Figure out financing before making deal
Some advice for owners of recreation properties, as well as for people considering making a purchase:
From RBC Royal Bank Canada at rbc.com:
There are three main financing alternatives for purchasing a vacation home:
A conventional mortgage allows you to finance up to 75 per cent of the purchase price of the home, thus requiring a down payment of at least 25 per cent.
An insured mortgage makes it possible to finance up to 95 per cent of the value of a second home. If you happen to already own a cottage that has no debt on it, then you can also refinance that existing property for up to 90 per cent of its value and get an insured mortgage to purchase another vacation home.
A home equity line of credit makes use of the equity built up in your primary residence to let you borrow up to 75 per cent of the value of the home less the debt still owing on it.
You will need to have an up-todate appraisal done to determine the home’s current value.
Some tips for making sure buying a recreation property doesn’t leave you with unexpected sticker shock:
Be aware of closing costs, such as lawyer fees and home inspec- tion fees.
An accountant can help you navigate the taxation implications, both in terms of what taxes you have to pay up front, whether any taxes like GST can be deferred, what taxes are applicable if you rent out a property, and if any rebates/write-offs are available.
Location and amenities play a role in determining ongoing costs, such as condo/strata fees.
Contact local realtors, mortgage brokers, etc. to find out if an area has unique taxes or other fees that need to be factored into the purchase of the property.
Some signs to look for that an area is primed for recreation property growth:
Significant investment, in terms of people buying properties, developers building properties, and governments investing in infrastructure.
Upgrades to transportation that allow improved access from a wider area, such as the establishment of Calgary-toComox flights.
Talk to local realtors for their take on the latest trends in their area.
Proximity to other hot spots (such as Kelowna, B.C., or Canmore) can cause a ripple effect where locations farther out (such as Penticton, B.C., or Crowsnest Pass) experience growth.