Tag Archives: home owners

5 tips for insuring your first home

Photo: James Bombales

Before you take ownership of the property, your mortgage provider will likely want to see proof that the home is insured. This protects their interest in the building in case of damage or loss. Here are 5 tips for insuring your first home:

1. Be honest during your application

Buying insurance is not like buying a candy bar. It’s a contract with requirements from both parties. The most important thing to remember when purchasing insurance for your first home is to answer the application questions with as much openness and honesty as possible. This will help to ensure that the policy you purchase will be valid in the event you need to make a claim.

It’s worth doing some research on your home at this stage so that you’re prepared to answer any questions that may arise during a quote. For example, you may need to know about your home’s construction or the age of key systems, like the roof or furnace. Also, be clear about who’s living at the property and in what capacity. Any tenants occupying rental suites should be disclosed upfront.

Photo: James Bombales

2. Consider if you’d like to make renovations

Similarly, if you’re thinking about making changes to your home, be sure to let your insurance provider know before you start renovating. For most renovations, Square One will simply update your policy to cover the renovations, and follow up every now and then to check on your progress. There’s typically no need to buy a new policy to ensure your home remains protected. Just be sure to update the value of your home to include the renovations. That way, you won’t be forced to pay for them twice in the event of a total loss.

3. Check for lender-specific requirements

Most mortgage providers require confirmation of insurance before they’re willing to release the funds for your purchase. The terms of requirements differ with each lender, so be sure to identify what’s needed before you sign the dotted line.

For example, your mortgage providers will need to be listed as a “mortgagee” on your policy. This means you can’t simply cancel the coverage without the mortgage provider finding out. Most will also require an appraisal of the home’s value. Some mortgage providers will require a home inspection, or might have specific coverage requirements, such as Guaranteed Building Replacement coverage. This coverage guarantees that your home will be rebuilt in the event of a total loss, even if the cost to do so exceeds the limit of your coverage.

Photo: James Bombales

4. Pay attention to your home’s systems

Your home inspector should identify the type, age and condition of your home’s systems. If your home contains older or less reliable systems such knob + tube wiring or Kitec plumbing, you may want to consider upgrading to a more modern alternative. Not only will this provide some leverage for you to re-negotiate the purchase price, but upgrading to copper wire and pipes (considered the gold-standard) could help safeguard your home. Many providers, including Square One, offer a reduction in your home insurance premium if you’re willing to upgrade your home’s systems. (However, not all providers do – so if this is part of your decision-making process, check with your provider to be sure.)

5. Qualify for discounts to your premium

Homeowners with a history of continuous, claims-free coverage will often qualify for discounts on their premium– even if they’ve only previously held a policy for tenant’s insurance. Your insurance provider wants to see that you’re responsible and proactive about managing the risks associated with your home. And, because tenant insurance policies are typically cheaper than homeowner’s policies, the discount that’s applied to your future homeowner’s insurance premium may help to offset the cost of your tenant insurance today.

Source: Livabl.com – SPONSORED 

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Home renovations are costly, prone to errors

Jennifer Skingley and her partner—the former an erstwhile project manager and the latter an executive manager—are meticulous planners, so no detail was spared when they planned a home renovation. However, no amount of planning could have prepared them for the aggravations they would subsequently endure.

“We got the keys to our home in February 2018 and before we even took possession of it we had teed up people to do the work. We really researched and organized our renovation,” said Skingley. “There were several false starts trying to get people who were available to commit to doing the work. We interviewed a ton of contractors, got multiple estimates and did as much of the leg work ourselves as humanly possible without actually being construction experts. We tried to hand everything over on a silver platter, but for the work to actually start was like pulling teeth.”

And that was only the beginning, added Skingley.

The basement level needed external waterproofing, upgraded plumbing and a new bathroom was fitted in, while the kitchen and upstairs bathroom also received significant work.

However, because of last minute cancellations by contractors and a seeming deluge of errors, the home renovation took much longer than originally anticipated and cost over $80,000.

“Management was the issue,” said Skingley. “There were some blatant oversights and lossages with the team of people we picked, so we definitely ended up spending more money than we had allocated, even though we budgeted quite thoroughly from the outset, because we know when you tear things apart you find ugly surprises, but we there were things like having to tear floors out a second time because they forgot to get a permit. Silly little things like that took us way over and above. Even sourcing material was challenging.”

