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

1. Approaches to Financing a
Cottage Purchase by Borrowing

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. 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. 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. 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!