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Category: News

  • Closing Costs: What You Can Expect

    Closing Costs: What You Can Expect

    It is important to be fully aware of all the costs involved in buying a home, preferably before you go house hunting. Knowing in advance what these additional ‘costs’ are, over and above the down payment that you might have, will help you plan for a smooth closing and avoid any unpleasant surprises. You should allow at least 2% of the purchase price for closing costs, although they could be as high as 4%.

    Below is a comprehensive list of closings costs that you might incur, but remember that they are only estimates and should be used as a guideline.

    Legal Fees & Disbursements
    A lawyer will charge a fee for their professional services involved in drafting the title deed, preparing the mortgage, and conducting the various searches. The disbursements, on the other hand, are out-of-pocket expenses incurred, such as registrations, searches, supplies, etc… The actual fee that the lawyer will charge will depend entirely upon the deal between you and your lawyer. Be sure to ascertain exactly what this will amount to in a worst-case situation. A typical purchase transaction for a $200,000 property with one mortgage will range between $800 to $1,200, including disbursements. We recommend you call one or two lawyers and obtain a quote directly from them including both their fee and estimates of disbursements before choosing which one you’d like to use.

    Land Transfer Tax
    There is usually a land transfer tax that is charged on closing when the property is transferred to your name and it can vary depending on the price of the home, whether or not you are a first time home buyer and which city you live in. Learn more about Land Transfer Tax Ontario.

    Mortgage Insurance
    You should budget for insurance on your new home. Insurance costs can include default mortgage insurance, homeowners insurance, mortgage life insurance and title insurance.

    Property Tax & Prepaid Utilities Adjustments
    At the time of a sale, the lawyer for the buyer must confirm that local taxes have been paid up to date. If they are, a Tax Certificate is issued, from which any adjustments can be made – usually requiring the buyer to compensate the seller for any prepaid taxes. If they are not up to date, the municipality requires that the seller pay them off from the proceeds of the sale. Therefore, remember that if the previous owner has prepaid property taxes or other utilities for the year, they will be credited the prepaid portion on closing. If they paid all their taxes by April, expect a large adjustment cost on closing.

    Property Appraisal
    If your lender requires an appraisal report to be completed, it will have to be done before they hand over any mortgage money. They want to be assured that the property is worth what you are either paying for it, or valuing it for, and the cost normally ranges between $150 to $300 depending upon the location and complexity of the property.

    Home Inspection
    A report commissioned by a property owner or purchaser, usually to verify the condition of a property prior to the ‘firming up’ of a Real Estate transaction. The scope and detail may vary, but most reports indicate the specific problem and the cost to repair. Depending on the size and location of the property, a home inspection is around $300.

    Interest Adjustment (IA)
    If you arrange to make your mortgage payments monthly on the first day of the month, and your transaction closes after the first day of the month, your lender may charge you interest on closing up to the first theoretical payment date, called the Interest Adjustment Date (IAD). Your mortgage agent will calculate this for you. Remember, that all mortgages are paid in arrears so if your possession date is June 1st, and you choose to pay monthly, then your first payment will be July 1st. In this example there is no Interest Adjustment payable. However, if you moved in on May 29th, with your first payment on the first of the month, your first payment would still be July 1st, but there will be a three day Interest Adjustment (from May 29th to the ‘official start date’ of June 1st).

  • How to Budget for the New Year

    How to Budget for the New Year

    New Year’s resolutions come and go. A sad and small amount often work out like you’d planned and the rest are forgotten about, or perhaps regretted later on. Losing weight and creating a budget are two of the most common New Year’s goals.

    This year, you can shake off old habits and create new ones that last. The key is being realistic and using a system that works. Only you can decide how to budget your money, but with a little guidance from a financial expert and Mint software, you can set those plans in motion and keep track of your daily progress.