Unfortunately, Skingley and her partner’s nightmare renovation is extremely common, and given the exorbitant cost of the work, most homeowners can afford nary a thing to go wrong, says Casper Wong, co-founder and COO of Financeit, a consumer financing platform.

“When most Canadians renovate their homes, they aren’t offered flexible payment plans by their merchants, and while there are more traditional ways of paying, like with cash or using HELOCs [home equity lines of credit], not every Canadian can afford to make cash payments up front,” he said.

“Not everybody has access to HELOCs. Only three million Canadians have access to them, and on average Canadians owe $65,000, and 25% of Canadians with HELOCs just make interest-only payments.”

Financeit, a digital platform, works with thousands of contractors to homeowners make those large renovations in low-installation payments.

“We use our technology—and we own the entire stack, which allows us to manage credit, underwriting, servicing, and we work with multiple lenders and have a mobile app,” said Wong. “Not every Canadian can afford to make cash payments up front and usually when they do, they’re more reliant on credit, but credit cards have high interest.”

Source: Canadian Real Estate Magazine – Neil Sharma 12 Aug 2019

 

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HOME INSURANCE 101

HOME INSURANCE 101

Whether you’re a homeowner or a tenant, your home deserves to be properly protected. Unlike auto insurance, home insurance is not legally required by the government. Instead, it may be deemed as a requirement by anyone who has a financial interest in the property. For example, a landlord can require tenants to maintain specific insurance coverage while renting the dwelling. Similarly, a mortgage company can stipulate that homeowners maintain adequate insurance at all times, which is a way to protect their interests.

Now that we know why other people are interested in you having home insurance, let’s focus on why home insurance is, and should be, important to you. Let’s start by defining what it actually is. Homeowner’s insurance provides you with protection against damages that may occur to your home. For example, fire or flood damage (to name a couple) could be quite costly to repair — not to mention when the damages are beyond repair and require replacement or rebuilding. Your home insurance policy is there to cover you should such incidents occur.

In addition to covering damages to your dwelling and other structures, your home insurance policy provides coverage for your personal property. Insurance companies commonly refer to your personal property as contents. Each policy has a defined monetary limit when it comes to contents. When purchasing a tenant’s insurance policy, this limit is usually set by you.

A handy way to determine an appropriate contents limit is to create a personal inventory. This document lists all of your belongings room-by-room, along with their value. The total value of all the items is the total amount of contents you’re wanting to insure through a tenant’s policy. A homeowner’s policy, on the other hand, handles contents limits a bit differently: usually, this limit is a percentage of the total cost calculated to rebuild the home.

A home insurance policy also provides you with coverage for liability. As with auto insurance, your home insurance policy protects you in the event a third party attempts to take legal action against you as it relates to your home. Liability coverage also comes in handy when you may be held responsible for damage to a third party’s property. One of the factors to consider when choosing your liability limit is the exposure you may have to risks. If you operate a home-based business, for example, you could be vulnerable to additional risk because you have a higher volume of people visiting your house. Having tenants is another example of liability risk.

The next time you’re shopping for a home insurance quote using the traditional route, keep in mind the multitude of details you’ll need to organize to help ensure a hiccup-free process (see our helpful checklist below). With aha insurance, however, we can save you a lot of time and hassle because the entire process is completed online, leveraging secure, state-of-the-art technology. In fact, the only information you’ll need to know for a home insurance quote with aha insurance is your address!

Checklist:

1) Address
Okay, we know this one sounds like a no-brainer, but it’s important to specify your exact address when getting a home insurance quote. This is particularly important for those who live in more rural regions with rural routes.

2) Insurance Information
If you have a current home insurance policy, ensure you know its details, such as the renewal dates. It’s also useful to know what your current coverages are, including replacement costs.

3) Claims History
Be prepared to share the details of your home insurance claims history. You’ll also want to make sure you have the specifics about how the claims were settled, including the amounts that were paid out as well as the reason for the claim (e.g., water damage, hail damage, theft, etc.).

4) Home Occupant
Who will be living with you? If you rent out rooms or the basement of your home, provide this information to ensure you have the proper protection.

5) Property Details
Know your home, inside and out. You should know your home’s approximate living space. You should also make note of its construction, including the year it was built and the materials used. Details about your plumbing, electrical, heating and roofing will also be required. You should be aware of the materials, as well as the most recent dates they were updated. You should also note how close your home is (in metres or kilometres) to the nearest fire hydrant and fire station.

