We’ve celebrated Thanksgiving and (in most parts of Canada) are enjoying the last warm days of the year. You’re probably not stressing about your holiday budget – yet. The good news is if you take some time to plan now, you could avoid that end-of-year money stress for good.
Continue reading
We’ve celebrated Thanksgiving and (in most parts of Canada) are enjoying the last warm days of the year. You’re probably not stressing about your holiday budget – yet. The good news is if you take some time to plan now, you could avoid that end-of-year money stress for good.
Continue reading
For Canadians in most parts of the country, spring had a later start than usual. Whether your adult child is looking for a home this year or is planning to purchase a home in the coming months or years, it’s never too early for them to get their finances in order.
Buying a home isn’t as easy for kids these days as it was even a decade or two ago. High home prices coupled with the mortgage stress test means that it’s tough to even afford a starter home in a decent location. This had led to a lot of parents helping out their adult kids financially to afford a home.
Let’s take a look at some good ways parents can help adult kids buy a home sooner.
The first way to help out your adult child is by gifting them their down payment. If you’re in the financial position to do that, gifting them their down payment can let your adult child buy a home in a decent neighbourhood sooner. Maybe they’ll even choose a place close to you. You might do what is called “living inheritance,” when you gift your adult child part of their inheritance when you’re still alive.
A word of caution about this – gifting your adult kid their down payment is fine as long as they appreciate it and it won’t set you back financially. As much as you want to help, gifting your adult child their down payment shouldn’t set back your retirement or involve taking out a reverse mortgage on your home. If that’s the case, maybe you can to help them in other ways.
If you can’t afford to gift your adult child their entire down payment or you’re afraid they won’t appreciate it as much as they should, you might consider only gifting them a portion of their down payment. This can be done in several ways.
Personally, my favourite way is to match your adult child’s down payment. This helps your child work towards their down payment and incentives them to save. For example, if your adult child saves $10,000, you’ll match it with $10,000 of your own. This can help them get in the good habit of saving later in life.
A variation of matching is topping up your adult child’s down payment. For example, if your adult child saves 15 percent towards a down payment, you’ll top it up by 5 percent to help them avoid mortgage default insurance (this adds up to a 20 percent down payment). It’s a really nice gesture!
There’s no shame in not being able to afford to gift your adult child money. However, a way you can really help them out is letting them live at home longer. This lets your adult child “supercharge” their down payment since they won’t be paying market-level rents.
If you do this have a serious conversation with your adult kid ahead of time. Explain why you are letting them live a home. Set rules and responsibilities. Let them know any chores they are expected to do and how long this arrangement will last. Emphasize that you’re doing this to help them save a bigger down payment sooner. That way they’re less likely to blow their extra money on frivolous things.
There are several ways to do this. You can let them live at home and charge them below-market rent. You could also choose not to charge them any rent at all. Regardless of how you do this, by getting your adult kid on board, it will help make this a win-win situation for both parent and child.
Are you not sure the best way to help your adult kid with their down payment? Contact our offices today to come up with a good savings strategy.
Climb’s Personalized Credit Prescription provides you with customized recommendations to help rebuild your credit score.
Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense. Connect with Sean on LinkedIn, Twitter, Facebook and Instagram.
Having just purchased a home with my husband, I can tell you… it can be an exciting but frustrating process. We spent over a year scouring Realtor.ca to find the right home. We had two deals fall through because of the inspection, meaning we have an incredible knack for finding poorly constructed homes. With the price of houses in many of the major cities across Canada exceeding the half million-dollar mark, it can seem impossible to purchase a home on your own these days. Most people need two incomes to qualify for the amount of mortgage they will be requesting and their joint savings to be able to pull together a sizeable down payment.
Whether you are purchasing a home with your spouse or a significant other, there are definitely things that you should keep in mind when starting the home buying journey.
At the end of the day, the largest lesson we learned was one of patience and communication. It took us a long time to find a house in the location we wanted, the quality we would accept, and in our price range. During this time, we were able to grow the amount we would put down, which further decreased our mortgage. We are in the final closing processes for our new home, and even though it took over a year to find our home, I am happy with the way things turned out. We were able to have saved up a large down payment and have many conversations about what was most important to us as the process went on. Knowing where your partner stands and their risk level is key to managing your financial future together, so have those conversations sooner rather than later.
Janine Rogan is a personal finance educator and CPA based in Calgary Alberta. She is passionate about sharing her financial knowledge with Canadians to help educate them to make money-smart decisions. Through her website, Youtube channel, and community engagement Janine shares solid financial advice that will make a difference in how you manage your money. Check out JanineRogan.com for more details.
With spring officially here (finally!), let’s continue our discussion on real estate. In my last article, we talked about the importance of being pre-approved for a mortgage before you go house hunting. Once you have your finances in order, only then can think about buying the property itself.
House hunting is an exciting time, but if you’re not careful you can make a costly mistake along the way. Let’s take a look at three common home buying mistakes and how to avoid them.
Before you go house hunting, it’s a good idea to come up with a list of needs and wants. Examples of need include three bedrooms and two bathrooms and wants include a Jacuzzi and deck.
