If you think you’re ready for home ownership then this post is for you! Owning a home requires more than stable employment and money for a down payment – Here are a few additional things to consider.
1. You Can Afford Your Down Payment & Ongoing Costs
Once you have the down payment, it is important that you can also manage the monthly mortgage payments and ongoing maintenance that comes with home ownership. Our “My Mortgage Toolbox” app has a great calculator to help you determine what you can afford on a monthly basis. And we are here to help with that as well!
2. You Have Good Credit
Credit scores play a major role in qualifying for the financing to purchase a home. If you have a good credit score (at least 680) you have nothing to worry about! However, if your credit score is below this, it is more likely that you will be paying higher interest rates or not be able to qualify. Working with a mortgage professional can help get you on the right track as quick as possible. Sometimes all that’s needed is debt consolidation or a few subtle changes.
3. No Other Large, Upcoming Expenses
Do you plan on buying a new vehicle in the next two years? Are you thinking of starting a family? Are you considering going back to school? Although you may think you can afford to purchase a home right now, you have to be honest about your future plans. What does your life look like in one year? Five years? Ten years? Incurring big expenses is something that you need to factor into your budget.
4. You are Disciplined to Budget for Home Ownership
One of the most important factors for purchasing a home is budgeting. You have to know what you can afford and stick with it! It is easy to be tempted by a gorgeous six bedroom home with a backyard pool in a private community – but at what cost? If going all-in is going to leave you scrambling each paycheck or derail any plans of future financial stability, it is worth rethinking. Understanding the difference between what you NEED in a home versus what you WANT is important.
Do you know a First Responder? Perhaps it’s yourself! As a thank you for serving our community, we have teamed up with other industry professionals to help save you money around the costs of purchasing a home or refinancing your current one. Contact our office at 604-552-6190 to find out about our amazing First Responders Program today!
Just like you have a physical every year to make sure you’re healthy, you should do the same for your credit score. Here are a few things you should be looking for.
Mistakes
Make sure your personal information is correct and up to date. This includes your date of birth and any other identifying information.
Errors
Even creditors make mistakes, so carefully look over any negative information to confirm that it’s true. They will be required to change any errors that you find.
HINT: If you find an error, send a letter to the credit bureau to make them aware and then send a copy to the credit agency that incorrectly reported it. This will ensure it is taken care of in a timely manner.
Outdated Information
Credit agencies are required to remove information after a specific number of years. For example, if you fall behind on your payments and then correct it, the history showing this is to be removed after 6-7 years. However, it’s important to be proactive and follow up to make sure it gets done.
Fraud
We all know someone who has had their identity stolen and nothing destroys a credit score more than this. Often, it may be someone you know such as a family member or a friend. Make sure you keep your credit information protected, as they may suggest that they just “borrowed” it.
Why do errors on your credit report matter?
Even minor errors like a misspelled name or wrong address can lower your credit score and keep you from getting a loan. This is why it’s important to review it every year and keep it “healthy”. We suggest choosing a day that will be easy to remember, such as your birthday or the day you file your taxes.
Have questions about your credit score? Reach out to us here!
This has been an exciting month for us! Primex turned 12 on May 1st and we have spent the month celebrating and reminiscing on the last 12 years. We have accomplished so much as a team, receiving numerous awards and recognition in our industry and the community, which has us in the top 2% of mortgage brokers Canada-wide. If you have been a part of our journey, THANK YOU! We could not have gotten here without you.
On May 20th, our team took the day to celebrate at the Glass House Estate Winery in Langley – Wow! It’s beautiful. If you haven’t been, we highly recommend that you check it out. We enjoyed a delicious lunch on the patio, complimented by a wine tasting and wonderful service.
We will be wrapping up our birthday celebrations this weekend at Pitt Meadows Day. This annual event is a community tradition that takes place rain or shine. This year marks the 81st anniversary! It’s being held on June 4th at Harris Road Park in Pitt Meadows where we will have a Primex tent in the field exhibitor’s area. Come say hi for a fun surprise and a chance to win some awesome prizes. It’s been a long time since we have seen our clients in person, so we hope to see you Saturday! You can check out more details for the event here.
Again, we want to extend a huge thank you to everyone who has supported Primex over the years. We love our clients and partners and look forward to many more years together.