    Baby Steps to Get Out of Debt

    Nationally-syndicated radio talk show host and financial expert Dave Ramsey advises clients and listeners to get out of debt first and foremost, then build wealth. His is one of the simplest, most effective budget approaches, and nearly anyone can follow it. Ramsey explains what he calls the “7 Baby Steps” as a journey to debt control and ultimately living debt free. Each of the steps should happen in order, and include:

    • Start an emergency fund
    • Pay off debt
    • Build your emergency fund
    • Invest
    • Save for college (if applicable)
    • Pay off mortgage
    • Build wealth & give to charity

    There’s a method to the order. Your emergency fund is there to rescue you in case of a dire circumstance. Everyone needs this fund. It’s for those unexpected things that fall into your lap when you’re not looking. Start with $1,000, and you’re covered for some of the smaller things that life can throw your way.

    “Pay off debt” is a small statement, but it’s sometimes an enormous feat of dedication and endurance. This baby step is near the top of Ramsey’s list for a reason — you can’t make much financial progress for yourself while you’re building someone else’s wealth. He suggests paying off the smallest debts first, then working toward larger ones.

    Next comes building your emergency fund to a healthy level. Time was; 3 months’ pay was plenty. It could carry you over in case of job loss, medical bills, or other large, unexpected emergencies. Ramsey recommends a more generous approach, with 6 to 9 months’ pay set aside. Build this up, and you’re ready to tackle the next baby step.

    Investments, college fund, paying off your mortgage, and ultimately building wealth are the last items on the list. You might need an advisor before stepping into investments, and a college fund might not be important to your family for any number of reasons. Paying off a mortgage, if you have one, is that last big hurdle before debt-free living. After that, you build wealth and live generously.


    Mint Can Help You Handle the Particulars of Budgeting

    Getting out of debt is important. But when you drill down, there is a lot more to think about. While you’re saving for an emergency fund, paying off credit cards, and thinking about retirement, you’re still receiving utility bills and buying groceries. Mint software will help take your overall budget course and pull it into sharp focus. You can see an overview just as easily as you can review a single transaction. This gives you control that you might not have otherwise.

    It’s the daily activities that can sometimes cause budgeting hassles. Spending too much at the grocery store, dining out, splurging when you should be saving — all of these, and other things, can throw you off track. With Mint software, that never has to happen, at least not without your knowledge.

    Mint software has all of your budgeting needs, such as setting financial goals, tracking income and expense trends, receiving bill notifications, and bank account alerts, rolled into one tidy, user friendly package. You can start out the New Year with the same plans as last year, or you can make 2017 your year to live with less financial stress and more control than you’ve ever had.

  • Are You Ready for Homeownership?

    Are You Ready for Homeownership?

    Are you ready for homeownership? Is purchasing a home on your list of goals? If so, assess how close you are to making your real estate dreams come true. This basic, Yes/No quiz will tell you if you’re ready for homeownership.

    1. Are you familiar with the housing market in your preferred neighbourhood?
    Start perusing the real estate pages and Realtor.ca well in advance of your house-hunt, so you know what properties sell for. There’s nothing worse than meeting an agent, only to discover the average price of homes in your preferred community is double what you were hoping.

    2. Do you know how much you can afford to spend on your first home?
    You want to start your home search pre-approved for a mortgage. Find out ahead of time how much that mortgage will most likely be by using Genworth Canada’s How Much Can I Afford calculator which factors your income, debt and other expenses into mortgage and monthly payment amounts.

    3. Have you saved at least a 5% down payment towards your first home?
    The good news is you don’t need a sizeable down payment to buy your first home. Conventional mortgages require a down payment of 20% of the purchase price, but mortgage insurance, you can buy with as little as 5% down.

    4. Do you have regular income, whether you are salaried or self-employed?
    Conventional lenders favour borrowers with salaried income, but we recognize many Canadians are self-employed. We have many lenders that are geared towards self-employed borrowers. If you’ve got a two-year history of managing your credit and finances responsibly, you can qualify without traditional income verification.

    5. Have you got a handle on your consumer debt?
    If you’re carrying a high debt load, it could hinder your ability to meet your financial obligations as a homeowner. Your monthly debt repayments (housing, car, credit cards, lines of credit etc…) should not exceed 40% of your household’s gross monthly income. If you’re carrying more than that, be aggressive about paying it down so you’re set up for success when you do buy your first home.

