Using Your Home Equity to Buy a Cottage in Ontario

One of the most common ways Ontario homeowners finance a cottage purchase is by accessing equity in their primary home. It's worth understanding how this works before you assume the down payment is out of reach.

Option 1 — HELOC (Home Equity Line of Credit)

If you have enough equity, a HELOC lets you draw funds as needed, use them for a cottage down payment, and pay interest only on what you use. The rate is variable and tied to prime. You keep flexibility — you're not locked into a fixed payment on the equity portion.

Option 2 — Refinance

You refinance your primary mortgage to a higher amount, pull out the equity as a lump sum, and use that as your cottage down payment. The result is one mortgage on your primary home with a fixed payment, and a separate cottage mortgage. Some people prefer this structure for the predictability.

How much equity do you need?

Most lenders will allow you to access up to 80% of your primary home's appraised value, less any existing mortgage balance. Whether there's enough equity to fund a cottage down payment depends on your specific situation — purchase price, existing mortgage balance, and current market value of your home.

When this works and when it doesn't

This strategy works well when your primary home has appreciated significantly and your existing mortgage balance is moderate. It's less straightforward if you're close to the 80% threshold or if your primary mortgage has meaningful prepayment penalties. These are solvable questions — worth a conversation before you assume it won't work.

Matthew Shaw-Ward | Mortgage Agent Level 1 | Lic. M25002611 | Verico The Mortgage Wellness Group Limited | Brokerage Lic. #11970