Category Archives: millennial buyers

A first-time buyer’s guide to choosing a mortgage plan that’s right for you

I used to think I had a pretty good understanding of mortgages — you contribute a downpayment (a minimum of five percent of the property value if you’re in Canada) and someone (usually a bank) lends you the rest. If you fail to pay your mortgage back, your lender can take your house away. Ouch.

When I started looking into buying a cottage, I realized my mortgage knowledge fell seriously short (by the way, the cottage is the inspiration behind our brand new newsletter called The Ladder, about the climb on and up the property ladder). Early on, I jumped on an online calculator and immediately had a lot of questions. How can these interest rates vary so wildly? What is a fixed versus variable mortgage? What does amortization mean? If I put down less than 20 percent will terrible things happen to me and everyone I love? They don’t teach this stuff in school and I learned there is no one-size-fits-all mortgage plan that will work for everyone.

Photo: Romain Toornier 

Enter Matt Yakabuski, an Ontario-based mortgage broker — here to break it all down and help you, me, all of us— understand the variables to help pick the best mortgage plan. If you’re Oprah, or just won the lottery — feel free to stop reading. Everyone else, buckle in!

And if you’re curious, I’ll be sharing more about my cottage mortgage in the next newsletter, landing in your inbox on Wednesday, April 3rd — sign up here!

Um, where do I get a mortgage?

Mortgages usually come from either a bank or a broker.

Think of your mortgage broker as your personal mortgage shopper — they are provincially licensed professionals who have access to multiple lenders, including all of the major banks. They will listen to your needs and goals, analyze the numbers, help you through the qualifying process and find a mortgage product that fits just so.

“Online, you’ll get an idea of what the rates are generally, but they vary based on the downpayment amount, the location, your credit, your income and more. No two deals are alike, no two clients are alike, no two properties are alike,” says Yakabuski.

Banks are trusted, federally regulated lenders that can only access and offer you their own rates and products. You can also get a mortgage from a credit union (an increasingly popular option ever since the mortgage stress test was introduced) or a non-traditional Mortgage Investment Corporation. MICs are typically used by Canadians who have not qualified with traditional lenders and are willing to gobble higher interest rates to get into the property game.

Photo: CreditRepairExpert

How do I qualify for a mortgage?

To qualify for a mortgage, you have to prove to your lender that you can afford it and have a steady stream of income to keep up with payments. They will take a look at your income before taxes, living expenses, your credit score and all of the debts you carry. They will also look at your downpayment amount and the terms of your mortgage.

“Your debt servicing ratio is the main measure we use to qualify people for their mortgage,” says Yakabuski. “Depending on your credit score, you’re allowed to put a maximum of 44 percent of your total income towards debt servicing. This covers your mortgage, your property tax, credit card bills, car loans and any lines of credit.” If your debt eats up more than 44 percent of your income, you won’t be approved by traditional lenders.

Will I pass the mortgage stress test?

As of January 1st, 2018, you also have to pass the mortgage stress test — a calculation used by federally regulated lenders to determine if homebuyers can keep up with their mortgage payments if interest rates were to rise. If you can demonstrate that you can withstand your mortgage at the Bank of Canada’s benchmark qualifying rate (at 5.34 percent at the time of writing) or your interest rate plus two points — whichever amount is greater — you pass.

The mortgage stress test has reduced purchasing power by just under 20 percent. But as Yakabuski puts it, “If interest rates do go up, you know you can afford it.”

Photo: adventures_of_pippa_and_clark/Instagram

Should I take the biggest loan I can get?

Your lender will tell you the maximum loan you can qualify for (and they can help you find ways to increase that amount). But the maximum isn’t necessarily the loan you should take.

“Instead of my clients asking me what they can afford, I ask them what they’re comfortable spending on a monthly basis on their mortgage, property tax, heat, hydro, that kind of thing. And then we’ll work backwards,” explains Yakabuski.

Everyone has different comfort levels. “Some people are conservative and some people just want to hit their maximum,” he says. In the end, it all comes down to budgeting and making sure you don’t completely wipe out your bank account and end up house poor. If you have to beg your in-laws to cover the closing costs, can’t afford to hire movers or even get the nice coffee beans you like — you may want to consider getting less house than you can actually qualify for, but more financial freedom.

