Fig­ure out fi­nanc­ing be­fore mak­ing deal

Calgary Herald - Calgary Herald New Condos - - Recreation & Investment Properties -

Some ad­vice for own­ers of recre­ation prop­er­ties, as well as for peo­ple con­sid­er­ing mak­ing a pur­chase:

Fi­nanc­ing

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.

Bud­get­ing

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.

Hot spots

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.

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