Advice for clients’ vacation dollars

(May 20, 2005) With the first summer holiday weekend upon us, many clients will be thinking about how to spend their vacation dollars. Travelling and buying vacation properties are two popular considerations that come up with the temperature. In both cases, there is a list of unique details to think about that will affect the overall cost of the endeavor.

Proper planning for travel reduces the risk of being hassled about money or stranded without money at all. It can also reduce the chances you’ll pay too much in the way of service charges and commissions.

When planning a summer vacation, Scotiabank points out that planning ways to carry and use money can be as important as buying a plane ticket. Recently, the company put out a list of money tips for travellers to help people consider the pros and cons associated with different methods of payment.

Among the list of recommendations, the bank says travellers’ cheques are useful because they can be easily replaced if lost or stolen, but some issuers and cashiers charge commissions or fees to issue or redeem them. When carrying cash, consider the amount needed and split it up by keeping some in a hotel safe or travel wallet. Debit cards are useful in some parts of the world — most Canadian banks allow debit card purchases in the United States for example, but people are advised to contact their bank and research their destination to see if debit cards are accepted.

Credit cards are still the most widely accepted method of payment for travelers, but calling the credit card company ahead of time to register your cards and confirm they will be honoured can save a significant amount of aggravation. Credit card registration is a specialty service offered by some banks that allows clients to register the names of all their credit cards with one institution and gives them one phone number to call if their wallet is lost or stolen. The bank also recommends Canadians buy travel insurance.

“Whether traveling within Canada or abroad, consider a combination of payment methods to ensure you’ve got all the angles covered,” says Tom Laursen, managing director at Scotiabank.

Those who would prefer to spend their vacation dollars by investing in a cottage instead also have a long list of things to look out for. Mortgage brokers say buying a cottage or vacation property is not as difficult as commonly believed, but there are unique considerations that can impact eligibility for financing. Even if you don’t need a mortgage to purchase the property, the list is also useful to avoid “lemon” properties and headaches.

Invis, a Canadian independent mortgage brokerage business, says clients should consider how they will access the property. Although most buyers want road access, prices can be significantly lower for water access cottages. Prospective buyers should find out if roads are public or private, how and when they’re maintained and if a legal agreement exists to use them.

In most municipalities, septic systems require a certificate of approval and a permit. Evidence that the system works might also be required to secure financing. Similarly, lenders will likely request proof that the cottage water supply is safe to drink. If water is drawn from a lake the cottage will need a filtration system to make it potable. If water comes from a well, be sure to find out if it sits on higher ground than the sewage system, how fast it reaches the cottage and if it has ever gone dry.

Most parts of cottage country also have local municipal regulations that apply to hunters, snowmobilers and others who cross private property lines, water exclusivity, and the right of way or easement for neighbours and utility companies. An easement is an interest in land owned by someone else that entitles the holder to a specific limited use or right to enjoy the property. Similarly, look into municipal zoning rules. Some cottages don’t allow for year round residency and might not allow people to be on the property and certain times of the year.

Finally, find out if current structures on the property, like the cottage itself, boathouses and sheds have been approved and find out if additions or renovations will be allowed. Consider also that there are often restrictions limiting docks, boathouses and other structures that extend over water.

“You need to really check with the municipality in the area,” says Jim Rawson, Invis regional sales manager. Since most cottage structures are built by the owners he also encourages prospective buyers to talk to real estate professionals in the area and hire a building inspector before purchasing the property. “Building inspection and things like that are very important.”

Invis suggests clients buy a property that can be rented out easily if they are not using it, seek independent advice to determine what size mortgage is affordable and be aware about possible seasonal slumps in recreational area real estate prices that could affect future resale prices.

For the time being however, attractive mortgage rates are holding cottage prices steady in all seasons. According to a Royal LePage poll of cottage owners and prospective buyers, market conditions and current property prices are unlikely to ease any time soon. The 2005 Recreational Property Poll found significant property price appreciation across the country and, on average, seven prospective buyers for every two cottage owners planning to sell their property.