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Considerations for Purchasing a Cottage or Vacation Property

Considerations for Purchasing a Cottage or Vacation Property


Vacation cottage on a lake

With winter finally behind us, it’s time to start thinking about summer and start making those sunny-day plans! Many people dream of owning a cottage or cabin getaway and visualize long, lazy days on the dock, naps in the hammock, fishing and barbeques. There’s only one thing getting in the way however…how to finance it. Here are a few essential points you’ll want to ponder before committing to purchasing a vacation property.

Skyrocketing prices

Cottage prices, especially the popular areas such as Muskoka and Haliburton, have really skyrocketed in the past few decades. What was once affordable for our parents or grandparents is now way out of reach for the many, with average waterfront properties in these markets selling for $500,000 to $1.65 million. Some of these aren’t even winterized or have year-round access, so be sure to do your research before you start your hunt.

How much can you financially manage?

Although we like to think of a vacation property as a relaxing, family getaway in the great outdoors, it’s also important to remember that it is a significant financial commitment. You’d never want your little oasis to become a burden, that’s for sure! For families already balancing a hefty mortgage, car payments and other debt, adding a new mortgage and extra bills to the mix may make it too difficult to stay financially afloat.

What are the extra costs?

The cost of a cottage is similar to a home in that you need to cover the down payment, regular mortgage payments, insurance, property taxes, utility bills and regular maintenance, but there are other costs as well to consider. For example, cottage or cabin owners may have to pay cottage association fees, septic/environmental expenses and winterization costs such as rooftop snow removal or winter road access. Insurance on a cottage can also be costly, as many insurance companies recognize the risks involved when a property is vacant for so long. Finally, don’t forget that your cottage will need furniture, home and kitchen essentials, tools, and all the fun toys and gadgets that make cottage life so enjoyable.

How to prioritize

When mulling over your cottage purchase pros and cons, be sure to consider your short-term and long-term financial goals. For instance, do you have kids who will go to college or university? What about travel plans or home renovation needs? Further, have you started saving for retirement? Although a recreational property can be a great investment, there are no guarantees that it will be a financial win for you when it comes time to sell. Before committing to putting all your money into that dream vacation property, be sure you’ve mapped out and prioritized your financial goals.

Refinancing options

Using your home’s equity could be a great option for your vacation property purchase if you don’t have a lot of money saved up. Depending on the current value of your home and how much is left owing on your mortgage, you can access the equity in your home to use towards your purchase. Be sure to talk to your lender or mortgage broker to find out if you qualify and for exactly how much.

Explore your options

If you know you’re committed to getting a cottage, but money is just too tight at the moment, there are still a few options to help you achieve your dream. One is that you go in on the purchase with close friends or family members and split the payments and the scheduled times that you can access the property. It’s advisable to get all the agreements and expectations drafted up legally to help avoid any issues down the road. You can also purchase a small plot of land, and work on building it year after year while camping out and enjoying the outdoors until the cottage or cabin is complete. You can also skip the purchase altogether and simply rent a fully furnished cottage for a week or a month every year, with no maintenance or mortgages to worry about. Time shares are also a solid option for many families, depending on cottage-country availability.

If owning a vacation property is your life-long dream, then let’s work out a plan to make it a reality. As an accredited mortgage broker and a financial planner, it’s my job to help you assess your current financial situation and start on a plan of action to help you save money and reach financial goals – including cottage ownership! Give me a call at 705-315-0516 to set up an appointment and let’s get started.

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