How will you use this property?
You may be looking into a vacation home, or perhaps a rental property that you’ll use occasionally. Start by considering all the things that will go into this decision. Is this property easy to rent or share? More importantly, is this property in a community that permits short-term rentals? You may want to ask around and see how the local homeowners feel about rental guests.
Perhaps, the bigger question is around what you want out of your retirement and if this property will give you that. If you have children, they may play a big role in your decision. If your children are older and starting to grow their own families, you may want to ensure that there’s enough room for them to visit, or even use the space independently.
How does this investment measure up financially?
Besides the price of the property itself, consider things like renovations and upgrades. Have you investigated all the other expenses to run this property? How much are the land taxes, property fees, insurance, cleaning, outdoor maintenance? Moreover, are you eligible for any tax deductions with a second property? It’s important to budget for these things and ensure that they won’t have a negative impact and affect your overall financial goals.
There may be other financial aspects that you may not have considered, such as landlord-tenant laws, taxable rental income, property management costs, fluctuating markets, resale, and the legal duties and expectations of a landlord.
You will need to consider your options for financing. To help you access equity to buy a second property, consider the Scotia Total Equity Plan (STEP).
What is the Scotia Total Equity Plan (STEP) and how can it help me?
If you need money to fund a down payment on a second property and you don’t want to cash out investments, with STEP you may borrow up to 80% of your home equity. A STEP allows you to finance a purchase using the equity of your primary residence. If you earn rental income from this property, you can deduct expenses such as the interest paid on the borrowed funds. For physicians who pay the highest marginal tax rate, the higher loan to value ratio can help offset the rental income you earn and reduce your taxes payable.
Insert heading textwith an optional subtitle
With the flexibility of a STEP, you’re in control to mix and match mortgages, lines of credit, loans and credit cards to create a plan that works for you. You can use your home equity whenever and however you need it. We understand that as a physician you have unique financial needs. Scotiabank Home Financing Advisors can provide expert advice and help you choose the right mortgage solution customized to meet your needs. Together with MD Financial Management, we can develop a holistic financial plan to build your wealth.
Legal Disclaimer: This article is provided for information purposes only. It is not to be relied upon as financial, tax or investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell. Information contained in this article, including information relating to interest rates, market conditions, tax rules, and other investment factors are subject to change without notice and The Bank of Nova Scotia is not responsible to update this information. All third-party sources are believed to be accurate and reliable as of the date of publication and The Bank of Nova Scotia does not guarantee its accuracy or reliability. Readers should consult their own professional advisor for specific financial, investment and/or tax advice tailored to their needs to ensure that individual circumstances are considered properly and action is taken based on the latest available information.
MD Financial Management (MD Financial) provides financial products and services, the MD Family of Funds and investment counselling services through the MD Group of Companies. For a detailed list of the companies, visit md.ca. All banking and credit products and services available through the Scotiabank Healthcare+ Physician Banking Program are offered by The Bank of Nova Scotia (Scotiabank). Credit and lending products are subject to credit approval by Scotiabank.
® Registered trademark of The Bank of Nova Scotia, used under licence.