Home Ownership

Is it better to buy or rent?  Yes, renting can have some advantages. There is very little upfront investment (usually only first and last month’s rent) and there is no long-term commitment beyond the lease term.

However, for most, purchasing and owning a home is a much better option. For some the reason is purely emotional. But the bottom line is that you will save more money over time by purchasing over renting. You will realize other financial benefits such as property appreciation and a “forced” savings plan, building equity each and every month.

Sure, as a Mortgage Broker, I am supposed to say this. But, when all things are considered, homeownership rules over renting in almost every case.

 

Some Facts

In October 2017, CMHC surveyed 2,507 prospective home buyers on-line. Respondents were all prime household decision-makers who intend to purchase a new home within the next two years, including approximately 1,500 First-Time Buyers, 500 current owners, and 500 previous owners.

The survey results highlight that:

  • First-Time Buyers and Previous Owners share the same top motivator to purchase a home: they want to stop renting. Improved accessibility (physical obstacles and barriers) and investment opportunity were also noted as top motivators across all groups. Changes to mortgage regulations and concerns about possible future interest rate increases were not among the top motivators.
  • The majority of future home buyers intend to obtain a mortgage to finance their home purchase, with First-Time Buyers showing higher incidence compared to Previous Owners and Current Owners.
  • Among all groups, the two most common actions completed one to two years prior to the purchase of a home were saving for a down payment and determining what type of home to buy. On the other hand, in the last three months before purchasing, about two-in ten of prospective buyers pre-qualify for a mortgage.

Own What Appreciates

We’ve been in a cycle where home values have been steadily rising. When you own your own home, an environment of rising home values means you not only gain equity in your home when you make your payment every month; it also rises with the value of your home.

So, not only do you get the benefit of having a roof over your head and a place to entertain family and friends, you also have the benefit of owning real estate. For each month you make your mortgage payment or your home value rises, it’s increasing your net worth.

Equity in the home can help you in the future. Convert the equity into an investment or use it home repairs or improvements, children’s education or any other reason you see fit.

Who benefits when you rent?  The landlord is seeing the benefits of those equity gains.

The Down Payment Monster

No, you don’t need 20 percent down payment. There are options that allow prospective buyers to get into homes with as little as 5% down. Further, there are rebates on land transfer tax, RRSP Home Ownership plans, and tax savings that are available to First-Time Buyers.

Interest Rates

Waiting for interest rates to go down, afraid they may increase, fixed rate, variable rate, etc. There are many variables and many things to consider. However, the most important thing is to consider your purchase, plan for it, and then investigate all available options before you move forward.

Every situation is different. Carefully consider your financial situation to pick the loan that’s right for you. That includes exploring all interest rate options.

Improvements Are For your Benefit

Weather your rent or own, your property will require improvements from time to time. As a renter, although major improvements may be covered by your landlord, you will still need to maintain the property and make minor improvements. Again, this benefits your landlord. As a homeowner, you increase the value of your property with any improvements you make and you enjoy the benefits.

Summary

Owning your own home can be a very rewarding and financially sound investment. Consider your current financial situation as well as your lifestyle to decide if it makes sense for you. Can you afford to make a down payment, pay a monthly mortgage and pay for any items that break or need repairs in your home?

We have assisted many clients over the years in transitioning from renters to homeowners. Purchasing a home can become a reality if you plan and position things accordingly.

Have any questions, need any advice? Visit us at www.thefinancialforum.ca. Email us at mortgages@thefinancialforum.ca. Call us at (905) 265-0246.

VERICO The Financial Forum Ltd.

“Your Connection To A Better Mortgage”

Together, We Make Mortgages Easy!

 

A down payment on a house is one of the biggest investments you will save for in your lifetime. If you’re saving up for it on your own, it can be difficult – especially with the recent increase in home prices. But you don’t have to feel as if you’re always two steps behind – you can get there. You just need to exercise some self-discipline and a little creativity to reach your goal. Here are the 5 best ways to save for a down payment so you can get into your dream home as soon as possible.

