Mortgage services · 05
Investment & vacation properties
A rental property is a small business with a roof. A cottage is a family plan with a driveway. Lenders treat each one differently — this page explains both, in plain words.
Rental down payment
At least 20%. 25% often buys a better rate.
How rent counts
Lenders count only part of the rent — the formula matters.
Vacation homes
With real personal use, some programs allow as little as 5–10% down.
The basics
The ground rules for rentals
Three rules shape every rental purchase:
- 20% down, minimum. A property you will not live in cannot be insured, so 20% is the floor. If you buy a duplex and live in one unit, friendlier owner-occupied rules apply.
- Only part of the rent counts. Lenders do not take the rent at face value. Depending on the lender's formula, 50% to 100% of market rent is counted against the property's costs. The formula you get can change your approval by six figures.
- You still have to qualify too. Many lenders want savings beyond the down payment — often a few months of payments in reserve.
What this means for you — the rent math
Mortgage and running costs: about $4,300/month. Market rent: $4,400/month.
A lender that counts 80% of rent sees $3,520 — your income must carry the $780 gap. A lender that counts 50% triples that gap. A lender that adds back 100% sees the property nearly carry itself. Same building, three answers. Choosing the lender is the strategy.
Thinking ahead
Plan past the first door
The most expensive mistake in rental financing is not a bad rate. It is parking your first rental with a lender whose rules stop you at two properties.
Lenders differ sharply on how many financed rentals they allow, and how they count your existing rental income when you buy the next one. If your plan is three properties in six years, the first mortgage should be placed with that plan in mind:
- The right lender order — flexible lenders saved for later, strict ones used first.
- Payments structured to protect your monthly cash flow.
- Equity set up so it can be re-used for the next down payment.
A common route for the down payment itself: a refinance or HELOC on your own home funds the 20%, and the rental carries its own mortgage. Interest on money borrowed to invest is generally tax-deductible — your accountant confirms. See Refinancing & equity for how that works.
The getaway
Vacation and secondary properties
Cottages and second homes play by their own rules. The first question every lender asks: is this really for your family, or is it an income property?
- True vacation home (your family genuinely uses it): some insured programs allow as little as 5–10% down, at rates close to a normal home.
- Mostly a rental with some family weekends: it is an investment property — 20% down and rental underwriting. Describing it wrongly to get a better rate is mortgage fraud, so we set it up as what it really is. I will price both versions so you can compare honestly.
The property itself matters as much as the money:
- Road access. If the road is not maintained all year — or access is by water — many lenders step back.
- Four-season use. A proper heat source, water, and septic make financing far easier.
- Foundation and land. A prefab cottage on a permanent foundation on owned land finances like a house. On blocks or leased land, it reads like a vehicle.
What this means for you
Before you fall for a view, send me the listing. Ten minutes of checking access, heat, water, and septic tells us which lenders will finance it — and at what down payment tier — before you spend a weekend driving north.
Before you offer
What I will ask you about the property
Send me the listing and these answers, and I can tell you quickly whether a lender will finance it — and at what down payment.
- How many units? One to four units is residential lending. Five or more is a different kind of loan entirely.
- Will you live in one unit? If yes, friendlier rules and a smaller down payment may apply.
- What is the current or expected rent? With a lease or a rental appraisal if you have one.
- What are the running costs? Property tax, insurance, heat, and condo fees if any.
- Condition and age. Knob-and-tube wiring, an old oil tank, or an unfinished renovation can narrow the lender list.
- For a cottage: year-round road access, heat source, water and septic.
What this means for you
Ten minutes of checking before you offer is worth more than any rate shopping afterwards. A property that does not fit a lender's rules cannot be fixed with a better rate.
Common questions
Questions people ask
Short answers in plain English. Your situation may be different — ask me anything on a free call.
How many rental properties can I finance?
There is no legal limit — there are lender limits. Big banks often stop at three to five financed properties; credit unions and mortgage-only lenders each have their own ceilings. With the lender sequence planned properly, your cash flow is the real limit, not a bank policy.
Do condo rentals work differently?
The condo fee is added to the carrying costs, which eats into the rent math — a $600 monthly fee can quietly erase a property's paper cash flow. Buildings with healthy reserve funds finance more smoothly.
What about Airbnb income?
Most residential lenders qualify you on long-term market rent, not nightly rates, and some decline dedicated short-term rentals entirely. City licensing rules matter too. If the plan is genuinely short-term hospitality, there are lenders who price it that way — let's talk first.
Are cottage rates higher?
A four-season, road-access cottage prices close to a normal home. Seasonal or harder-to-reach properties can cost modestly more, with fewer lenders bidding — which is exactly when shopping the file matters most. The bigger difference is usually the down payment tier, not the rate.
Can I use my home's equity for the down payment?
Yes — it is the standard playbook for both rentals and cottages. A refinance or HELOC on your home funds the down payment, and the new property carries its own mortgage. We make sure your income comfortably supports both.
Have a property in mind?
Send me the listing and the rent numbers. I will run the math across lender types and tell you what the file really supports — before you offer.