Does the idea of saving money and having financial freedom seem impossible? The average Canadian owes $23,000 in consumer debt and has at least 2 credit cards*. If you live paycheque to paycheque, this may be you.
But experts in financial education point out that no matter your income, a few changes to the way you’re living can make all the difference. It’s never too late to start to learn and reverse course, so that financial freedom can be in your future. If you’re still not convinced, here are a few simple ideas to get you started:
Pretend You Earn Less Than You Do
Give yourself a pay-cut. The goal is to put 10% from each paycheque into your savings account. The easiest way to do this is an automatic transfer from your chequing account to your savings accountevery payday.
Create a Budget
In order to stop living paycheque to paycheque, you need to know where your money is going. Creating a budget is simple with Google docs, or look into other online tools and sites to get started.
Build an Emergency Fund
Once you have your budget in place, review it and break it down into non-discretionary expenses (rent, groceries, utilities, etc.) and discretionary expenses (eating out, entertainment, clothes, etc.). See where you could cut down on discretionary spending and put that money towards your emergency fund. Even starting with just a little amount is great and helps you create a habit of saving.
Consider Downsizing
It may be time to consider a lifestyle change. Consider moving to a smaller place. Cut gym expenses with a trip to the local park. Think about if you really need that brand new car or if a used one would work just as well.
Pay Down Debt
If you have a lot of credit card or unsecured debt, try paying the minimum on all but one of them and aggressively pay down that one card. Once it’s paid off, attack the next one. If you’re so deep in debt that you can’t fight your way out, consider consulting with a company who specializes in debt consolidation. They will help you negotiate your debt into smaller amounts that you can begin to pay off.
Don’t Forget Your Future
Putting at least 3% of your paycheck into a retirement fund is a great idea. If you get a raise, try putting it into a savings account and forget about it. You’ll be glad it’s there when you need it in the future.
A down payment is one of the most essential aspects of every mortgage application and new home purchase. Here are a few things to keep in mind while getting it prepared.
The Source of the Down Payment
Most home buyers are aware that they will require a certain amount of money for a down payment. What many do not realize, is that lenders are required to verify the source of the funds. This allows them to ensure that it is not coming from a source of debt, such as a line of credit or credit card. Instead, the best options for your down payment are as follows.
1. Savings Account
The first and most traditional method is your savings account; you’ve likely been saving for this your whole life!
If you are utilizing your personal savings for a down payment, lenders will require three months of bank statements. These should include your name, account number, past transactions and balance history. Any large deposits made in that time will require an explanation and supporting documentation.
2. Gifted From A Family Member
If you are fortunate enough to receive help from the Bank of Mom and Dad, there are certain requirements:
A signed gift letter from the immediate family member
Proof of the transfer into your bank account with the account history
Important note: If money is being transferred from immediate family overseas, most lenders will require copies of the wire transfer and account history
3. RRSP Withdrawal
Another option for a down payment is the use of a Registered Retirement Savings Plan (RRSP); this only applies to first-time buyers. First-time buyers are allowed to borrow up to $35,000 from their RRSPs tax-free. Note, the money must be repaid within 15 years over 15 equal installments paid once per year.
How Much of a Down Payment is Required?
The minimum down payment amount required in Canada is as follows:
5% on the first $500,000
10% on $500,000 to $1 million
20% over $1 million
For example, on a $600,000 house you would need to put a minimum of $35,000 down ($25,000 on the first $500,000 and $10,000 for the additional $100,000).
If your down payment is less than 20% of the purchase price, you will be required to purchase mortgage loan insurance. These premiums range from 0.6% to 4.50% of the total amount of your mortgage. Using the example above, this would mean an additional $3,600 to $27,000. However, if your down payment is 20% or more, you will not be required to purchase mortgage loan insurance.
Additional Costs and Fees
Lastly, you have to consider closing costs. Closing costs are typically 1.5% to 4% of the purchase price. In order to get financing, you are required to show that you have enough to cover these costs. These funds need to remain in your bank account until they are provided to the lawyer to complete the purchase. This is because lenders will often request updated statements near the closing of the sale to ensure nothing has changed. If money has been moved around or there are new large deposits or withdrawals, they could affect the final approval.
