Can You Get a Reverse Mortgage on a Cottage or Secondary Property in Ontario?
Hi, WealthTrack founder David Pipe here. For many Ontarians, the family cottage is more than just a vacation spot — it’s a place filled with memories, tradition, and a sense of escape from city life. As retirement approaches, some homeowners wonder if they can tap into the equity of their cottage the same way they might with their primary home. Specifically, can you get a reverse mortgage on a cottage or secondary property in Ontario?
The short answer: No, reverse mortgages in Canada are only available for your primary residence. However, that doesn’t mean cottage owners are out of options. In this article, we’ll break down why cottages and secondary homes don’t qualify, and explore the alternative ways you can access equity from these properties in retirement.
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What is a Reverse Mortgage in Ontario?
A reverse mortgage is a financial product that allows homeowners aged 55+ to borrow up to 55% of their home’s appraised value without making regular payments. Instead, the loan is repaid when the homeowner sells the property, moves into long-term care, or passes away.
In Canada, reverse mortgages are primarily offered by:
HomeEquity Bank (through the CHIP Reverse Mortgage program)
Equitable Bank (select markets)
These products are designed for retirees who are “house rich but cash poor,” giving them access to the value of their home while allowing them to continue living in it.
Can You Use a Reverse Mortgage on a Cottage or Secondary Property?
Here’s the key point: lenders only offer reverse mortgages on a borrower’s primary residence.
That means if you own a cottage in Muskoka, Haliburton, or another Ontario vacation destination, you cannot take out a reverse mortgage directly on that property.
Why not? Lenders view secondary properties as riskier for several reasons:
Seasonal use: Many cottages are not winterized or used year-round.
Market volatility: Cottage markets can fluctuate more sharply than urban or suburban housing markets.
Liquidity issues: It may take longer to sell a cottage, making it harder for lenders to recover their investment.
What Are the Alternatives for Cottage Owners?
While you can’t get a reverse mortgage directly on your cottage, there are still several ways to access equity:
1. HELOC (Home Equity Line of Credit)
If your cottage is mortgage-free and meets certain standards (year-round access, good condition, etc.), you may qualify for a HELOC against it. This works like a revolving line of credit secured by the property. You can borrow as needed and only pay interest on the amount used.
2. Cash-Out Refinance
Another option is refinancing the mortgage on your cottage (or even your primary home) to take out equity. This involves replacing your current mortgage with a larger one and accessing the difference in cash.
3. Sell or Downsize
Some retirees choose to sell their primary home, move into their cottage full-time, and then take out a reverse mortgage once it becomes their primary residence.
4. Seasonal or Short-Term Rentals
Platforms like Airbnb and VRBO have made it easier to generate income from a cottage. Renting out your property during peak months could provide supplemental retirement income without touching the equity.
Using a Reverse Mortgage on Your Primary Residence to Fund the Cottage
Even though you can’t put a reverse mortgage on your cottage directly, you could:
Take out a reverse mortgage on your primary home
Use the funds to maintain, renovate, or even keep the cottage in the family.
This can be a smart way to balance both properties in retirement — unlocking the equity from your city home while preserving the cottage as a family retreat or legacy asset.
Why Lenders Restrict Reverse Mortgages to Primary Homes
It might seem unfair that cottages are excluded, but there are practical reasons:
Unpredictable markets: Urban housing markets are generally more stable than recreational ones.
Limited buyer pool: Selling a cottage can take longer, especially in off-seasons.
Maintenance challenges: Secondary homes, especially rural ones, often face greater wear and tear (septic systems, shoreline erosion, heating costs, etc.).
Risk to lender: Because repayment is tied to the sale of the property, lenders want assurance they can recover funds quickly and reliably.
Alternatives for Ontario Cottage Owners Nearing Retirement
If your retirement plan involves keeping the cottage in the family or freeing up equity, here are some options to consider:
HELOC on the cottage (if eligible)
Reverse mortgage on your primary home to free up funds for the cottage
Refinance either property to access equity
Downsizing from a larger primary home to make the cottage your main residence
Estate planning strategies with a financial advisor, such as co-ownership with children or setting up a trust
Frequently Asked Questions
Can I ever get a reverse mortgage directly on my cottage?
No. As of now, all Canadian lenders restrict reverse mortgages to primary residences only.
If I move into my cottage full-time, can I then apply for a reverse mortgage?
Yes — once your cottage legally becomes your primary residence, it may qualify. The property still needs to meet lender requirements (year-round accessibility, good condition, etc.).
Is a HELOC easier to get than a reverse mortgage?
HELOCs are more flexible but require monthly payments and depend on your credit score and income. Reverse mortgages are designed specifically for retirees without strong income but significant equity.
Conclusion
While you cannot get a reverse mortgage on a cottage or secondary property in Ontario, there are still creative ways to unlock value from your real estate. A reverse mortgage on your primary residence, a HELOC, or a refinance can all help fund cottage upkeep, renovations, or simply provide extra cash flow in retirement.
For many, the family cottage is priceless. With the right financial planning, you can continue enjoying it — and pass it on to the next generation — without sacrificing retirement security.