Photo: mandimakes/Instagram

Finding the “best rate” is not as easy as it looks

You may have seen a low rate on a website or on the window at the bank, but not every rate is for you and you have to read the fine print. There are rates for refinancing, rates for rental properties, rates if you’re putting more than 20 percent down (uninsured) and rates if you’re putting less (insured), and on and on.

“Your friend who got a 2.49 percent interest rate six months ago, sorry to say — that’s just not available today — and even if it was, it doesn’t mean you could have gotten it. If you find a rate that seems like a much better deal than everywhere else, there’s probably a reason for that,” explains Yakabuski.

For example, restricted mortgages, which often have lower rates but inflict painful penalties if you break them and prohibit you from refinancing elsewhere before your term is up. “If I sell you a restricted mortgage and then in two years, you have to sell the property, I don’t want to say, ‘Sorry, your penalty is going to be triple the amount of a regular penalty because it was a restricted deal.’ Anyone who is looking out for your best interest is going to take into consideration the portability of the mortgage.”

Photo: James Bombales

How long should my term and amortization be?

The term you choose will have a direct impact on your mortgage rate and how long you’re locked in to the rate, lender, and various terms and conditions of your mortgage product.

“A shorter term length has historically proven to have a lower interest rate. Right now, not so much,” explains Yakabuski. Terms can range from six months to 10 years. “Most people choose a five-year because it’s often the longest term for the best rate.”

Your mortgage amortization period is the length of time it will take you to pay off your entire loan. In Canada, the maximum amortization period is 35 years — but you’ll only have access to this timeframe if you’re putting down more than 20 percent. If you’re putting down less than 20 percent and have an insured mortgage, the maximum amortization period is 25 years.

If you go with a longer amortization period, you will have smaller monthly payments, but keep in mind: you’ll pay more in the long run in interest over the life of your mortgage.

Depending on your mortgage commitment, lenders will only allow you to pay so much extra towards a mortgage before they start penalizing you. How’s it’s calculated depends on the product you’re in and what lender you’re with, but in many cases you will have the opportunity to make lump-sum payments towards your mortgage, to double up payments or to increase the payment amount.

“I suggest taking the highest amortization possible, but if you have the affordability to pay more, make sure you do,” says Yakabuski. “Even with a longer amortization, you effectively could pay at the rate of a 15- or 20-year amortization, saving you thousands of dollars in interest by paying the principal off that much quicker. But should your financial situation change, you could scale back your payments all the way to the 25-year if you have to.”

Photo: James Bombales

Should I get a fixed or variable mortgage?

Fixed mortgages mean the rate you settle on will be your rate for the entire term of your mortgage. A variable rate is going to fluctuate based on what the prime rate is doing (at the time of writing, it’s currently sitting at 3.95 percent). If the prime rate goes down, your rate and payment will go down and vice versa. With a variable rate, there is often an opportunity to save money, but you have to be comfortable with some risk.

Choosing the right strategy often comes down to flexibility. Many Canadians default to a five-year fixed rate mortgage, but if there’s a possibility you may be moving on before then, the penalty for breaking the term can get costly, whereas a variable mortgage will cost you three months of interest.

“Variable is a good option because they traditionally have a lower interest rate and you have flexibility should you need to get rid of it quicker with the smallest penalty possible,” says Yakabuski.

Should I go for an open or closed mortgage?

Let’s say you come into a large inheritance and want to pay off your mortgage in full or you unexpectedly have to ditch your property before the term is up.

With a closed mortgage, you cannot repay, renew or renegotiate before the term is up without incurring penalties. With an open mortgage, you can do all of the above without penalty — but the interest rates are often much higher.

“I rarely recommend an open mortgage, even when people say they’re going to flip the property,” says Yakabuski. “The reason is because an open mortgage right now has an interest rate of about six percent (all open terms are variable). Whereas the interest on a closed, variable mortgage is, let’s say, three percent less. If you’re going to sell the place inside two, maybe three months, then open makes sense. But if you’re going to keep it for four months plus, generally the three-month interest penalty on breaking a closed, variable mortgage can save you thousands in just six months.”