6) Personal Belongings
How much stuff do you have? If you’ve ever created a home inventory, now is the time to refer to it (and update it). Your home insurance quote will automatically calculate an amount for your contents, but if you have anything that should be given particular attention due to its value, such as jewellery or expensive antiques, you’ll want to include it.

When it comes to home insurance coverage, every insurance company sets their own requirements for the information they’ll request in order to provide you with a quote. But if you keep this checklist in mind, you’ll certainly be prepared for whatever they’d like to know.

If you’re looking to upgrade insurance coverage, we invite you to get started with an online quote. When you purchase home insurance through Hudson’s Bay Financial Services and aha insurance, you’ll be eligible to receive up to 4,000 Hudson’s Bay Rewards points.1

Source: HudsonsBayFinancial.com

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Your Spring Home Maintenance Checklist

When winter departs, it’s time to check for damage and prepare for hot weather ahead

With the days lengthening and weather warming, spring is a good time to get outdoors and tackle some larger home projects. With the threat of winter storms past, you can look for damage and make any needed repairs, as well as prep your home and garden for summer. We spoke with an expert to get some tips on what to watch for this season, from proper irrigation to mosquitoes and termites (oh my!).
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A first-time homebuyer’s guide to avoiding the house poor trap

Photo: James Bombales

Life likes to deal us surprises from time to time — a job loss, a chronic illness, an unfortunate fender bender. As a homeowner, any one of these sudden changes can throw you off your game, financially speaking, but if you’re house poor, even a minor expense change can have catastrophic consequences.

House poorness occurs when a large portion of your income goes towards your housing expenses, leaving little leftover for savings, discretionary spending or emergency funds. House poorness is not uncommon; an Ipsos poll by MNP published in January found that nearly half of Canadians are $200 or less away from being unable to pay their bills. A fluctuation in interest rates or a sudden expense can bring a house poor owner to their knees, Laurie Campbell, CEO of Credit Canada Debt Solutions explains.

“You’re really fighting a situation where anything that happens becomes too much,” she says.

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House poorness falls on a spectrum of intensity. For some, not having much financial wiggle room means no vacations or new cars. For others, it’s the difference between paying the mortgage and saving for retirement.

“The more serious version of house poor that I think people are just starting to see, and possibly for a couple more years, is people who not only can’t afford to do those discretionary spending types of things, but who also cannot save for retirement, save for children’s education, other things that are really important to do as well,” says Jason Heath, managing director of Objective Financial Partners Inc.

While the prospect of house poorness is frightening, it can be prevented through detailed planning, budgeting and thinking into the future. Campbell and Heath share how you can avoid house poorness, even before you sign those mortgage documents.

Want to retire? Buy from the bottom

While it’s expected that Canada’s hottest housing markets won’t cool off entirely this year, affordable housing remains inaccessible for many. Campbell is concerned that in the current market conditions, some new buyers are still purchasing above what they can afford. In the event of a interest rate rise, she says that those who’ve bought beyond their means could be on a course for financial hardship.

Photo: James Bombales

“Even a quarter point could result in immediate financial discord for a family that has really bought at the top of their income,” says Campbell.

Heath has worked with a number of clients, who, after several years of house poorness, have not been able to efficiently save for retirement. In order to recoup their losses, Heath says that house poorness has forced some homeowners to make downsizing an inevitable part of their financial plan. He fears that those overpaying in today’s market will follow the same fate.

“Particularly if and when home interest rates rise, mortgages payments will rise accordingly,” says Heath. “I worry that you’ve got a whole generation of young people who may be putting a lot of their retirement plans into their home as opposed to saving in a traditional manner.”

Preventing house poorness starts with buying at the bottom of the market, where the prices are the lowest, but Campbell adds that it also requires ignoring the pressures of needing to buy right now — home prices may decline further yet. By monitoring the price of homes in the markets in which you want to buy, you’ll build your knowledge of a fair evaluation of prices in your desired area and skip overpaying, Campbell explains.

“Even if you want to buy a house a year from now, start doing your research now,” she says. “Know what the real cost of housing in the area you want to buy is so you can make sure you’re evaluating the houses that are up for sale with experience.”

Taking on a smaller mortgage loan may also prevent house poorness, especially in the event of an unexpected income change. Borrowing under the maximum amount a mortgage lender approves you for, Heath says, leaves a good buffer in your financial budget in case any unanticipated changes should occur.