Best Way to Save For a Down Payment

Set Up Automatic Payments

First things first – set up the highest interest savings account possible. Having automatic withdrawals go into your savings account is really one of the best ways to save for a down payment. This method builds discipline and is the best way to ensure that the money intended for your down payment doesn’t get spent on other things.

Get a Second Job

One of the best ways you can save for a down payment is to take on a second job. Even just finding a job that you can tack on some weekend hours, can help put that extra money in your account to help you reach your goal sooner.

Deposit Your Bonuses

Any yearly work bonus, tax refund, or extra money generated from a promotion, should go directly into your down payment savings account. These lump sums may not seem like a lot at first, but over time they can really add up fast, getting you into your dream home faster.

Use Your RRSP

If you’re a first-time home buyer, you can use the government’s Home Buyers Plan to take out money that is saved in your RRSP to use towards your down payment. Not only will it not be taxed, but you will have a 15-year period to pay back the money with zero consequence.

Utilize a Staycation

That yearly trip you take often costs thousands of dollars that could otherwise be put towards your down payment. Until you purchase your home, opt for staycations instead so you can save for a down payment. Activities like camping, a week visiting family, or time just relaxing around the house, can help you reach your goal sooner than later.

You will be surprised at how much money you can save for your down payment when you utilize a little self-discipline and keep your money in the bank. By getting your savings into gear, you can be in a new home much sooner than you think. If you would like to explore your options or create a financial strategy, talk to us at The Financial Forum – we can help you get your finances in order to pursue your home-ownership goals.

When you’re ready to purchase a new home, there are plenty of factors you need to consider before you head out on the hunt. Questions like, “Will I need another bedroom once I start a family? And how much can I afford if we get in a pricing bid with another buyer?” are just some of the thoughts that are important to consider. So, before you step out the door to your first open house, read our 6 things to consider before buying a new home.

Things to Consider Before Buying a New Home

Rental Income or Not

Before you start looking for a new home, it’s vital to determine the type of home you need to suit all your lifestyle requirements. For instance, if you want to have a space you can rent out to make some supplementary income, then you probably won’t want to move into a one-bedroom condo. Write out your wants and needs now and 5 years into the future to figure out the space you require so you can start your house shopping on the right foot.

Pricing and Trends

Next, you should research all the markets in which you would like to live in. Check the comparable sales, neighbourhood amenities, statistics on the future growth and development, and any available information you can find on the pricing trends. Then shortlist a few neighbourhoods that are best suited for your current and future needs, along with their average prices.

How Much You Can Afford

Once you understand the average pricing and trends, you should determine how much you can afford and if you have enough for a down payment saved. Tools such as an affordability calculator can help, but getting a pre-approved mortgage is your best way to find out the price range you qualify for and the mortgage options available to you.

To Go Alone or With a Realtor

One of the biggest questions you face is whether to go alone or with a realtor. If you don’t have prior real estate experience, it’s highly recommended that you seek the expertise of a realtor. They can help you understand all the legal terms in the agreements and negotiate on your behalf to get you the best pricing.

Give or Take on Offers

You also need to know how much pricing room you have to work with in case of a bidding war. A pre-approval will give you an estimate of your affordability but if you place an offer at the full amount you may not have any leeway you need to re-negotiate.

Potential Closing Costs

Going hand-in-hand with the last point, you also need to have money available for your pre-closing, closing, and after closing costs. A professional can help you calculate all the required payments so you don’t get blindsided by the hidden costs that your mortgage cannot completely cover.

Buying a new home has many moving parts, and if it’s your first time, it can be very overwhelming, especially when trying to choose a mortgage that is right for you. That’s where we come in. At Financial Forum, we can help you learn what your options are to get you the best mortgage for your needs.

 

Have questions? Contact us!

With the condo boom that’s been occurring over the past decade, it’s become increasingly difficult for homebuyers to choose between purchasing a condo or a house. There are plenty of benefits to owning either style of property, and there are key factors to consider that will help you determine which one suits your lifestyle best. So, if you’re stuck in the great debate: house vs. condo, read further as we help you decide which is best for you.