While it’s helpful to have a list of top 5 needs and wants, be careful not to go overboard. If your list of needs and wants is too long and you’re not willing to compromise, it could take you a very long time to find the ideal home. I’m not saying that you should compromise on something crucial like the number of bedrooms, but if a home has something you’re not particularly fond of like carpeting in the basement, that can be fixed. I hate to break it to you, but if you’re looking for the perfect home, you could be looking for quite a while.
Another mistake to make when you’re house hunting is focusing on the wrong things. When you’re looking at properties, it’s easy to focus on the cosmetics and overlook what I liked to call the “bones” of the house. Cosmetics are things like a newly renovated kitchen and bathroom, hardwood floors and paint colours.
While those things are all nice, make sure you don’t overlook the most costly parts of the home. I’m talking about the roof, windows and furnace. Those can end up costing you a pretty penny to repair. Likewise, see if there’s any dampness in the basement. Waterproofing your house can be one of the most costly things a homeowner can face.
When you see a place that you like and five other people are interested, it’s easy to skip the home inspection and go in with an offer without any conditions. But by doing this, you’re leaving yourself open to all sorts of problems later on. Not only does getting a home inspection offer you piece of mind, it can be a good negotiating tool. If you find something wrong with the property, you could ask the seller to knock an amount off the selling price to compensate you for it.
So, you want to get a home inspection, but you’re worried that you’ll lose the house since there are other people making offers. What can you do? You can get something called a “pre-inspection.” A pre-inspection is when you get your home inspection done before you make an offer on a property. By doing that you don’t have to include it as a condition, improving your chances of getting the property.
Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense. Connect with Sean on LinkedIn, Twitter, Facebook and Instagram.
With the federal election coming up on October 21st, home affordability is a hot topic for Canadians. Home affordability is such an important issue because it’s the single most costly household expensive for most Canadians. When your shelter costs are high relative to your income, you can find yourself “house rich, cash poor,” with very little left over to save, let alone have fun.
To help address home affordability, the Liberals introduced the First-Time Home Buyer Incentive. The First-Time Home Buyer Incentive is a shared-equity mortgage, a relatively new concept to most Canadians. Let’s take a closer look at the Incentive and how it may help with home affordability.
Shared-equity mortgages may not be something you know very well and that’s understandable. Shared-equity mortgages aren’t very widespread in Canada, but that could soon change if the Incentive proves popular.
A shared-equity mortgage is a mortgage where the lender (or the government for the Incentive) puts money towards your down payment. But instead of it being a loan that you have to pay back right away, the lender or government takes an ownership stake in your home.
The main benefit of a shared-equity mortgage is that it helps make the carrying cost of your home less costly and more affordable. That’s because your mortgage payments will be lower, not to mention you’ll pay less in mortgage default insurance (insurance you’re required to buy when making less than a 20 percent down payment on a property in Canada).
But there is a downside to that. As mentioned, the government owns part of your property. Depending on how much your home goes up in value over the years, a shared-equity mortgage could end up costing you a lot. That’s because not only will you have to pay back the original amount you borrowed, you’ll also have to pay back a portion of how much your home has gone up in value. (Although the silver lining is that in most cases you won’t need to pay back any money while you’re still living in the home. It’s only when you sell the property or you’ve been there 25 years that you have to repay the shared-equity mortgage).
As mentioned, the First-Time Home Buyer Incentive is a shared-equity mortgage. A “shared-equity mortgage” can be offered by any lender, and for the Incentive, the federal government is using this existing financial tool to provide a top-up to a home buyer’s down payment, if they’re putting down less than 20% on a property.
The Incentive has been accepting applications since September 2nd, 2019 with the first closing taking place November 1st, 2019 – the application info is available here. Using the Incentive, if your household has a combined income up to $120,000 you’re able to receive 5% from the Incentive towards a resale home and 10% towards a new home. (In case you’re wondering, yes, you can withdraw the money from your RRSP under the Home Buyers’ Plan).
As the name suggests, you have to be a first-time homebuyer to participate in the Incentive. That means that you’ve never owned a home before, you haven’t occupied a home that you or your spouse or common-law partner owned, or you’re going through a marriage breakdown or breakdown of a common-law relationship.
Using the Incentive you can spend up to $565,000 on a property. This scenario is assuming you earn $120,000 per year and you’re purchasing a new home. That’s equal to four times your annual income and the Incentive amount. If your income is lower or you’re buying a resale home, your maximum purchase price under the Incentive would be lower.
To address the lack of affordable housing in Toronto, Vancouver and Victoria, the federal government has since introduced a new version of the Incentive. If you’re buying in those markets, you’d qualify to spend almost $800,000 on a property and could have a combined income of up to $150,000.
If you’re someone struggling to save up a large enough down payment the Incentive is worth considering. It can help you get into a home sooner rather than later and start building up equity, not to mention it can save you in mortgage default insurance premiums.
Are you looking to rebuild your credit score to qualify for a better mortgage rate? Contact our offices today for tips on achieving a good credit score.
Climb’s Personalized Credit Prescription provides you with customized recommendations to help rebuild your credit score.
About the Author
Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense. Connect with Sean on LinkedIn, Twitter, Facebook and Instagram.