    6. Do you have credit history?
    Lenders look at your credit history to determine if you’re a reliable borrower. Refraining from credit cards altogether is counter-productive. If you’re hoping to buy your first home this year, establish good credit history by acquiring a standard credit card. Use it for small purchases and pay off the full balance each month.

    7. Do you have a healthy credit score?
    Poor credit history makes it harder to get mortgage approval. Always meet your monthly minimum payments on time, but don’t stop there. Be aggressive about clearing your credit card debt, or at least bringing each credit card balance to under 35% of its credit limit. If you’re recovering from bankruptcy, apply for a secured card to help re-establish a pattern of responsible borrowing.

    Scoring:

    If you answered YES to 4 or more, you’re probably ready to start your home search! If you scored under 4, you may need a bit more time to prepare yourself for homeownership.

  • Rent or Buy, Which is Right for You?

    Rent or Buy, Which is Right for You?

    Rent or Buy? It’s a question many people struggle with, and, it’s important to know if you truly want to own a home before you’re firmly entrenched in the home buying process. To help you decide better, here are some things to consider…

    PROS

    A Sound Investment
    If you choose a home that you can afford, the payoff can be great. When you make a mortgage payment each month, you build equity in a place of your own (unlike a rent payment). Equity is the difference between the value of the home and your outstanding mortgage. The longer you stay in your home (and the more payments you make), the more equity you’ll have, and, unlike most things you buy, a home will almost certainly increase in value over time, which builds even more equity.

    A First Step
    As you build up equity in your current home and comfort level in being a home owner, it may be easier to move up to another home in the future.

    Satisfaction & Security
    As a homeowner, you can decorate and renovate your home any way you like. You don’t have that luxury as a renter. Owning a home also gives you a new sense of pride in your surroundings. Your family may also feel strong ties to your community.

    CONS

    Higher Costs
    When budgeting, you’ll have to factor in more than your monthly mortgage payments. You should consider things like maintenance and repair expenses.

    Tying Up Cash
    You home will probably increase in value as time goes by, but don’t count on getting a big return quickly. If you need to sell your home during the first few years of homeownership, you could lose money given the various costs involved, such as realtor fees and possible penalties for breaking your mortgage before your term is up.

    No Guarantees
    There’s no guarantee your house will increase in value, especially during the first few years. Although, historically, over the longer term, homes will have proven to increase in value.

  • 7 Most Common Financial Mistakes

    7 Most Common Financial Mistakes

    It is indeed a material world. When it comes to spending, North America is a culture of consumption. The result: rising levels of consumer debt and declining household savings rates. Don’t make these 7 most common financial mistakes. In 2008, this culture was hit hard by economic reality. According to the Federal Reserve, U.S. household debt grew steadily from the time they started tracking it in 1952. It declined for the first time in the third quarter of 2008. As a result of the credit crisis and ensuing economic recession, savings rates also rebounded.

    For those who had been living beyond their means for years, it suddenly got a lot harder to make ends meet. And, although the government tends to encourage spending during economic downturn and statistics may lead us to think that overspending is normal, it is often a risky choice. Here we’ll take a look at seven of the most common financial mistakes that often lead people to major economic hardship. Even if you’re already facing financial difficulties, steering clear of these mistakes could be the key to survival.

    Mistake No. 1: Excessive/Frivolous Spending
    Great fortunes are often lost one dollar at time. It may not seem like a big deal when you pick up that double-double, stop for a pack of cigarettes, have dinner out or order that PPV movie, but every little item adds up. Just $25 per week spent on dining out costs you $1,300 per year, which could go toward an extra mortgage payment or a number of extra car payments. If you’re enduring financial hardship, avoiding this mistake really matters – after all, if you’re only a few dollars away from foreclosure or bankruptcy, every dollar will count more than ever.

    Mistake No. 2: Never-Ending Payments
    Ask yourself if you really need items that keep you paying for every month, year after year. Things like cable television, subscription radio, video games, and cell phones can force you to pay unceasingly, but leave you owning nothing. When money is tight, or you just want to save more, creating a leaner lifestyle can go a long way to fattening your savings and cushioning you from financial hardship.