 

The Great Debate: House vs. Condo

Affordability

It’s worth noting that in most cases condominiums are much more affordable than homes. That statement, however, doesn’t include luxury condos in major cities like Toronto or Vancouver. For most buyers, when you compare the price of an average two-bedroom condo unit to an average two-bedroom home, you’ll find that condos have a much lower price tag. With a house, you’re not only paying for more square footage, but also the land, and because of this fact, a home will usually yield a higher price.

Overall Space

If you have a family or are planning to start one soon, a condo might not provide you with all the space you need. Most condos are one or two-bedroom units, and often do not provide the space that most families need. However, if you are single or a part of a pair, a condo can provide an adequate amount of space and offer attractive amenities, like gyms, pools, and on-site shops, for example.

Maintenance and Home Care

Some people prefer to make all the decisions when it comes to altering, maintaining, and improving their property. With a home, you can control exactly what you want to do with your home and when. On the other hand, with a condo, there are restrictions on what you can and cannot do to alter the unit and maintenance fees that come along with your purchase. These maintenance fees are not always set in stone and can increase over time. For this reason, it’s always best to consider what your lifestyle preferences are when it comes to home care and maintenance.

Starter Home?

When you’re a first-time homebuyer, it’s easier to save for a down payment and qualify to buy a condo.  Since condominiums are more affordable than homes, they make for great starter properties. With the lower monthly mortgage payments, you can focus on building up your equity and financial security to later sell and then buy a home.

Privacy Requirements

Depending on how much privacy you want will also help decipher whether condo living vs. house living is better for your lifestyle. In a condo, your neighbours share your walls, and often your privacy is limited. This might not bother some, but if you have younger children, you may prefer more of an intimate family setting.  

When you need to make the big decision between house versus condo, don’t just consider your budget, consider these important factors as well. When stuck at a crossroads, just remember that a professional financial advisor can always help point you in the right direction based on your own unique situation.

Have questions? Contact us!

Getting ready to purchase your first home? If so, you should know about the Home Buyers Plan (HBP), in Canada. This program, created by the Canadian Federal Government, is designed to help you free up your RRSP savings to use towards your home. With an allowable $25,000 withdrawal limit, you can remove money tax-free from your RRSP savings easily, and slowly pay it back on a 15-year repayment plan. It’s the best way to get access to the equity you need to get you into a home sooner. To find out if you are eligible for the program, read on.

Everything You Need to Know About the Home Buyers Plan

Eligibility

To be eligible to participate in the HBP you will need to meet all the following criteria:

  1. Be a Canadian resident at the time you make the withdrawal
  2. Be entitled to receive payments from the RRSP to withdraw the funds
  3. Qualify to purchase a home
  4. Have a written agreement to buy a qualifying home or to build a qualifying home
  5. Will use the house as your primary place of residence for a minimum of one year
  6. You or your spouse/common-law partner cannot have owned the home for more than 30 days before the withdrawal
  7. Have no balance from a previous HBP
  8. Have not owned a house as your principal residence within the last four years.

There may be additional criteria or restrictions in specific cases, so talking to a professional mortgage lender is a must.

Eligible RRSPs

Not every type of RRSP will be eligible for the Home Buyers Plan. Your issuer can help you better understand whether your plan is eligible, but locked-in RRSPs and group plans are generally not part of the program.

Eligible Homes

Most homes are eligible under the HBP. However, if you wish to purchase a cooperative (co-op) housing unit, then the rules will differ. Talking to a mortgage and financial professional will help you learn more.

Withdrawing Money

The withdrawal process is easy. All you need to do is complete the Canada Revenue Agency T1036 form online. Once you have filled out the applicable area (Area 1), you will need to bring the form to your RRSP issuer who will complete the remaining section (Area 2). The funds will then be released to you tax-free. Just remember to file the T4RSP form you will receive during tax time. If you do not report your withdrawal, you will face tax penalties.