Photo: alyssacloud_/Instagram

Now for the fun part — finding a home

Before you even start looking at properties, it’s important to get your finances in order so you can crunch the numbers when you do find places you like. You’ve saved for a downpayment, qualified for a loan and have chosen a mortgage plan that is right for you. You’re officially a mortgage badass and it’s time to start house hunting. You’ve got this.

Source: Livabl.com –  

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The 7 Most Common Mistakes Home Buyers Make

 

1
Not Getting Pre-Approved Before You Shop

The more experience you have with buying real estate, the more you’ll learn about the complicated process. Between the confusing terminology and the logistics of buying a house, it’s all-too-easy to make the wrong move or wind up in an unwise investment. If you’re a first-time home buyer, skip the buyer’s remorse by learning about some of the most common pitfalls and how to avoid them. To find out what not to do, we reached out to Tracie Rigione and Vicki Ihlefeldthis link opens in a new tab, Vice Presidents of Sales at Al Filippone Associates/William Raveis Real Estate in Fairfield, Connecticut, to get their best advice.

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Mark Cuban Says the Best Investment Is Paying Off Your Debt — Is He Right?

Mark Cuban Says the Best Investment Is Paying Off Your Debt -- Is He Right?

Image credit: Invision/AP/REX/Shutterstock via GOBankingRates

Billionaire investor and Shark Tank star Mark Cuban said that the safest investment you can make right now is to pay off your debt, according to an interview with Kitco News earlier this year.

 

“The reason for that is whatever interest you have — it might be a student loan with a 7 percent interest rate — if you pay off that loan, you’re making 7 percent,” said Cuban. “And so that’s your immediate return, which is a lot safer than trying to pick a stock, or trying to pick real estate or whatever it may be.”

Cuban is mostly right: More often than not, paying down debt as fast as possible is going to provide the most value in the long run. And perhaps more importantly, it will do so without any real risk that comes with most investing. That said, each person’s financial situation is different, so it is worth a closer look at when it’s better to pay off debt or invest.

Debt is like investing but in reverse.

One important thing to note is that the same principals that make investing so important also make paying off your debt similarly crucial. As Cuban points out, the interest rate on your loan is essentially like the rate of return on your investments but backward. In fact, many investments are simply ways you’re letting your money get loaned out to others in exchange for them paying interest.

As such, it’s important to keep in mind that as satisfying as it might be to watch your money grow in investments, it’s doing just the opposite when you have debt.

Every loan is different.

Although debt chips away at your net worth through interest, it’s important to note that different types of borrowing do so in very different ways. Every loan is different, with some offering terms that are actually quite favorable and others that can be excessively costly.

An overdue payday loan can lay waste to your financial health in no time, but a 30-year fixed-rate mortgage with a competitive rate can be relatively easy to manage with good planning. Borrowers should be sure they understand what kind of debt they have and how it’s affecting their finances.

 

Focus on the interest rate.

The key factor to take note of when considering how to allocate funds is the interest rate — usually expressed as your APR. Debt with a high APR is almost always going to be better to pay down before you focus on any other financial priorities beyond the most basic necessities.

The average APR on credit cards as of August 2018 was 14.38 percent. That’s well in excess of what anyone can reasonably expect to sustain as a return on most investments, so it shouldn’t be hard to see that investing instead of paying down your credit card is almost always going to cost you money in the long run.

Does your interest compound?

Another crucial factor in understanding how your debts and your investments differ is whether or not your interest is compounding. Compounding interest — like that on most credit cards — means that the money you pay in interest is added to the amount due and you’ll then have to pay interest on it in the future. That can lead to debt snowballing and growing exponentially. So, not only do credit cards have high interest rates, but they also make for debt that’s growing faster and faster unless you take action to pay it down.

However, that same principle can work in reverse. Gains on something like stocks will also compound over time, so there’s a similar dynamic at work when comparing your investment returns to fixed interest costs.

Know your risk tolerance.

Another factor that plays a big part in the conversation is your level of risk tolerance. Note that the question Cuban was responding to earlier was about what the “safest” investment was. For most people, erring well on the side of caution when it comes to something like personal finance just makes sense, and in that case, focusing on paying off debt is pretty crucial.

However, others might decide that the long-term payoffs that are possible make it worth rolling the dice on their future. Borrowing money for investments is common despite the risks associated, with everyone from massive investment banks to investors with margin accounts opting to take a calculated risk that their returns will ultimately outpace the cost of borrowing.