We are always here to help guide you through the process. Make sure you are upfront about your down payment amount, and where it is coming from. This will help determine whether or not it is suitable, and allow us to find the best lender and mortgage product for you!
Analysts are predicting another rate increase to the prime rate on April 13, 2022, with a few more to follow in the remainder of the year. Many variable rate mortgage holders have concerns, asking if they should lock in or take a fixed rate on a new mortgage.
If you are shopping for a mortgage or are currently in a variable rate mortgage term, there are many reasons why staying with a variable rate may benefit you. Below are a few reasons why.
Benefits of Variable Rate Mortgages
Variable rates are currently about 2 -2.50% lower than fixed rates
If the prime rate changes, it will increase at a slower pace than just jumping to the current fixed rate
Paying lower rates will save you thousands of dollars in interest
Variable rates have the lowest penalty if you need to make changes to your mortgage during your term
Let’s Break Down the Numbers
This can be overwhelming for homeowners, so we’ve provided some examples below to help give you a better understanding. The below figures are based on a current mortgage of $400,000 with a 25-year amortization.
Variable Rate: 1.50% to 1.85% (lender dependent) Fixed Rate: 3.79% to 4.14%
Payment at a Variable Rate of 1.50% = $1598 Payment at a Fixed Rate of 3.79% = $2058
Penalty to Break a Variable Rate Mortgage = $1500 (always 3 months interest) Penalty to Break a Fixed Rate Mortgage = $26,080 With 2 Years Remaining
These numbers are just estimates to give you an idea of what a variable rate mortgage and fixed rate mortgage could look like.
If you have questions about your specific situation, please reach out and let us know. We’re happy to review your current mortgage term and let you know what the best options are for your unique needs.
Moving to a larger house is not the only time that things can change with your home and mortgage. Sometimes there comes a point when owning a home becomes a little too much to handle. Perhaps your children have moved out and you no longer need those three extra bedrooms. Whatever the reason, downsizing is a great option when you no longer need a full-size home. Perhaps you want to swap your two-story family home for a rancher, a townhome or a cute little apartment! There are many options for people wanting to scale down.
Homeowners who are fortunate enough to now be mortgage-free and looking to downsize could be sitting on a gold mine!
Breaking Your Current Mortgage
If you do still owe on your current mortgage, it is important to remember that downsizing during your current mortgage cycle, will be breaking the mortgage. This means that you will be required to go through the entire qualification process again – including passing the stress test. The stress test is now required for all mortgages. Its purpose is to determine whether a homebuyer can afford the principal and interest payments, should interest rates increase. It is based on the 5-year benchmark rate from the Bank of Canada or the customer’s mortgage interest rate plus 2% – whichever is higher.
Regardless of your current situation, there are some costs that go with selling your existing home and moving to something smaller or more affordable.
Costs Associated With Downsizing
Realtor commission fees (typically 2.5 to 5% of the home selling price)
Closing costs and legal fees (1 to 4% of the purchase price on the new home)
Miscellaneous costs such as moving expenses, upgrading appliances or buying new furniture
If you are moving into a condominium or townhouse there are strata fees to consider
When it comes to the Canadian housing market, there are lots of options. From renting an apartment to owning a single-family home, it all comes down to where you’d like to live and what you can afford. There is no right or wrong answer when it comes to whether you should rent or buy, but we’ve broken down the pros and cons of both below.
Why Do People Rent?
One of the most common answers to this question is affordability. Most people rent because they believe it is cheaper than owning a home. This can be true in some cases, but there are also times when monthly rent costs more than monthly mortgage payments. Of course there are also cases where rent is far more affordable than buying. Affordability is fairly dependent on an individual’s situation, but it is not the only deciding factor for choosing to rent.
Another reason you may choose to rent is that you simply aren’t sure where you want to live. If you’re new to an area, you may want to rent until you get to know the neighbourhoods and determine which area is the right fit for you. In some cases, you may not be able to find a home that is affordable in the area you want to buy.
For people who travel a lot for work or like to be free-floating, renting can be the perfect option.
