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Approaches to Financing a Cottage Purchase by Borrowing Slide 1 Approaches to Financing a Cottage Purchase by Borrowing Slide 2 Approaches to Financing a Cottage Purchase by Borrowing Slide 3 Approaches to Financing a Cottage Purchase by Borrowing Slide 4 Approaches to Financing a Cottage Purchase by Borrowing Slide 5
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Approaches to Financing a Cottage Purchase by Borrowing

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You want to buy a cottage and are unsure about the best way to finance that purchase with debt. This presentation will walk you through your options

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Approaches to Financing a Cottage Purchase by Borrowing

  1. 1. Approaches to Financing a Cottage Purchase by Borrowing
  2. 2. Option 1 - Stand-alone mortgage on the new cottage • Clear demarcation between your principal residence and cottage • This helps if you decide to rent out the cottage for a portion of the year • You have a clear paper-trail for any expenses that you use to deduct against your rental income • Standalone mortgage can be rate-competitive with a mortgage on a home in the city/suburbs • Provided that the property is “marketable” (road access, good repair, reliable heating and water sources) • Does not require you to re-negotiate your existing mortgage on your home
  3. 3. Option 2 – Line of Credit Against Your Principal Residence • Less restrictions regarding what type of property you can purchase • No early re-payment restrictions if you choose to pay the LOC down earlier • Line of Credit is callable, meaning lender can change the terms of the debt including requesting principal repayments • Blending of debt between cottage and principal residence and other spending will may make deducting rental expenses riskier from a tax standpoint
  4. 4. Option 3 – Refinancing Your Existing Mortgage on your Principal Residence • Refinancing the mortgage on your existing property may provide funds you can use to purchase a new cottage • Same flexibility in cottages as option 2 – (ie. fixer upper, boat access, etc) • Reduces risk of loan being recalled • Blending of debt still an issue for tax deductibility of rental expenses (if applicable) • If you are in the middle of a mortgage, re-financing will come with a cost (legal, possible penalties)
  5. 5. Disclaimer: This material is general in nature (and I hope you find it helpful!) But, in real life you should absolutely speak with an advisor familiar with your financial situation before making any decisions. Specifically, for mortgages, those professionals will include a qualified mortgage specialist. Thanks for reading! Send questions to retiremepod@gmail.com Make it a great day!

You want to buy a cottage and are unsure about the best way to finance that purchase with debt. This presentation will walk you through your options

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