 

Costs of debt are set, investment returns often are not.

One important aspect of understanding the risks involved is that the cost of your debt is usually set and predictable, but the returns on your investments are not. It might be easy to look at the historical returns of the S&P 500 at just under 10 percent a year and assume that it’s worth it to put off paying down debt for an S&P 500 ETF or index fund as long as your APR is under 10 percent.

However, that long-term average does not reflect just how chaotic the markets really are. Sure, it might average out to about 10 percent, but some years will be in the negative — sometimes over 30 percent into the red. Even with bonds — where your rate of return is fixed — there is always a chance that the borrower will default and leave you with nothing.

If you have a variable rate loan

Of course, if your loan has variable interest rates, the equation changes yet again. You could see your interest rate rise or fall depending on what the Federal Reserve does, adding another layer of uncertainty to the decision — especially when it’s impossible to say with certainty which direction interest rates are headed in for the long run.

So, although debt will typically have more certainty associated with its costs than investing, that’s not always the case and variable rate loans could change things for some borrowers.

Don’t forget taxes.

You should also remember that the tax code includes a number of provisions that promote investment, and those can boost the value of investing. In particular, contributions to a 401(k) or traditional IRA are made with before-tax income, meaning that you can invest much more of that money than you would have with your after-tax income that would be used to pay down debt.

That’s especially true when you have an employer who matches your 401(k) contributions. If your employer matches, you’re essentially getting a chance to not just avoid paying taxes on that income, but you’re doubling its value the moment you invest — before it’s even started to accrue returns.

 

Some opportunities are unique.

Another important factor to consider is what type of investments you can make. In some very specific cases, you might have access to an investment opportunity that brings with it huge potential returns that could tip the scale. Maybe a specific local real estate investment you’re particularly familiar with or a startup company run by a family member where you can get in on the ground floor.

Opportunities like this usually come with enormous risks, but they can also create transformational shifts in wealth when they pay off. Obviously, you have to gauge each opportunity very carefully and make some hard choices, but if you do feel like it’s a truly unique chance to get the sort of returns that just don’t exist with publicly-traded stocks or bonds, it might be worth putting off paying down debt — especially if those debts have fixed rates and a reasonable APR.

What really matters with debt and investments

At the end of the day, you certainly shouldn’t opt to invest money that could be used to pay down debt unless the expectation for your returns is greater than the interest rate on your debt. If your personal loan has an APR of 15 percent, investing in stocks is probably not going to return enough to make it worthwhile. If that rate is 5 percent, though, you could very well do better with certain investments, especially if that’s a fixed rate that doesn’t compound.

But, even in circumstances where you might have reasonable expectations for returns higher than your APR, you might still want to take the definite benefits of paying down debt instead of the uncertain benefits associated with investments. When a wrong move might mean having to delay retirement or delay buying a home, opting for the sure thing is hard to argue with.

Which decision is right for you?

Unfortunately, there’s no magic bullet for knowing whether your specific circumstances call for you to prioritize paying down debt over everything else. Although paying down debt is typically going to be the smartest use for your money, that doesn’t mean you should do so blindly.

Putting off paying down your credit card balance to try your hand at picking some winning stocks is a (really) bad idea, but failing to make regular 401(k) contributions in an effort to pay off your fixed-rate mortgage a couple of years early is probably going to cost you in the long run — especially if you’re missing out on matching funds from your employer by doing so.

So, in a certain sense, Mark Cuban is right: Paying down debt is very rarely going to be a bad idea, and it’s almost always the safest choice. But that said, it’s still worth taking the time to examine the circumstances of your specific situation to be sure you’re not the exception that proves the rule.

Source: Entrepreneur – Joel Anderson , 

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4 things credit unions do that make banking with them better

On a scale of one to 10, how much do you like financial advisors?

Be honest…

Unsurprisingly, you’re not the only one. It turns out a lot of millennials have a” negative perception of financial advisers,” according to a millennials and wealth management report by Deloitte.

It also points out that word-of-mouth and personal recommendations significantly influence around 50% of millennials. Yep, they’re more likely to “consult peers and media” instead of using a financial adviser and those who do use an advisor are likely to cross-check the facts using external sources.