Repayment Plan

Starting the second year after your withdrawal, you will be required to pay a portion of the withdrawal amount back into your RRSP every year. You must pay the minimum but can also pay more into the RRSP if you like, as long as it does not exceed your yearly contribution amount. If you are unable to make the payment, you will need to declare the amount on your tax forms as RRSP income and will need to pay the applicable taxes.

If you need assistance or have more questions, you can always reach out to us at The Financial Form; we are always available to assist you with your mortgage and home purchasing needs.

Have questions? Contact us!

Sifting through home listings online can often be very different than than the experience you have in person. That’s why open houses are extremely beneficial to those interested in purchasing a new home. It allows you to get a real feel of the home and whether or not it’s the right fit for you and your family. That being said, an open house needs to be taken seriously, as a perfectly staged home often can hide flaws or areas that may need improvement. To make sure you’re getting the most out of your search, follow these quick tips to know what to look for during an open house viewing.

Layout

Pay close attention to the layout of the home. The layout should provide flow from one room to the next, with rooms that offer adequate space for your family needs. If you have small children, you’ll want the bedrooms to be on the same floor as the master bedroom. If you have older children, you may want them to have their own bathroom. If you have teenagers, you’ll most likely want their room to be farther away from yours or to at least have enough space to give them some designated hang-out space. Also, think about if you need a workable space like an office, or a workshop to put to use.

Odours

Look for any odd smells that resemble earthy, musty odours – this could point to a problem with water damage and mold. Also, check for water stains on ceilings, dark patches around furniture on floorboards and check underneath all the sinks. Mold not only indicates water damage and flooding issues, but can also indicate underlying structural damage. Beyond the structural issues, black mold spores are dangerous to your health and costly to remove – a reason to avoid the home altogether.

Neighbourhood

The neighbourhood and your neighbours can play an integral role in your lifestyle and overall happiness when it comes to finding a new home. Look at the surrounding schools and local amenities to see if the area has everything you need. Also, look at the neighbouring properties to make sure you are not buying the best house on the block, with deteriorating properties around you. Lastly, check to see if there are any large, long-term construction projects nearby that will keep you up at night or disturb your peace.

Privacy

Take a good walk around the home and look for areas that hinder your privacy. Does the backyard have a fence that blocks out peering eyes? Can you see directly into your neighbour’s home? Can they see directly into yours? Privacy is something that is important and should always be considered as you look at potential homes.

Cracks and Structural Damage

If the bricks outside are showing long vertical cracks, or if the paint is chipping, and the roof shingles are curling, you may want to give the home a hard pass. Signs of early structural damage along the exterior and roof can end up costing you a lot out of pocket in repairs.

Storage

Often overlooked is the storage capacity of a home. The design, location and layout may all be in line with your style, but if there isn’t enough storage to make that move practical, then it might be worth continuing your search. Inspect all the closets and areas that are available offer ample storage options. Consider that as you and your children get older, you obtain more belongings and you’ll need room to accommodate all your items. Always keep storage space in mind during the open house tour.

House hunting can be a fun and exciting adventure, but it can be overwhelming when you don’t really know what to look for beyond the stunning staged design. Knowing the important things to pay attention for when you view a home will help you feel confident in finding the right price for a house that is suitable for you and your family, while avoiding any hidden surprises.

Own Your Getaway: Vacation Home Mortgages

 

Have you been dreaming about owning your own vacation home? Maybe a place you can spend the weekends relaxing lakeside or maybe even skiing at your own chalet?  Well it’s easier than you think to turn that dream into a reality, thanks to vacation home mortgages. With the right financial advice and guidance through the process, you can find the right mortgage for your needs. So, if you’re interested in finding out how you can secure a vacation home mortgage, read on as we give you all the tips you need to find your perfect getaway home.