“I think it’s a really good lesson to people before they buy to appreciate that job loss happens, health issues happen,” says Heath. “There are extraordinary financial situations that you may not be able to anticipate that could put you into difficulty if you bite off more than you can chew in the first place.”

Skip the McMansion — think long term

Like we keep a spare tire in the event of a flat, or a box of bandaids for those little accidents, avoiding house poorness requires establishing some safeguards in case of unforeseen circumstances. This means having a well thought out financial budget, and a good cushion of emergency funds.

When it comes to budgets, Heath says it takes a very personalized approach to get it right. The mortgage stress test does not factor in personal spending, so financial budgets for homeownership should reflect your own spending habits and expenses.

“The mortgage qualification process does not take into account things like your discretionary spending or the activities that your children are enrolled in, for example,” says Heath. “You can have two families with the same income and the same mortgage approval, but spend very different amounts of money month to month on housing related stuff.”

Photo: CafeCreditFlickr

Beyond budgets, Campbell says it’s also important to account for the long-term lifestyle you’ll want under your mortgage. Owning a home in your early thirties with no children will mean different financial priorities compared to your late forties with post-secondary education fees and retirement in mind. It’s important that your mortgage accommodates your long-term savings and planned changes to family and income. Campbell says this starts with sticking to a budget.

“You don’t need the McMansion,” she says. “A lot of people think the bigger the house, the better it is and a lot of people regret that. So make sure that it’s within the budget that you have within an emergency fund that you need to develop around that budget and you’re able to do the things that you’ve wanted to do over time that won’t be impacted by the decisions you make with that home.”

Don’t give up everything

Owning a home ain’t cheap: there’s renovations, regular maintenance, seasonal upkeep and at least one emergency repair that you’ll need to fork out for at some point. Heath says that new home buyers tend to overlook these expenses — but they are critical to account for in any homeowner budget.

“I think it’s really important to, either on your own or with a professional, to try to assess what the true homeownership cost is going to be in that home,” says Heath. “Particularly, if you’re moving from a condo into a house, or from a rental into a homeownership position.”

Failing to accommodate regular home upkeep and extra costs in the budget can skew the true cost of homeownership. It can also be a drain on your finances. House poorness is marked by a lack of disposable income, which not only leads to skipping those needed repairs, but also the inability to go out and enjoy living life.

“People will often say, ‘We’ll give up everything to buy this house,’ but everything gets really boring very fast to have given up everything,” says Campbell.

Heath recommends making a detailed budget for the medium- to long-term financial outcomes of buying a home in order to assess true ownership costs.

Breaking up is hard to do

If you’re in a position of house poorness, don’t give up — there are options.

Campbell says that boosting your income is a good first step. You can do this by getting a part-time job, or creating side hustle from your home by renting out your extra rooms on Airbnb. But, if your mortgage payments have simply become too much, Heath says that you may need to consider selling and downsizing.

“There are situations where people need to consider the home that they own and whether it is too expensive,” he says.

If selling is the last resort, Campbell advises not to do so hastily. While there could be a mounting urge to get cash — and fast — selling quickly could cost you value in your home.

“Don’t wait until you really hit the dirt, and then try to sell your house, because chances are you’re going to have to sell it very quickly, and if you need to sell it very quickly, you’ll probably going to sell at a lower rate than you wanted to get,” says Campbell.

Source: Livabl.com –   

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3 reasons high household debt in Canada won’t contribute to a US-style housing crash

Photo: BasicGov/Flickr

By one measure, conditions in Canada are reminiscent of those present in the US right before a stateside housing bubble burst, yet a repeat performance to the north is unlikely.

Oxford Economics notes that the Canadian rate of debt to disposable income reached a record 167 percent last year, meaning for each dollar of disposable income households in Canada had, they owed $1.67.

In 2008 — ahead of the housing crash and financial crisis — the ratio was at 163 percent in the US.

However, there are a number of reasons that similarity isn’t likely a sign that Canadian households are stretched to the breaking point or US-style housing crash is imminent, Oxford Economics, a firm that specializes in economic forecasting and analysis, explains.

In economies with a higher share of indebted households, a few factors stand in the way of consumers defaulting on loans en masse. “In any leveraged economy, the key factors preventing defaults and rapid deleveraging include solid income growth, low interest rates, free-flowing and high-quality credit, and solid balance sheets,” writes Tony Stillo, Oxford Economics’ director of Canada Economics, in a Research Briefing.

