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Buying a cottage and keeping the peace

Summer is in full swing and thoughts continue turning to lapping waves, crackling campfires and tranquil forests. It’s the time of year when cottage, cabin or beach house fever starts to take hold.

But the sunny dream of owning a vacation home may be dampened by the reality of property prices in many of Canada’s popular vacation destinations, plus the usual homeownership expenses such as a mortgage, utilities, and taxes. Sharing these costs, along with joint ownership, can be ways for families or friends to buy a place that still feels like their own.

However, before making the leap into co-ownership of a vacation property, buyers must be sure that they really understand the ins-and-outs of sharing a vacation property.

Before deciding to split the purchase with relatives or friends, having the right mix of personalities is key to a long-lasting arrangement. 

You and the other owners will have to decide jointly on everything, from when maintenance or urgent repairs need to get done, to shopping for common supplies.

Three top questions for the group before moving forward are:

1) Does owning a vacation property fit your lifestyle?

In addition to the fun and leisure aspects of a vacation home it is important to factor in the time and cost involved in year-round upkeep. How will the property be used?

If your dream is to own a ready-to-live-in relaxing hideaway while your co-owners dream of a northern DIY project, you may not see eye-to-eye when it comes to how you will be spending your weekends.

It’s important to think carefully about how much time you and your co-owners plan to spend at the vacation property. Will you be vacationing as a group, or do you want to trade off on weekends? Will one use the property more than the other? Will it be a 50/50 split?

2) Have you thought about what’s involved before you put it up for rent?

While most Canadians buy a second home for recreational use, growing numbers are also buying for investment purposes. Determine in advance how you will split, and claim, the rental income. In the case of a vacation property that you intend to rent out most of the time, the lender may deduct the rental income from your total monthly debt payments when qualifying you for a mortgage. It is important to be aware that not all lenders will take rental income into account — a mortgage broker can advise you on this.

3) Can you afford the financing?

While it certainly helps to go in with a co-purchaser, you want to be sure that your waterfront property isn’t putting you underwater. Seek independent advice on what size of mortgage you can reasonably handle — a mortgage broker can arrange a mortgage pre-approval, which will give you a clear price range.

The bottom line is that emotion shouldn’t trump common sense when it comes to buying vacation property.  Buyers need to do their mortgage homework, and good advice can help them get the most for their vacation home dollar.

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