied rent-free by the borrower, an individual related to the borrower by marriage or civil union, or a legal parent or child.
To avoid violating the terms of your mortgage agreement, you should confirm the particular terms and conditions of your lender.
Minimum deposit for a rental property in Canada
Different rules apply if the second property isn’t occupied by the owner, i.e. the owner intends to rent out all units within the constructing.
Generally, it’s harder to acquire financing for such a purchase, and buyers must make a minimum down payment of 20%. This applies to all rental properties with 4 or fewer units.
Here are the minimum down payment requirements for a non-owner occupied second home (or rental property) in Canada.
| Number of units in second home | Home | Minimum deposit required |
|---|---|---|
| 1 or 2 units | NO | 20% of the acquisition price |
| 3 or 4 units | NO | 20% of the acquisition price |
| 5 or more units | N/A (Commercial constructing) |
20 to 35% of the acquisition price (varies by lender) |
Mortgage default insurance for second homes
Before you purchase a second home, consider how the scale of your down payment will affect your overall funds. One consideration is the extra cost of mortgage default insurance, which protects your lender if you happen to default in your mortgage.
Canada’s mortgage default insurance providers have special eligibility criteria for second homes. CMHC offers insurance to a maximum of 1 home per borrower at any given time. This implies that a mortgage on a non-owner occupied rental property or on a second home for private use, similar to a vacation home or holiday property, isn’t insurable with CMHC. Canada Guarantee And SayCanada’s two private insurers offer mortgage default insurance for second homes, with a 5% down payment required.
How to finance the down payment for a second property
To purchase their first home from a top-tier lender, similar to a serious bank, buyers often should prove that their down payment isn’t borrowed money. This isn’t the case with second homes. While it could make financial sense to avoid wasting enough money for the down payment on a second property, it is not uncommon for buyers to finance (borrow money for) the down payment.