    Mistake No. 3: Living on Borrowed Money
    Using credit cards to buy essentials has become somewhat normal. But even if an ever-increasing number of consumers are willing to pay double-digit interest rates on gasoline, groceries and a host of other items that are gone long before the bill is paid in full, don’t be one of them. Credit card interest rates make the price of the charged items a great deal more expensive. Depending on credit also makes it more likely that you’ll spend more than you earn.

    Mistake No. 4: Buying a New Car
    Millions of new cars are sold each year, although few buyers can afford to pay for them in cash. However, the inability to pay cash for a new car means an inability to afford the car. After all, being able to afford the payment is not the same as being able to afford the car. Furthermore, by borrowing money to buy a car, the consumer pays interest on a depreciating asset, which amplifies the difference between the value of the car and the price paid for it. Sometimes a person has no choice but to take out a loan to buy a car, but how badly does any consumer really need a large SUV? Such vehicles are expensive to buy, insure and fuel. If you need to buy a car and/or borrow money to do so, consider buying one that uses less gas and costs less to insure and maintain.

    Mistake No. 5: Buying Too Much House
    When it comes to buying a house, bigger is also not necessarily better. Unless you have a large family, choosing a 6,000 square-foot home will only mean more expensive taxes, maintenance and utilities. Do you really want to put such a significant, long-term dent in your monthly budget?

    Mistake No. 6: Treating Your Home Equity Like a Piggy Bank
    Your home is your castle. Refinancing and taking cash out on it means giving away ownership to someone else. It also costs you thousands of dollars in interest and fees. Smart homeowners want to build equity, not make payments in perpetuity. In addition, you’ll end up paying way more for your home than it’s worth, which virtually ensures that you won’t come out on top when you decide to sell.

    Mistake No. 7: Living Paycheck to Paycheck
    The cumulative result of overspending puts people into a precarious position – one in which they need every dime they earn and one missed paycheck would be disastrous. This is not the position you want to find yourself in when an economic recession hits. If this happens, you’ll have very few options. Everyone has a choice in how they live, so it’s just a matter of making savings a priority.

    Making a Payment vs. Affording a Purchase
    To steer yourself away from the dangers of overspending, start by monitoring the little expenses that add up quickly, then move on to monitoring the big expenses. Think carefully before adding new debts to your list of payments, and keep in mind that being able to make a payment isn’t the same as being able to afford the purchase. Finally, make saving some of what you earn a monthly priority.

  • What to Know Before You Retire

    What to Know Before You Retire

    Retirement planning is about managing your money so you can make the most of your retirement years. Your retirement plan should balance your needs, wants and the reality of your finances. Below are a few tips about what to know before you retire.

    How Much You Need to Save Depends on 3 Things

    Age: When you start saving makes a big difference in how much you need to put away. The younger you are when you start, the less money you have to put aside, thanks to the power of compounding.

    Lifestyle: Do you plan to stay home or travel the world? The amount you’ll need to save will depend on the life you plan to lead when you retire. Not sure what your retirement lifestyle will cost?

    Federal Government Benefits: You could be entitled to government retirement benefits like the Canada Pension Plan (CPP), Old Age Security (OAS) and the Guaranteed Income Supplement (GIS). If you’re eligible for income from these government programs, you might not have to save as much.

    7 Tips for Last Minute Savers

    Take advantage of any unused RRSP contribution room – The government allows you to carry forward unused contributions each year. If you have unused contribution room, try to use it as soon as you can.

    Invest in a TFSA – As of January 2013, you can invest $5,500 each year. Your money grows tax-free and you don’t pay tax on the money you withdraw.

    Look for small ways to save – Consider cutting back on your spending for items like lottery tickets, magazines or fancy coffees. It may be better to live on a little less now, so you’ll have more when you really need it. Here are more ways to save.

    Take advantage of workplace pension or savings plans – Especially if your employer offers matching contributions.