 

Pre-Approval Process

The first step is navigating through the pre-approval process. Without a pre-approval, you won’t have a clear understanding of how much you can afford to pay on a second home. A pre-approved mortgage is the best way to know your affordability level, the interest rate and amortization period, what your estimated mortgage payments will be, and your overall financial status. A pre-approval also ensures that when you find the perfect home, you can put in an offer right away, giving you a competitive advantage over other purchasers. Here’s the best part of the process; applying for pre-approvals cost you nothing. Just remember to have all your financial information organized for the application process.

 

Qualification

With all of this years’ changes to the Canadian mortgage landscape regarding qualification requirements, it’s wise to talk to a mortgage professional in advance. At The Financial Form, we understand how the new mortgage changes can impact how you qualify. We’ll help you navigate through the entire process to ensure you are provided the best mortgage option to secure your vacation home.

 

Property Considerations

Selecting the right location and property can often be challenging because it’s not the same from one place to the next. For instance, not all municipalities will allow you to out right own the title to your property, and some have much higher taxes than others. Also, if you’re considering turning the property into a vacation rental, you’ll need a professional who can help show you where the most profitable locations are in the neighbourhoods, and whether the property – if condo or townhome, allows rentals in their units. So before making any decisions, let an expert help you navigate through some of the more difficult factors to vacation home purchasing and obtaining vacation home mortgages.

You deserve to have your dream vacation home, and deserve a team that’s dedicated to helping you reach your goals. We have assisted hundreds of people just like you to obtain second homes used as a getaway home. Together, we can ensure that you are offered the most affordable vacation home mortgage rates, so you can obtain the home you’ve been dreaming of.

Ready to get started searching for your getaway home? Contact us today to get started.

 

What Is a Bridge Loan?

 

When it comes to financing, there are lots of different types of loans available. One common loan is a bridge loan, also referred to as bridge financing, gap financing, interim financing, or a swing loan. If you’re looking to upgrade to a new home and have not yet sold your current home, a bridge loan may be exactly what you need. To find out more about bridge loans, read on as we outline how a bridge home can help you.

 

Bridge Loan Uses

A bridge loan is a short-term loan that is used to borrow money against your current property to help finance the purchase of another property. If you’re pretty certain that your home won’t be closing at the same time that you purchase, it will help you by bridging the gap of time between when you sell your old property to when the new property is purchased.

 

Financing Terms

Although this loan is often good for a six-month period, you may be able to extend a bridge loan for up to 12 months. And because it is a loan that is in addition to your mortgage, it carries a higher interest rate. You can expect to pay an interest rate above the average fixed-rate and additional fees set by the lender.

 

How It Works

A bridge loan can be opened as a second or third mortgage to be used as the down payment for the new property. Just be certain you can afford the extra mortgage, as you will still need to make the regular payments on your old mortgage. Alternatively, it can also be used to pay off any existing liens and the excess amount can be used as the down payment. With this method, you won’t need to make payments on your bridge loan but instead, use the proceeds to pay for the bridge loan once your house sells.

 

Potential Risks

With this type of loan, financing costs are higher so they should only be used primarily as short-term solutions and not long-term financial solutions. As a borrower needs to pay the loan more quickly, there may be additional fees and penalties on late payments. Plus, some lenders may have prepayment penalties, where you would need to pay them if you sell and want to pay the loan back too early. So, to avoid penalties or additional fees, it is recommended to talk to your mortgage broker in Vaughan who can help direct you to the best bridge loans available on the market that match your requirements.

If you believe that a bridge loan can help you, talk to The Financial Forum. Our qualified mortgage brokers can provide you with all the information you need and the deals that are available to you.

www.thefinancialforum.ca

Have questions? Contact us!

 

What are the Advantages of Pre-Qualification?

 

When it comes to buying a home, not knowing your budget or how much you will be granted for your mortgage can affect your purchasing power. Mortgage pre-qualification is a key step that every home buyer should do before they start placing offers. So, if you’re not familiar with all the advantages of a pre-approved mortgage, read on as we help you understand how you can get ahead of your competition and avoid costly mistakes from the get go.