So you could say that there’s a sense of distrust felt by youth in Canada when it comes to banking. If you have to question your bank that much, maybe it’s not the one for you. Banking should be easy because you don’t need any unnecessary stress factors in your life.

Luckily, you have another option (no, not carrying cash on you 24/7) – banking with a credit union. These financial institutions act in the interest of their members and work to make things better in your local community (without the drab financial advisor spiel).

With that in mind, we’ve compiled a list of four lovely things credit unions do.

They’re involved with the community

Credit unions understand that most young families in Ontario are dealing with large amounts of debt ranging from credit cards to student loans, and mortgages. Understanding the impact of heavy debt loads on the future of young people, credit unions want to step in and help any way they can. Aside from helping with debt management, they’re also involved in grassroots programs in their communities. Credit union staff members volunteer thousands of hours each year to help local non-profits and community initiatives. And they also help their communities thrive by hiring locally, keeping their members’ dollars local, and reinvesting their profits back in the local area. 

They’re environmentally friendly

Given the very nature of their cooperative model, it should come as no surprise that over the years, many credit unions have been recognized as Canada’s Greenest Employers. In fact, Ontario’s credit unions have made environmental performance a key part of their growth strategy, and are engaged in a full spectrum of operational improvements. But it doesn’t end there, they also have social and environmental finance innovations aimed at improving every aspect of their operation – from carbon neutrality and paperless banking to responsible investing, assistance for green start-ups, and social enterprise.

They help individuals, local businesses, and charities

The act of charity is centered around helping people in need. And since credit unions strongly believe in helping people, it’s only natural that they’re involved in a variety of charitable endeavours. From local sponsorships, to grants, bursaries, and even financial literacy blogs, credit unions are pretty much dedicated to helping everyone. They also support local community events and non-profit organizations through donations. When several provinces were suffering from floods earlier this year, multiple credit unions across Canada rallied to donate $150,000 to the Red Cross at a moment’s notice.

They offer tailored financial advice

Credit union staff ensure products are tailored to the specific financial needs of each customer. This means you’re not going to hear about investment portfolio options when you simply want to set up a savings account (unless you want to). Irrespective of your current financial situation, credit unions can help you tackle debt, save for a large purchase, or plan for a stress-free retirement. With the expertise to provide financial guidance to help their members build a strong foundation for their future, it’s no wonder that more and more Canadians are switching to credit unions. Will you?

Source: DailyHive.com – Daily Hive Custom ContentDec 11, 2017 

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In 2018, these homes will sell the fastest

With reduced buying power next year, expect house hunters to scoop up everything under $500,000.

Paul D’Abruzzo, an investment advisor with Rockstar Real Estate, says that while most people will qualify for less money on their mortgages, they won’t be completely shut out of the market. They will simply adjust their demands.

“If somebody was preapproved for $500,000, their new approval will be $400-450,000, so they will lose 10-20% of their preapproval amount,” he told CREW. “It won’t shut people out, it will just move them lower. If some were on the brink of getting approved, you’ll lose some there, but lower-priced properties will do very, very well.”

In Toronto, that will put single-family detached homes even further out of the reach than they are now, but the popularity of condos will keep soaring.

“In Toronto, with everybody’s sightline coming down, condos will be the most popular,” said D’Abruzzo. “In the GTA, like Mississauga or Vaughan, it will be condos and maybe townhouses.”

Single-family detached homes will become difficult, but not impossible, to afford. The Greater Toronto Area’s fringes still have moderately priced detached houses for sale, and even with the new mortgage rules, that won’t change.

“In Hamilton, Kitchener and St. Catharines, $400,000 gets you a detached home,” he said, “so you’ll see a continued trend of population spreading out into the horseshoe.”

According to D’Abruzzo, 2018 will not be kind to sellers—at least not through the first few months—but he recommends being patient.

“Right now, people are trying to get their places sold before the mortgage rules kick in,” he said. “Next year, inventory will be crap in January and February. If anyone is scared or fearful and waiting to sell their house, patience is the solution right now. Just wait and see, because nobody knows for sure what it will be like.”

Akshay Dev, a sales agent with REMAX Realty One, echoed that wait-and-see approach. While nobody will miss out because of too much time on the sidelines, Dev says Toronto’s chronic housing shortage will continue working in sellers’ favour next year.