    Save your bonuses & raises – Next time you get a bonus or raise, don’t spend it all. Try to put some of it toward your retirement savings.

    Consider saving less for your children’s education – If you have to choose between saving for retirement and your children’s education, put money in your RRSP first. Let your children get jobs or borrow to help pay for their education.

    Revisit your investment strategy – Look for ways to get a little more growth without more risk. If you choose only the most conservative investments, your savings may not grow fast enough to give you the income you need after you retire.

  • How to Talk to Your Kids About Money

    How to Talk to Your Kids About Money

    In some families, how to talk to your kids about money can be more uncomfortable than talking about sex. Many parents don’t know how to approach the topic of money, and some avoid it altogether. By starting the discussion early, you can make it easier to talk about this tough topic later, when your child is making larger purchases, thinking about getting a job, or beginning financial planning for college.

    Practice Smart Spending
    Talk with your children about how you make spending choices based on more than just affordability. Use language like “We’re not going to spend our money that way because…” or “It’s not a good value because…,” rather than just saying, “It’s too expensive,” which may give the impression that you would buy it if you could afford it.

    Create Learning Opportunities
    If you’re refinancing your mortgage, you have an opportunity to discuss the concept of interest and the importance of paying off loan balances quickly. When you’re taking out a car loan, talk about how loans allow you to pay for things that you don’t have the money for, but you end up paying more in the long run. Bring your kids with you to the bank. If you’re making a deposit in a savings account, talk about the importance of ‘saving for a rainy day’.

    Honesty as the Best Policy
    If you are facing financial difficulty, be honest with your children. You don’t need to worry them with all the details, but it is helpful for them to learn that money isn’t magical—it doesn’t just appear when you need it.

    Stress Wants vs. Needs
    Many kids—especially young ones—have difficulty differentiating between wants and needs. When your child says she ‘needs’ something, ask if she really needs it, or if she just wants it. Make sure your child understands the difference, and start paying attention to what you’re saying and the example you’re setting—for example, do you really need an expensive cup of coffee to get you through the morning?

    Keep an Open Dialogue
    When you’re out shopping, talk with your kids about why you make the purchases you do. Are you influenced by advertising? Pricing? The quality of the product? How do you choose one product over another? Help your child start thinking carefully about making purchases.

    Be an Example
    Discuss with your children the choices you make with your money. For example, how does your caring for others impact how you save, spend, and give money away? Why do you sometimes wait to make certain purchases? What does it mean to you to be responsible with your money?

    Highlight the Positive
    Many financially savvy practices, such as buying secondhand, donating old clothes to a thrift store, and reusing and recycling goods, are also good for the environment. Point out that not only are you saving money by doing these things, but you’re also taking action to help preserve the environment.

  • Before You Renew Your Mortgage…

    Before You Renew Your Mortgage…

    The biggest monthly expense for most Canadians is their mortgage payment. Yet according to an Angus Reid survey, almost 27% of households automatically renew their mortgage when the term is up instead of trying to find a better deal. So, before you renew your mortgage, be sure to read these helpful tips…

    Get Going Early
    Start shopping around for a better rate four to six months before your mortgage is up for renewal. That’s the longest lenders will guarantee a discounted rate, says Vancouver’s Robert McLister, editor of Canadian MortgageTrends.com. “If your current lender’s rates rise, you’ve got your guaranteed rate to fall back on. If they drop, you simply renegotiate a lower rate.”

    Do Your Homework
    Before negotiating a lower rate from your bank, find out what other lenders are offering. Plenty of websites post current rates from all the banks, which can vary widely. A good one to look at is canadamortgage.com.

    Never Accept the Banks Posted Rate
    “If you don’t come right out and ask for a better rate, you won’t get one,” says Alan Silverstein, a real estate lawyer in Toronto and author of The Perfect Mortgage: Cutting the Cost of Home Ownership. He also notes that banks may be more willing to lower your rate if you transfer over other accounts or investments.

    Negotiate on Other Available Options
    Don’t just fixate on the interest rate. The amortization period, the rate type (fixed or variable) and the flexibility of the payment schedule can be crucial to lowering your costs.