 

Helps You Negotiate Better

What could be worse than finding that dream home, putting in a bid, and then being rejected by the lender or offered a much lower loan amount than the purchase price? Instead, you should know what amount a lender will loan you in advance. Securing pre-qualification ensures that you are provided with a set loan amount that is guaranteed for a specified amount of time. This will help you negotiate better and get the documents ready faster, beating out your competition.

 

Shows That You’re Serious

A pre-approval will show your realtor and seller that you are serious about buying a home. And when it comes down to you and another bidder, your offer will be stronger than one from a buyer without pre-approval. It tells the seller that they don’t have to worry about the financing falling through, which is an important advantage.

 

Ensures You Close Faster

When you set out for a pre-approved mortgage, you are required to provide your financial details to the lender. All the supporting documentation you provide for pre-approval is also required as part of the closing process. This allows for a much faster closing and can help a seller choose you over your competition knowing they will have the deal done in a shorter timeframe.

 

Provides Protection Against Rising Interest Rates

When you have a pre-approved mortgage, you are locked into a specific interest rate for a certain amount of time. This can protect you from any rising interest rates that can happen in the near term. Even if rates rise you will be still given the rate that is outlined in the pre-approval. And even if the rates fall you will be given the best rate possible.

In today’s market, going house hunting without a pre-qualified mortgage can result in pure disappointment. Don’t get beat out on every bid – talk to your Toronto mortgage broker today about the process for getting a pre-approved mortgage.

www.thefinancialforum.ca

Have questions? Contact us!

PSST – Do You Know About the Home Buyer’s Plan?

 

Being a first-time homebuyer isn’t easy in today’s real estate market. Many feel the pinch of the down payment and qualifying terms more than those who have already owned a home.  Luckily for all first-time homebuyers, there is a federal government program called the Home Buyer’s Plan that can help free up funds to finance the down payment. The plan allows you to use your RRSP savings to help you get into a home. To find out more, read on as we outline everything you need to know about the Home Buyer’s Plan.

 

Eligibility

Under the Home Buyer’s Plan, you are eligible to withdraw up to $25,000 of your RRSP when you qualify. To be eligible, you must be a Canadian resident at the time of the withdrawal, have a written agreement to buy or build a qualifying home, and not have purchased a home in the last four years. Plus, the first year that you withdraw from your RRSP, you must intend to live in the home as your primary residence.

 

Ineligibility

On the other hand, if you or your partner has owned the home for more than 30 days prior to the RRSP withdrawal, or you have a remaining balance from a previous Home Buyer’s Plan agreement, you will not qualify. There are also certain types of RRSPs that may not be eligible such as locked-in RRSPs. To find out if you can meet the qualifications you should talk to your financial institution or to a professional mortgage broker.

 

Starting the Process

Once you have met the necessary qualifications, you can start the process by completing a Canada Revenue Agency T1036 form. Once you have filled in all the applicable sections, you will need to bring the form to your RRSP holder who will finish the process and release the funds to you, tax free.

 

Filing with Your Taxes

Each year during tax time, you will receive a tax slip outlining the amount you have withdrawn. You are required to file this with your income tax return and complete the relevant sections. We recommend you talk to a financial advisor or accountant to ensure you process the information correctly before proceeding.

 

Repayment

Repayment for the Home Buyer’s Plan is easy. Starting two years after the amount has been withdrawn, you will have 15 years to repay back your RRSP without incurring any taxes. The payment schedule will be based on a yearly repayment plan set out by the Canada Revenue Agency. If you are unable to pay the amount required in any given year, the amount will be added to your income as taxable income and you will be required to pay the taxes. Just note that any repayment amount you make will not affect your yearly contribution limit, You could contribute towards your RRSP for the year as per normal.

The Home Buyer’s Plan can help all new, first-time home buyers get into the market and into a home more easily. If you’re ready to purchase a new home, talk to your mortgage broker with The Financial Forum for more information about the services available to you and whether you qualify.

www.thefinancialforum.ca

Have questions? Contact us!