“Whatever correction was needed is done, and in the spring we should see the market picking up and being strong,” he said. “In the Toronto area, there’s a huge shortage of housing, so it’s still going to be a seller’s market, but I don’t expect crazy bidding wars. Sellers will still get the prices they’re expecting.”

Contrary to popular belief, first-time buyers won’t have trouble purchasing starter homes, especially because cheaper abodes will be in high demand. However, they might live in those homes longer than the historical average.

“Historically, we’ve seen that when people graduate from their first buying experience, it takes anywhere from three to five years to move into the next level of housing, but it may become five to seven years with new rules,” said Dev.

Source: Canada Real Estate Magazine – by Neil Sharma 8 Dec 2017
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Mississauga Ranked 14th Most Unaffordable Area to Live in in North America

You knew it was expensive to live in Mississauga. With detached houses costing buyers anywhere from $800,000 to $1 million and compact condos selling for over $400,000, residents are turning to the rental market and being equally as disappointed to see that prices are no more kind there (in some cases, two-bedroom suites can cost close to $2,000 a month).

But while most people understand the GTA is a costly place to call home, some might be surprised to find out that Mississauga is one of the most expensive cities in all of North America.

According to data by real estate company Point2Homes, it’s the fourteenth most unaffordable real estate market on on the continent.

Having recently hit its lowest level in the past decades, housing affordability is definitely a highly discussed topic for Canadians today,” writes Point2Homes in a recent report. “With this in mind, our team of researchers looked at the 50 most populous cities in North America to determine the affordability ratio for each. Based on the numbers, Mississauga is the 14th most unaffordable real estate market on the continent.”

To show the affordability levels across North America, Point2Homes says it examined the home price to income ratio (also called median multiple).

Data shows that with a median multiple of 7.4, Mississauga is a “severely unaffordable market,” coming in fourteenth in the North American ranking and third in Canada—after Vancouver and Toronto.

But while the numbers aren’t great, people can still take comfort in the fact that Mississauga is more affordable than Toronto and significantly more affordable than Vancouver (which is actually number one on the list). It’s also cheaper—which shouldn’t surprise anyone—than such famous cities as San Francisco, Manhattan, NYC, Boston, San Jose and Seattle.

Surprisingly, it’s more expensive to live in than Dallas, Portland, Oregon, Chicago, Las Vegas, Houston, Montreal, Calgary, Edmonton, Ottawa and Philadelphia.

According to Point2Homes, it would take 10 fewer years to pay off a house in Mississauga than it would in Vancouver. That said, the report notes that, when looking at the raw numbers, Mississauga’s median family income stands out – it’s bigger than the income in Los Angeles and even New York.

If a Mississauga resident were to put their entire income towards their home, it would still take close to a decade—7.4 years—to pay it off.

Of course, this report isn’t the first to notice how unaffordable Mississauga has becom.

The City of Mississauga’s Planning and Development Committee recently adopted the city’s first housing strategy: Making Room for the Middle: A Housing Strategy for Mississauga.

According to the strategy, there’s a pressing and dire need to create affordable housing for middle income earners who are in danger of being priced out of the city.

Some of the draft’s findings are alarming, even though they’re not at all surprising.

According to the draft, a home is considered affordable when its inhabitants spend 30 per cent or less of their earnings on housing costs. In Mississauga, 1 in 3 households are spending more than 30 per cent of their income on housing and research suggests this number will rise.

Middle income households typically net between $50,000 and $100,000 a year and middle income earners include nurses, teachers and social workers. When people in this income bracket decide to try to purchase a home, they can typically afford to pay between $270,000 and $400,000—meaning their only options are condos and a limited selection of townhouses.

As far as rent goes, the city says the average rental unit costs $1,200 a month and that rental inventory is 1.6 per cent (which is troublingly low).

So, what has the city proposed to do?

  • Petition senior levels of government for taxation policies and credits that incent affordable housing
  • Pilot tools such as pre-zoning and a Development Permit System to develop affordable housing in appropriate locations (close to transit systems, for example)
  • Encourage the Region of Peel to develop an inclusionary zoning incentive program for private and nonprofit developers
  • Continue to engage with housing development stakeholders
  • Encourage the Region of Peel to investigate the cost of deferring development charges on the portion of affordable units provided in newly constructed multiple dwellings
  • The city has also been working to legalize accessory units (better known as basement apartments). At this juncture, basement suites remain a very viable option for people looking for affordable units, as the suites tend to cost $1,000 or less. Right now, most units remain unregistered and the city is responsible for levying fines against landlords operating unregulated units.