    Change Lenders
    “A lot of people renew with their lender and don’t even think about switching to another one, despite the fact that they could do better,” says Silverstein. Note that there’s no penalty if you switch at renewal time.

    Broker a Deal
    If you don’t like negotiating and don’t have the time to research rates, a mortgage broker will do the legwork for you. This can save you valuable time and money! According to the Bank of Canada, people who use a broker usually pay less than those who don’t. Using a broker can typically save $1,670 of interest on a $200,000 mortgage over five years. “The results of using a good broker are twofold,” says McLister. “Better rates and a less restrictive mortgage.”

    Did you know?!?
    Saving even half a percentage point on your mortgage rate can save you up to $10,000 over 25 years (based on a $150,000 mortgage).

  • How to Protect Yourself Against Identity Theft

    How to Protect Yourself Against Identity Theft

    Research indicates that identity theft is on the rise despite continued efforts to keep data secure and crack down on offenders. Big business and government can’t stop the problem alone. It requires the diligence and effort of every citizen to remain vigilant. Learn how to protect yourself against identity theft with these simple steps:

    Double-Check
    If you receive an unsolicited phone call, email or other correspondence, do not provide personal information. Instead, ask for a phone number and name so you can call them back, then verify that the information is the same as that provided on your billing statement or contact information. Sophisticated scammers are able to mimic email, websites and even toll-free call-back numbers so that they can entice unsuspecting consumers to provide information.

    Manage Passwords
    Always use encryption when doing online banking or shopping where you are providing private information. Also, take time to change account passwords frequently. Remember, never share your user names or passwords with others and create unique ones for each individual online account.

    Alerts!
    Use email alerts to notify you of unexpected withdrawals or large account transactions on banking or credit cards. This will help you to stay alert to potential fraudulent activity on your account.

    Wireless Warnings
    Although wireless hot spots in cafes and restaurants are convenient, they are a security nightmare. Avoid banking or conducting sensitive business via a wireless network. Instead, wait until you are in a more secure location or use additional encryption if necessary.

  • Pay Off Your Debt Faster & Save Money

    Pay Off Your Debt Faster & Save Money

    Below is one of the most effective methods for paying off your debt faster and saving yourself thousands of dollars. This technique will save you the most money when used on mortgages; however, it can also be used to pay down other debts quickly – like car loans or even credit cards.

    Pay Bi-Weekly Rather Than Monthly

    Making bi-weekly mortgage payments rather than monthly payments will usually reduce the time it takes to pay off your mortgage by several years.  Here is how this trick works.  Let’s say Mike and Cindy obtain a mortgage that has monthly payments of $1,000.  Instead of paying $1,000 per month, Mike and Cindy could ask their bank to chop their mortgage payment in half and pay $500 every two weeks instead.  Even though this doesn’t feel any different to them, it will shave 3.5 years off of their mortgage and save them more than $21,000 over the life of their mortgage (assuming that their interest rate stays the same).

    Here is how Mike and Cindy will save.  If they made monthly payments, their bank would take $1,000 from their account twelve times a year (12 months x $1,000 monthly payments = $12,000 in annual mortgage payments).  Now when they cut their monthly payment in half and their bank to withdraws $500 every two weeks, they end up making what amounts to one extra monthly payment each year (26 bi-weekly payments x $500 every two weeks = $13,000 in annual mortgage payments).  This happens because two months in every calendar year have a fifth week.  If you’re paid bi-weekly, these are the two months each year where you get three pay cheques instead of two.

    Assuming a mortgage of $172,000 at 5% interest over 25 years
    Type of Mortgage Payment Monthly Payment Accelerated Bi-Weekly Payment Accelerated Weekly Payment
    How it works… This is what your lender determines that you must pay each month. Divide your monthly payment in half and
    pay that amount every
    two weeks.    		 Divide your monthly payment into quarters and pay that amount every week.
    Payments $1,000 $500 $250
    Years to pay
    off mortgage    		 25 years 21.4 years 21.4 years
    Savings over
    the life of the mortgage    		 $0 $21,536 $21,774