Capital Mortgages opened in January 1999 and has since serviced thousands of clients and arranged several billion dollars in mortgages in Ottawa area.

Which Factors Should I Consider Before Buying a Cottage?

With the warm weather in full swing and many pandemic restrictions still in place, an increasing number of Canadians are considering buying a cottage to spend their weekends relaxing in nature and away from the hustle and bustle of city life.

Before you take the plunge and decide to purchase one, there are a few factors to consider that differ from the process of buying your primary residence. 

Insurance

Because your summer (or all seasons) cottage is likely to sit empty for longer periods of time than your normal home and nobody will be there to do upkeep, expect to pay higher insurance costs. Cottages are also at a risk factor for weather-related damage, which is a factor in what you’ll pay.

Maintenance

At your primary residence, you’re home to mow the lawn, water the grass, and pay for snow removal. If anything goes wrong, you notice right away as you’re constantly there. However, your cottage will require seasonal maintenance which may be tricky if you live far away – you can either pay someone to do it, or factor in that you’ll have to make visits to do it yourself. And keep in mind that on those stormy winter days, you might have to shovel your way to your cottage’s front door!

Drinking water

We take our home’s drinking water for granted, but many cottages’ water supply isn’t safe to drink. The potential for water problems and contamination is higher in rural areas, so consider looking into what the cottage’s water quality is like before buying.

Weather-proofing

Being in Ottawa, we all know that winters can get frigid. Winterizing your cottage will come at a cost, given that you’ll have to think of plumbing, electrical, insulation and windows to withstand the cold.

Electricity charges

You’d be surprised at how expensive your cottage’s hydro bill can be! Depending on where it’s located, delivery fees can be very high in the countryside. Ask to see a previous bill from the cottage’s owner to get an idea of what to expect.

The septic system

This isn’t exactly the most fun element to think about, but we recommend always asking for proof of inspection of your cottage’s septic system, or paying for an inspection yourself before buying the property.

Do you have additional questions about what to look out for when deciding to purchase a cottage? Give us a call today at 613-228-3888.

 

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Capital Mortgages specializes as a service-oriented brokerage that prides itself on integrity and maintaining a service level second to none in the industry.

How Do Capital Gains Work On Property Sales?

When entering today’s red hot real estate market, it’s easy to feel excited by the prospect of how much your home will grow in value in ten, five or even just two years. We’ve all heard stories of people who have bought a home for $400,000, only to sell it just a few years later for 50% more than what they paid.

While the prospect is exciting, it’s important to keep in mind that in Canada, 50% of capital gains are taxed. This is good news for those who own a single primary residence, but understandably an unfortunate factor for those who are looking to invest in more than one property at a time.

To put it simply, capital gains are the increase in the value of an investment – this term can be used when it comes to stocks, shares, exchange traded funds and in this case – real estate. A capital gain can be realized or unrealized, meaning that you either received this gain as a result of selling your investment, or your investment increased in value, but you did not sell it.

In the context of real estate, you do not have to pay capital gains on the sale of your primary residence. That means that if you bought your primary residence for $400,000 and sold it for $600,000, that $200,000 capital gain is yours to keep.

However, if you currently have a primary residence and purchased an additional home as an investment property, 50% of the value of any capital gains on the additional home will be taxable. This 50% in capital gains will be added to your annual income, meaning that the additional tax you pay that year will vary depending on how much you earned in a year.

Let’s say that the same $400,000 home that sold for $600,000 was your investment property and not your primary residence. 50% of the $200,000 you earned on it is $100,000 – which will be added to your annual taxable earnings. So if you earned $120,000 that year as a salary (with no other income sources), your taxable income for the year would now be $220,000.

While this can be disheartening for many, note that you can offset your capital gains for the year with any capital losses you had that year (realized or unrealized), until you reach zero. If you only have capital losses in a given year, the Canada Revenue Agency will allow you to offset a capital gain that you declared in the previous 3 years. You can also carry a capital loss forward into the future.

More questions about how capital gains work on property sales? Give us a call today at 613-228-3888.  

 

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