Buying a Second Home in Alberta: Financing Options and Tax Implications

Why Buy a Second Home?

Purchasing a second home in Alberta is becoming increasingly popular among homeowners looking to expand their investments or enjoy a vacation retreat.

A bright and modern living room in a Calgary home, perfect example of a second property that can serve as a relaxing retreat or a smart long-term investment.

Whether you’re buying a cabin near Sylvan Lake, a rental property in Edmonton, or a vacation condo in Canmore, owning another home can provide lifestyle and financial benefits.

Common reasons to buy a second home:

• Vacation property: Many Albertans invest in second homes near scenic destinations like Banff, Jasper, or Pigeon Lake for family getaways.

• Investment opportunity: Cities such as Calgary, Red Deer, and St. Albert offer strong rental markets, making second homes appealing for generating passive income.

• Future retirement plan: Some homeowners purchase a smaller home in areas like Lethbridge or Okotoks to downsize later.

• Helping family members: Buying a property for children attending school in Edmonton or Calgary is another common reason.
  

If you are buying your first property, you can learn more about mortgage programs and qualifications on Tina Kha’s First-Time Home Buyers page.

Financing Strategies for a Second Home

Getting a mortgage for a second property in Alberta depends on your financial goals and how the home will be used.

1. Traditional Second Home Mortgage

If the second property will be used for personal use or vacation, you can often secure a second home mortgage with as little as 5–10% down, depending on your credit and debt ratios. Lenders typically view these homes as lower-risk if they’re not rented out.

2. Investment Property Mortgage

For rental or income properties, the rules differ. You’ll need at least 20% down, and lenders will evaluate the potential rental income to determine eligibility. Learn more about this option on the Investment / Rental Property Mortgage page.

3. Refinancing Your Current Home

Many homeowners in Edmonton, Sherwood Park, and Airdrie tap into the equity of their primary residence to buy a second property. Refinancing allows you to borrow against your current home’s value, providing a lump sum for the new purchase. Explore refinancing options here.

4. Home Equity Line of Credit (HELOC)

A HELOC is another flexible option that gives you access to funds as needed. It’s often ideal if you plan to renovate or furnish your second home over time.

5. Reverse Mortgage Option for Retirees

For homeowners over 55, a reverse mortgage can help fund a second home purchase without monthly mortgage payments. To better understand how this works, you can also review Tina’s detailed Reverse Mortgage Alberta Guide.

If your mortgage term is ending, it’s worth reviewing renewal opportunities that could free up funds for your next investment. Learn more about mortgage renewals.

Tax Considerations for a Second Home in Alberta

When buying a second home, it’s crucial to understand the tax implications. How the property is used will affect what you owe and what you can claim.

Primary vs. Secondary Residence

Your primary home is exempt from capital gains tax when you sell it, but a second property (vacation or investment) is not. If you sell your second home in Calgary or Edmonton for more than you paid, you’ll owe capital gains tax on half of the profit.

Rental Income Tax

If you rent out your second home in areas like Red Deer, Leduc, or Cochrane, the income must be reported on your tax return. However, you can also deduct expenses such as:

• Mortgage interest

• Property taxes

• Maintenance and repairs

• Utilities (if included in rent)
  

Vacation Home Use

If the property is used solely for personal vacations, you won’t have to report income, but you also can’t claim rental deductions.

GST and Property Taxes

In Alberta, there’s no provincial sales tax on home purchases, but GST may apply to newly built or substantially renovated homes. Property taxes will also vary by municipality, Calgary and Edmonton generally have higher rates than smaller towns.

Consulting with a mortgage broker and tax professional can help you balance your financing structure and minimize tax burdens effectively.

Making the Right Choice

Buying a second home in Alberta can be both an emotional and financial milestone. Whether you’re investing in a vacation retreat or a rental property, the right mortgage strategy can make all the difference.

Modern condo buildings in Edmonton, Alberta, a popular choice for buyers investing in second homes or rental properties.

If you’re exploring options in Calgary, Edmonton, Red Deer, or surrounding Alberta communities, reach out to Tina Kha for expert guidance.

Contact Tina Kha today to explore second home mortgage solutions tailored to your financial goals.