Financing your vacation retreat.
Whether you're planning to purchase a waterfront or back lot, a seasonal or year-round property, something finished or unfinished, coming up with the funds to buy your vacation retreat may not be as difficult as it used to be.
Most financial institutions offer financing programs for vacation properties and/or second homes. Depending on the type of property you buy, you may be eligible to obtain financing for up to 95%* of its value.
Use the equity in your home
Your primary residence is another good place to look for financing. If your home is worth more than your outstanding mortgage, you may be able to tap into some of the available equity to purchase your vacation property.
Resourceful financing solutions
Along with cost to purchase, potential owners of vacation properties may have to budget for renovations, maintenance, and property taxes.
Renting your property
If you anticipate that you won't be using your vacation property for all the summer months (or if you intend to purchase a winterized chalet near the ski slopes that won't be in use during parts of the season), you might consider renting out your property to help with the carrying costs.
Tip:
Be sure to save all receipts associated with maintenance, utilities, and insurance, as you may be able to claim tax deductions if you are drawing income from your property. Renovations may also increase your capital base and can lower potential capital gains when and if you decide to sell. |
To determine a fair rental price, ask around or check into classified and Internet listings and community bulletin boards to get a sense of what others are charging for similar properties. Listing your property with a rental agency can help you market it.
Don't forget that if you decide to rent out your home away from home for parts of the year, you will be responsible for ensuring that it is clean and habitable.
Tip:
If you anticipate being out of the country when renters occupy the property, you might consider hiring a manager who can take care of maintenance and repairs. |
Family ownership
Another way to reduce your financial outlay is to consider a joint purchase with family or friends. A parent may consider buying property with an adult child who does not have a principal residence. If the property is in the adult child's name, this can help to save on capital gains taxes if you intend to sell during your lifetimes.
Siblings may also consider purchasing a property together. On the face of it, this may seem like an easy way to make a vacation property affordable, but potential problems can easily arise.
The most obvious is the use of the property - particularly as Canadian summers are short. Other things that should be worked out well in advance - and preferably put in writing - are who will be responsible for maintaining the property (work and costs) and succession planning.
Tap into local knowledge
Local real estate brokers are a valuable resource who can help you in your planning and budgeting. They will understand the market and renting conditions and can give you good estimates on property taxes and annual upkeep.
If you are planning to buy vacant land on which to build a dwelling, they can also help you check into any building restrictions and local zoning regulation.
Ask yourself the tough questions
Before you go ahead and make your vacation home purchase, it pays to be honest with yourself and your family about what you really want. How often do you plan to use the property? Can you afford the purchase price and maintenance costs without having to compromise on the other things you want out of life?
In your planning and budgeting, you may find that it makes much more sense to rent for a month during the summer season, and still have enough left over for travel and other leisure activities. But if you are still dreaming of owning a vacation property, sit down with your mortgage lender and find a way to make it happen.
* Subject to approval by a mortgage default insurer. All Scotiabank mortgages are subject to applicable credit approval, Scotiabank residential mortgage standards and maximum permitted loan amounts.
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