Spring fever has hit me hard! And like most of you, I’m dreaming of a cottage getaway. The smell of pine needles, a quiet sunset on a dock and the contentment that comes with a cottage by the lake.
Cottage-buying check list
- Add up all the costs of ownership
- Try to estimate how much costs will increase
- Put money aside for the unexpected
- Include the cost of mortgage insurance
- Ask whether it’s a financial or lifestyle choice
If you are seriously considering buying a place by the lake you will have to take a hard look at what it will really cost to have a place like that of your own.
Cottages themselves come with a pretty high price tag, and that’s just the beginning. There’s taxes, maintenance, fees to dock and store your boat at a marina, maybe winter ploughing of your road, internet and TV — and the list goes on so you have to do your homework before jumping in. Do you actually have financial room right now to add the type of expenses that come with a cottage?
Many people buy a smaller cottage and renovate it into what they want, in order to save on the initial price tag. But that can be an expensive project for a place that you only spend summer weekends at. General maintenance is top of the list of cottage costs. There’s always something that needs attention.
A cottage is a luxury.
One owner estimates that someone spending 50 days a year at their cottage, costs them $250 per night fo the privilege. You can’t always justify it economically, because it gives a new dimension to your life. Many feel that it’s the greatest purchase you can make from a spiritual perspective.
That may be true, but even a dose of spirituality has its price — and buyers need to beware. Preparation is everything and the owner shouldn’t be surprised by the carrying costs. You should try to get a feel for the projected increases using historical rates of growth, to make sure you can afford to carry the costs going forward. The same goes for municipal tax increases, utilities and insurance.
The cottage seems to have more unpredictable costs associated with it than a primary home as well, such as damage from a heavy winter snowfall or repairs to the road leading into your property. Also, depending on how much of a down payment you have, you may be faced with mortgage insurance. Mortgage insurance on your primary home will not cover a second one as it is specific to each property. Canada Mortgage and Housing Corporation (CMHC) no longer offers second property mortgage insurance, but others insurers do.
So where does that leave you? Should you invest in a cottage? It depends what you are looking for. If the decision is based on lifestyle you might be willing to make some bigger trade-offs than if your goal is to use the cottage as an investment. As an investment, a cottage is probably not a wise one, but the non-financial considerations are what you need to think about after you’ve quantified everything else. So if you’ve established you can afford it then you have to ask yourself if it is really worth it to you.
For some owning a cottage is just not worth it, and they will rent for the cottage experience instead. But others find value in the family time and tranquility the cottage allows.