Real Estate Talk:
Purchasing a Country Home

Considerations when buying a country home or second residence

By Joseph Marovitch

Updated June 17, 2023

If you have not had the chance to take a drive to the Laurentians or Townships lately, do so now, and take the country roads, not the highway. Our countryside in summer is so spectacular, it can be life-changing as one experiences a new perspective. The majestic green mountains and fragrances of the country, as well as crystal lakes that look like glass, melt away all the pressures of the city.

So many people don’t know that the earth is not covered in pavement, bricks, and mortar. If one lives in a city long enough and never strays beyond, one can forget what it means to be human and how natural it is to stare at a bonfire and stars, swim in clean lakes, view mountain vistas, and smell the morning mist.

We were not meant to live in huge groups in big cities. The concept of cities is the concept of planetary consumption, overpopulation, and lack of emotional touch with other humans. Is it not interesting that people observe that the more surrounded we are, the lonelier we can be? Yet, in small country towns and hamlets, everyone knows everyone intimately.

When considering a country home to purchase, there are factors that come into play that would not otherwise, if you were purchasing in the city.

All this being said the following are thoughts and the process to purchase a second residence in the countryside by the lake or up in the mountains. I started with country homes in my career as a realtor. I lived and worked up north for many years and have sold countless properties by lakes and on mountains.

A second residence in the mountains and/or by the lake is a dream retreat for many. It is a sanctuary away from the hustle and bustle of city life. It is an escape from work and the daily grind, a change of scenery, a place to rest and gather one’s thoughts or think of nothing. It can also be fun and exciting. A mountain retreat can provide hiking trails, swimming, sailing, waterskiing, alpine skiing, bonfires at night and stars, lots of stars.

When considering a country home to purchase, there are factors that come into play that would not otherwise if you were purchasing in the city. Most country homes are not in or near a town, therefore the house must have its own well for water and a septic tank for septic situations. If the property you are searching for has a waterfront, many more factors come into play such as whether the lake is navigable or non-navigable (motor boats allowed or not). Does the lake have an entrance and an exit, or is it sedimentary, meaning not enough oxygen enters the lake to make it liveable and drinkable?

When searching for a country home, these are the questions that must be answered first:

1. How far do you want to drive from the city?
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2. Do you want a lakefront?
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3. Proximity to your neighbours? Most buyers of second homes want privacy as this is their getaway home.
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4. If lakefront, do you want motorboats or no motorboats?
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5. Proximity to ski hills and towns?
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6. Number of bedrooms and bathrooms?

Once you have found that perfect home, the items to inspect and consider are:

1. Condition of the house via a regular inspection
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2. When was the chimney last cleaned and inspected?
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3. Water test to ensure the well is clean and the water is potable (drinkable)
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4. Lake water test to ensure the lake water is bacteria-safe for swimming
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5. Ensure the septic tank conforms to city bylaws and is the right size, based on the number of bedrooms in the house.
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6. Ensure the septic tank has been emptied. Most municipalities require the septic tank to be emptied every 4 years if the house is a second residence and every two years if it is a permanent residence.
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7. Ensure that nothing is built on designated wetlands. Wetlands are areas near a lake or river that we are not allowed to build on as it destroys the environment.
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8. Does the house have a working sump pump? A sump pump is a device placed in the basement of the house, below the floor. When the water table rises in the spring, the sump pump automatically pumps the rising water out and away from the house to keep it dry. A sump pump is usually required for homes by a lake.

Finally, the tax implication. In Canada a primary residence upon selling is tax-free. A second residence is considered a luxury item and is therefore not tax-free. Upon selling a second residence, any gain is considered a capital gain and is taxed on 50% of the gain. If you paid $100,000 for the country home and later sold the property for $150,000, you would be taxed on 50% of the gain or on $25,000. The tax you must pay is dependent upon your income, therefore, it is always a good idea to purchase a second home by placing it in the name of the person in your household who has the least income, to pay less tax.

A second property can also be placed in the name of a spouse as a primary residence. Therefore, upon selling, the property is tax-free.

Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, click here.

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State of the market

Bank of Canada Prime Rate 6.95%

Tier One Banks Prime Rate:
BMO 6.95% – TD 7.10% – Scotia Bank 6.95% – RBC 6.95% – CIBC 6.95% – National Bank 6.95%

As we are all aware, the Bank of Canada broke their word and raised interest rates .25% to 6.95%, and the five tier-one banks followed suit. The purpose of the rate hikes is to reduce spending and thereby lower inflation, which will never reduce to the Fed target of 2.5%. The real consequence is reduced property values and higher carrying costs.

The situation has not completely discouraged buyers, some of whom are now opting for shorter-term mortgages of one, two or three years instead of the usual five. Other buyers are turning to private or group lenders for short-term, high-interest mortgages. All are hoping that rates will come down in the next two or three years.

‘The situation has not completely halted buyers from purchasing. What many buyers are doing now is opting for shorter-term mortgages such as one, two, or three years instead of the typical five years that used to be acquired.’

Then some are not getting a mortgage. Those buyers are using cash to bypass interest rates and attain a better price on the property they are purchasing. Another interesting note in favour of buyers is current city evaluations are based on mid-pandemic prices when buyers were many and sellers were few. Therefore, today’s city evaluations do not reflect current market value. The result of this is more homes in Montreal are selling below their city evaluations.

Have a great week.

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Other articles by Joseph Marovitch