Pros and Cons of Renting
To help you decide if renting is right for you, we have put together a list of pros and cons:
Pros of Renting
Cons of Renting
Less maintenance
Lower upfront costs
Short-term commitment if needed
Protection from decreasing property values
Monthly payments may increase
Potential for being asked to leave
Not building your own equity
Requiring permission to paint or remodel
Why Do People Buy?
According to the most recent data, Canada boasts an overall homeownership rate of 67.8%. Even for those Canadians aged 35 and under, more than 40% of households own their own homes. This is quite an impressive statistic! So, let’s look at why people choose to buy.
One of the main reasons that people choose to buy a home is stability and peace of mind. This means you are not at risk of the landlord asking you to leave (in accordance with residential tenancy terms).
For others, building equity is a very strong benefit. When you choose to rent, you are paying someone else’s mortgage, but when you work towards buying your own home, that money is invested into your own future. This is an extremely important aspect to consider if you are finding saving for retirement a challenge.
Pros and Cons of Buying
To further show the benefits of buying, we have broken down some pros and cons below:
Pros of Buying
Cons of Buying
Freedom to renovate or remodel as you wish
Building up equity
Additional income with a rental suite
Stability and peace of mind
Coming up with a downpayment
Responsible for mortgage, property taxes, insurance & maintenance
Interest rates can increase
Possibility of unexpected costly repairs
So, Should You Rent or Buy?
The reality is that in the long run, homeowners often fare financially better than renters because homeownership enables forced savings that accumulate over the years through property equity. If you are unhappy renting or really prefer the idea of owning your own home, just know it’s possible! All you need is the right information and the right preparation.
Some other things to consider before buying include:
Your credit score – Do you have good financial standing to be approved for a mortgage?
Your savings – Do you have any money put away for a downpayment? If not, do you have wiggle room in your budget to start saving?
Your time – Do you have the resources to maintain a home?
Regardless of whether you choose to rent or buy, the most important factor is your financial security. What works for your friend or your parents may not work for you – and that is okay! However, educating yourself and looking into all the options will ensure that, at the end of the day, you are in the best situation for yourself. This is where talking with a real estate agent and mortgage broker can help you to determine if purchasing a home is viable. If you’re not ready to reach out but want to know if homeownership is an option, you can use our My Mortgage Toolbox app. It will calculate the minimum down payment needed and what your monthly mortgage costs might look like.
Financial independence is a critical skill for future success that your children will not learn anywhere else. Not only does financial literacy help your children have more success in life, but it allows them to move out sooner and avoids delaying retirement. As much as parents want to help their kids, it should not be done at the jeopardy of your own future. In fact, when it comes to teaching your children about money, there is no better time to start than now! So, how do you teach your children about money?
Review Your Attitude Towards Money
The first and most important thing is to examine your own attitude towards money. Are you a penny pincher? Frivolous spender? Do you buy on impulse, or take a long time to make a purchase? How much debt do you have? Your financial habits will shape your children’s. To ensure that you are setting them up for their best financial future, parents need to consider what messages they are sending with their own money habits.
Give Your Children an Allowance
Providing an allowance to your children (especially one in exchange for chores) is an age-old way of teaching your kids about money. A good guideline is $0.50 to $1.00 per year of your child’s age. For a 10-year-old, this would be $5 to $10 per week.
Teach Your Child to Save
If you are giving your child $10 per week in allowance for chores, encourage them to put even just $0.50 per week into a piggy bank. In six months, show them how much money they have saved and talk to them about why it is important, and what they can do with that larger amount now.
Encourage Kids to Think Before They Buy
While it’s hard to get a 10-year-old excited about an RRSP, there are other ways to help them plan ahead. One is to encourage them to think about their purchases before they commit. For example, if they saw a toy on TV they want, teach them about how advertisements are designed to make you want something. Then, ask them to wait a week – Do they still want it?
Involve Your Children in the Family Finances
It is more valuable than you might think to let your kids see and hear you discuss financial planning; let them be part of opening and paying bills, or planning vacations. Explain why you pay certain things and discuss affordable choices. This helps them be part of the conversation and will work to instill a sense of financial responsibility as they grow up.
Remember, you are the best example to your children about money. Don’t be afraid to share the ups and downs with them. Be patient with your kids, but don’t give up! The best thing you can do as a parent is to promote financial security and independence.
As always, feel free to reach out to us here with any questions about financial independence!