The city is also going to welcome a more affordable units in Mississauga’s City Centre neighbourhood.

The Daniels Corporation, the development firm who has built multiple properties in the City Centre and Erin Mills Town Centre areas in the city, is slated to construct an affordable housing project at 360 City Centre Drive.

As for how the development will work, 40 per cent of the units (70 in total) will be Rent Geared to Income suites. These units will take residents off affordable housing waitlist. The city also says that 60 per cent (or 104 units) will be set aside for renters and owned by the Region. They will be available to middle-class residents.

A second tower on the same podium will boast market-value units, creating a mixed-income property on City Centre grounds.

With the Hurontario LRT coming, there’s a chance property values along the LRT corridor will increase, potentially pushing people out of the area. The city is also tackling other major development projects, including complete redevelopment of some waterfront areas in the Port Credit and Lakeview neighbourhoods.

While the city is certainly doing its part to address affordability, it remains to be seen how the housing market will react to a bigger and more sophisticated and urbane Mississauga.

Perhaps the worst is yet to come.

Source: Insauga.com – by Ashley Newport on November 23, 2017

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The best way to help your child buy a home – The complications and benefits of gifting funds to your son/daughter to buy a condo

Q: I am in the process of helping my daughter buy a condo, here is what we have done so far:

We signed the mortgage with her as primary and me as co-signer,  I will be giving her the down payment and she is going to be living there and she will be the one paying the mortgage and all expenses.

My question is what would be the best way to do this transaction looking it at both a legal and tax perspective. From the tax perspective: How should I arrange/declare that I am gifting her the down payment on this condo? And when do we claim the tax breaks for her as a first time buyer? Would that be at time of paying the lawyer for land transfer etc.? Also, I would like to still be able to have some room on my credit as to buy another property so we were thinking if her owning 90% of the condo and me keeping just 10% would work for this purpose. According to the lawyer, we both have to have some percentage assigned because we are both on the mortgage.

From a legal perspective, we are thinking about joint tenancy as the best way to protect the asset if one of us passes away unexpectedly.

My intention is really just to help her “fly on her own,” but with all the legal and tax implications, we’d really like to do it in the best way possible.

—Claudia

A: Hi Claudia. First, let me congratulate you and your daughter! It’s wonderful that you are in a financial position to help her with the purchase of her first property.

It appears you’ve given the current and future implications of this decision a great deal of thought.

I can only assume that your lawyer has asked for a percentage split on the property because you are co-signing the mortgage and because you are opting to have both you and your daughter on title as owners’ of the property.

This legal structure helps limit the amount of taxes you owe, as you can specify that your share in the property is nominal, say 10%. Just keep in mind that each joint tenant can gift or sell their portion of the property. That means, your daughter has the legal right to sell her 90% stake in the condo even if you don’t want or agree to the sale. It also means that you are exposing yourself to creditors, should your daughter file for bankruptcy or become a defendant in a lawsuit. Finally, the 10% that you own will not be sheltered under the principal residence exemption as this property is not your primary residence.

But there is a silver lining. The Canada Revenue Agency does not tax gifted money. That means if you opt to gift your daughter the entire down payment to purchase the condo neither you nor your daughter are required to pay tax on that gifted money. If, however, lenders find out that this gift is, in fact, a loan, this can seriously impact whether or not your daughter can qualify for a mortgage as all debts (even loans to family members) are included in debt ratios used to qualify borrowers for mortgages.

Finally, your lawyer or legal representative handling this real estate transaction will take care of the paperwork when it comes to the first-time home buyers’ tax credits and rebate. That said, ask your lawyer to confirm that your daughter won’t be exempt from these credits because you are on title. According to the CRA, a buyer is disqualified from claiming these credits if they’ve already owned a home or they lived in a home owned by their spouse or common-law partner now or in the last five years. While it seems remote that your daughter would lose eligibility to these credits, it’s still better to check now than find out the hard way.

Source: MoneySense.ca – Romona King, November 13th 2017

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