MONTREAL – As cottage season dawns, the prospect of joint ownership with family or friends grows anew for many Canadians, budding perennially like a lakeside plant.<\/p>\n
Smaller down payments, lower risks and shared experiences all mark the promise of a property partnership with pals and loved ones.<\/p>\n
But experts warn that a range of issues need consideration before diving into a cottage co-investment like a kid off the dock.<\/p>\n
A candid conversation about finances, long-term life plans and the purpose of the cabin are a good place to start, says certified financial planner Mark Halpern.<\/p>\n
Credit is one important area.<\/p>\n
In a standard arrangement between co-owners, each is fully liable for the mortgage. That means a late payment or default will affect everyone's credit scores, notes Halpern, who runs WealthInsurance.com.<\/p>\n
Lenders will also average out the purchasers' credit scores, resulting in a higher-rate mortgage, if one of the buyers has a lower rating.<\/p>\n
"You've got to know who you're partnering with," Halpern said, adding that a variable-rate mortgage typically offers easier outs than a fixed-rate one should the borrowers want to break early.<\/p>\n
Ownership schemes mark another key question, with joint tenancy and tenant-in-common arrangements the two main options (in this case, the word tenant refers to owners rather than renters).<\/p>\n
For joint tenancy, each owner has a stake in the property, and if one dies their share transfers to the other — similar to a spousal situation. On the other hand, a tenants-in-common agreement allows for different-sized stakes in the property — 75 per cent and 25 per cent, for example — and would see the deceased's share become part of their estate and pass on to their heirs, who would then pay a probate tax, which is roughly 1.5 per cent in Ontario.<\/p>\n
Should those inheritors opt out of the investment, the remaining owner in a tenants-in-common arrangement would owe them a hefty amount of money, Halpern said.<\/p>\n
"Generally these agreements don't necessarily contemplate what happens on death, or what happens if somebody wants to be bought out," Halpern said, adding that people should view a joint property as the investment it is.<\/p>\n
Capital gains taxes are another issue if the parties have to sell.<\/p>\n
"Imagine you have a cottage you bought for half a million dollars, and now it's worth a million and a half — so there's a million-dollar gain — there'd be a $250,000 tax," Halpern said, noting Ontario taxes capital gains at 25 per cent for a recreational property.<\/p>\n
"Being half and half, each side would really have to come up with $125,000 in taxes."<\/p>\n
This report by The Canadian Press was first published May 25, 2023.<\/p>\n
<\/p>\n","protected":false},"excerpt":{"rendered":"
MONTREAL – As cottage season dawns, the prospect of joint ownership with family or friends grows anew for many Canadians, budding perennially like a lakeside plant. Smaller down payments, lower risks and shared experiences all mark the promise of a property partnership with pals and loved ones. But experts warn that a range of issues […]<\/p>\n","protected":false},"author":362,"featured_media":1661,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"guid":"","source":"The Canadian Press","byline":"Christopher Reynolds","published":"2023-05-28T06:03:34","updated":"2023-05-28T16:30:00","_infotelid":"IT98539","_prepressid":"98539","_multisite_post_sync":"","_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[2,552,543],"tags":[],"region":[322,323,324,325],"class_list":["post-1662","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-inhome","category-nonit","category-topnews","region-kamloops","region-kelowna","region-penticton","region-vernon"],"blocksy_meta":{"styles_descriptor":{"styles":{"desktop":"","tablet":"","mobile":""},"google_fonts":[],"version":7}},"post_modified":"2023-05-28T16:30:00","post_modified_gmt":"2023-05-28T23:30:00","jetpack_sharing_enabled":true,"jetpack_featured_media_url":"https:\/\/staging.infonews.ca\/inhome\/wp-content\/uploads\/sites\/4\/MediaItemID98539-4837.jpg","_links":{"self":[{"href":"https:\/\/staging.infonews.ca\/inhome\/wp-json\/wp\/v2\/posts\/1662","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/staging.infonews.ca\/inhome\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.infonews.ca\/inhome\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.infonews.ca\/inhome\/wp-json\/wp\/v2\/users\/362"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.infonews.ca\/inhome\/wp-json\/wp\/v2\/comments?post=1662"}],"version-history":[{"count":2,"href":"https:\/\/staging.infonews.ca\/inhome\/wp-json\/wp\/v2\/posts\/1662\/revisions"}],"predecessor-version":[{"id":6502,"href":"https:\/\/staging.infonews.ca\/inhome\/wp-json\/wp\/v2\/posts\/1662\/revisions\/6502"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/staging.infonews.ca\/inhome\/wp-json\/wp\/v2\/media\/1661"}],"wp:attachment":[{"href":"https:\/\/staging.infonews.ca\/inhome\/wp-json\/wp\/v2\/media?parent=1662"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.infonews.ca\/inhome\/wp-json\/wp\/v2\/categories?post=1662"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.infonews.ca\/inhome\/wp-json\/wp\/v2\/tags?post=1662"},{"taxonomy":"region","embeddable":true,"href":"https:\/\/staging.infonews.ca\/inhome\/wp-json\/wp\/v2\/region?post=1662"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}