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Vacation Home Mortgage

Vacation homes can be a way for your family to get away from their busy lives and get closer to nature or a way to take a break from the usual routine. Since they are considered second properties the requirements for a vacation home mortgage may be stricter. The mortgage rate will also generally be higher than the mortgage for your primary residence. The type of property, whether is a Type A second home or a Type B vacation home, will also determine the eligibility requirements for your vacation home mortgage. Trust the experienced team at Mortgage Squad Agents to find a vacation home mortgage solution that is right for you.

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    A bad credit mortgage is an option for people with a less than optimal credit score who are looking to finance their purchase of a home. A credit score is a number that gives lenders an idea of how safe or how risky it would be for them to provide their services to you. In Canada this number goes from 300 to 900, and the higher the number the better your credit score is. You build your credit score and your credit history over time by consistently and reliably paying off loans and debts, such as student loans, car loans, and credit cards. If your credit score is lower than what is ideally asked for you may still be eligible for a bad credit mortgage. A bad credit score typically indicates financial difficulties in the past, such as people who have experienced bankruptcy or have had difficulty paying back their loans. 
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    Prime Lenders: A prime lender will have the strictest requirements for your bad credit mortgage but can generally offer the best mortgage rates. Prime lenders will include the traditional lenders you would first think of when applying for a mortgage such as the major banks. While they typically prefer applicants to have a high credit score you may be able to get a bad credit mortgage with them with a credit score as low as 600. Trust Companies and Bad Credit Lenders: Financial institutions that specialize in providing a bad credit mortgage will include trust companies and other institutions that work with people with a bad credit score or history. Typically a bad credit lender or trust company will work with people who have a credit score of 700 or lower, and may be able to provide you with a bad credit mortgage with a score as low as 550
    Private Lenders: A private lender can include a private company or an individual lender willing to provide a bad credit mortgage to someone who has a poor credit score or history. Some private lenders will only provide loans to finance the down payment of a mortgage. While their mortgage rates will be much higher than a prime lender or trust company, private lenders typically become an option to consider if your credit score is below 600.
    If you have a poor credit score and are thinking of applying for a bad credit mortgage there are some things to consider first. Lenders will look at many things during the application process but will typically focus on: Credit Score and Debt History: A credit score and your debt or credit history provide a quick snapshot of your risk profile for a lender. Your credit score will determine whether you are eligible for a regular mortgage or will have to finance your home purchase with a bad credit mortgage. Credit scores in Canada range from 300 to 900 with a higher score being better. If your score is lower than 700 or you have a history of missed payments you may have to opt for a bad credit mortgage. Income and Employment History: The primary concern for a lender is if you will be able to pay back the loan reliably over time. As such they will be looking at your income and employment history when you apply for a mortgage. If your credit is below ideal and you have a low income or an employment history that is difficult to verify then you may be required to apply for a bad credit mortgage. Property: Any time you apply for a mortgage the lender will want to look at the property. They will look at the state of the construction and required maintenance costs of the property, the area it is in, and if they consider it affordable for you. If you are applying for a bad credit mortgage the lender may be stricter with the type of property they are willing to finance. Down Payment: In Canada the minimum down payment on a property is 5% with that amount rising to 10% of a property that is valued over $500,000.
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    Tips for Getting a Credit (HELOC)

    Because the burden to prove eligibility is greater on self-employed individuals, it pays to be well prepared before applying for a loan. The following should be considered before going into apply for a Self-Employed Mortgage:

    Vacation Home Mortgage Qualifications

    As with other properties there are certain rules or requirements that must be met for a vacation home mortgage. Most of the standard requirements for income and employment verification will apply for both Type A and Type B properties. Credit score assessments will also be similar with a score of 600 generally being the lowest accepted amount for Type A properties, although Type B properties will generally have a higher requirement. Bankruptcies, judgements, and recent missed payments may make you ineligible for a vacation home mortgage.

    The down payment requirements for a mortgage are a minimum of 5% for Type A properties and 10% for Type B properties, although Type A properties worth over $500,000 will require 10% for the amount valued above $500,000. Lenders may prohibit the use of non-repayable gifts from family members for the down payment of a vacation home mortgage.

    Is it harder to get a mortgage if I am self employed?

    Obtaining a Self-Employed Mortgage can be more difficult than a traditional mortgage as the borrower has to take extra steps to prove to the lender that they are capable of maintaining regular payments on their mortgage. It is possible that depending on the financial institution, that Self-Employed Mortgages are not offered at all. Where they are offered, there is also the chance that banks will significantly increase the interest rates for these loans, making them a more difficult consideration for borrowers. To give a better chance at being approved, lenders are expected to offer a large down payment, up to 20% or higher, as well. Another difficulty associated with Self-Employed Mortgages is the lack of a T4. A full time Employee can provide proof of income through a simple T4, however a self-employed individual must provide a stated income form, which shows the amount the potential borrower claimed to have earned, and then must provide documentation which can prove the stated amount is accurate.

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    Commonly Asked Questions

    For a property classified as a second home (Type A) the minimum down payment for a vacation home mortgage is 5%, although a property value greater than $500,000 will require a down payment of 10% for the value above $500,000. For a property classified as a vacation home (Type B) the minimum down payment is 10%.
    For a property classified as a second home (Type A) the minimum credit score required for a vacation home mortgage is usually 600. For a property classified as a vacation home (Type B) the minimum credit score is usually in the high 600s. The better your credit score the better the mortgage rate will be for your vacation home mortgage.
    Since vacation homes, both Type A and Type B, are considered second properties the risk is considered higher. The mortgage rates for a vacation home mortgage are typically higher than the rate for a primary residence. The larger the down payment and the better the credit score the more favourable the mortgage rate is likely to be.

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