Editor's note, October 6, 2026: this article was reviewed and rewritten in our accuracy check. An earlier version contained regional price ranges, carrying costs and financing categories we could not trace to a source; they have been removed or replaced with figures from the sources listed at the end of the article.
A cottage is a different purchase from a city home: different financing, different taxes when you sell, and systems such as a septic tank and a well that many city buyers have never had to judge. Here is what to check.
Financing a second home
- With 20% or more down, a cottage can be financed with a conventional mortgage, subject to the lender's rules for the property (year-round access, heating, foundation and water supply all matter).
- With less than 20% down, the mortgage must be insured. CMHC no longer insures second homes, but private insurers such as Sagen offer second-home insurance for owner-occupied properties that meet their criteria. Seasonal or hard-to-reach cottages often don't qualify.
- A cottage you plan to rent out is treated as a rental property: expect a 20% minimum down payment and the lender's rental rules.
The stress test applies: you qualify at the greater of 5.25% or your contract rate plus 2 points, with both the cottage and your home's costs counted in your debt ratios.
Taxes: capital gains and the principal residence exemption
You can designate only one property per family unit as your principal residence for each year. If you sell a cottage that isn't designated for those years, the gain is taxable. The proposed increase in the capital gains inclusion rate was cancelled in March 2025, and the CRA administers the inclusion rate of one-half. Which property to designate, and when, is a decision to make with a tax professional. Our first-time buyer programs (FHSA, HBP) are for a home you will live in as your principal residence, not a second home.
Water: wells and lake intakes
Private wells and lake water are not tested by a municipality. Ontario's public health laboratories test private drinking water for bacteria (E. coli and total coliforms) free of charge for private system owners; pick up a kit from your local public health unit. Make your offer conditional on satisfactory results, and ask about the well's construction and flow. Chemical testing (for example nitrates or metals) is done by private labs.
Septic systems
Most cottages have a private septic system regulated under the Ontario Building Code. The Code requires an inspection before a system is first used, not on resale, so ask for a re-inspection by a qualified inspector as a condition, along with the permit and pumping records. Some lake municipalities run their own septic re-inspection programs; check the municipality's page.
Access, shoreline and use
- Road access: is the road municipal and maintained year-round, or private? Who pays for ploughing and repairs?
- Shoreline: ask your lawyer to check whether the waterfront is owned, or whether a shoreline road allowance separates the lot from the water, and whether docks and boathouses have the permits they need.
- Zoning and rentals: many cottage municipalities licence or restrict short-term rentals. Check before you count on rental income.
- Insurance: wood stoves, distance to a fire hall and seasonal vacancy affect cover; get a quote before you firm up.
Closing costs
Ontario land transfer tax applies as on any purchase (there is no municipal land transfer tax outside Toronto): on a $900,000 cottage it is $14,475. First-time buyer refunds require you to live in the home. Add legal fees, title insurance, the inspection, water tests and the septic re-inspection.
Thinking about a cottage? Book a call with a licensed Summitly agent, or ask Zara, Summitly's AI virtual agent, for a due-diligence checklist for a specific property.