“In that regard, there are some positive trends in Canada’s household finances,” Stillo continues, before homing in on three positive factors in a general climate of rising interest rates.

Canadian household income growth expected to continue

It’s not difficult to see why declining or stagnating incomes would be an issue for households dealing with rising debt levels.

Fortunately for Canadian households, Oxford Economics projects personal disposable income in Canada will increase by 12 percent from 2018 to 2020. “This will help households manage payment increases with higher [interest] rates,” Stillo says.

Debt quality in Canada is not a major concern

Citing Bank of Canada numbers, Stillo suggests big banks are approving fewer mortgages for borrowers with high levels of debt. Another possible positive is mortgage stress testing introduced a year ago.

The tests have now been expanded to force uninsured-mortgage applicants to approve for their loan at a higher rate than they are signing on for. This should be better prepared to handle higher borrowing costs in the future.

Mortgage arrears are still low in Canada

The share of mortgages in arrears (that’s at least three months of missed payments) in Canada sits at 0.24 percent, notes Oxford Economics. And in Ontario and BC, home to the country’s priciest markets, the rates are much lower. According to the Canadian Bankers association, 0.09 percent of Ontario-originated mortgages were arrears, while the rate was 0.14 in BC.

 

Source: – Livabl.com –  

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Everything you need to know about your MPAC assessment and property taxes

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When people are trying to figure out whether they can afford a home, they’ll typically focus on the numbers of their down payment and mortgage. While this instinct is understandable — these factors, after all, account for the bulk of home ownership costs — paying down the actual price of your home isn’t all there is to it. Depending on what you own, homeownership costs can also span utilities, condo fees, maintenance fees, and insurance.

No matter what kind of property you have, though, you’ll have to pay property taxes.

What are property taxes, and how do they work? A property tax is a fee that property owners are charged by their local government, based on the value of their property. The tax is usually a percentage of the property’s value, and the exact percentage that a government will charge will vary depending on the municipality you live in. But how does the government determine how much your property is worth?

The answer, if you live in Ontario, is MPAC. The not-for-profit organization works with the province to assess every property in Ontario, and report their dollar value to the municipalities they belong to. Each local government will then use those numbers to set the price of your property tax.

MPAC updates its property assessments across the province once every four years, and the next update is scheduled for 2020. To help you understand how the process works and how it impacts you, we asked Greg Baxter, director of valuation and customer relations at MPAC, to break it down.

What is an MPAC assessment?

Simply put, an assessment is the process that MPAC uses to figure out how much money your property is worth. Your local government will then determine how much you owe in property taxes, based on this value.

“We are responsible for assessing and classifying all properties in Ontario,” Baxter explains. “There are more than five million properties in Ontario — and that represents about $2.78 trillion in property value.”

In Ontario, MPAC will update the value of properties across the province every four years — the last few updates were made in 2012, 2016, and the next one is scheduled for 2020.

The property values that MPAC reports during each update help determine how much property tax you’ll pay over the next four years. For example, if MPAC decided that the value of your home was $500,000 in 2012, the government calculated your property taxes based on a $500,000 value between 2013 and 2016, when MPAC made its next assessment update. The 2016 assessment was then applied between 2017 and 2020.

There are exceptions, though. MPAC continues to review properties between officially-scheduled updates to account for big changes like new structures being built, buildings being demolished, and properties changing uses. When this kind of change happens, MPAC will give you a new assessment for your next tax year.

And what happens if the value of your home changes between one scheduled assessment period and the next? Do you immediately get hit with a higher — or lower — assessment?

To protect homeowners from sudden increases in their property taxes, the Ontario government uses what it calls a “phase-in program.” Let’s say that the value of your home increased dramatically between 2012 and 2016, because you live in an expensive city (ahem, Toronto). Instead of immediately asking you to pay property taxes based on this new value, the value is gradually phased in between 2017 and 2020 until it reaches the full assessed value, so you have time to adjust.

On the other hand, if MPAC discovers that the value of your home decreased, no “phasing” is necessary: the assessed value of your home will immediately drop — along with (probably) the amount of property tax you’re paying.

It’s important to understand that changes in your property’s assessed value will not always lead to changes in how much you pay in property taxes. “If the assessed value of a home has increased by the same percentage as the average in the municipality, there may not be an increase in the property taxes paid by a property owner,” Baxter explains. “Contact your local municipality or taxing authority if you have questions about your property tax.”

How does MPAC determine the value of my property?

Essentially, it all boils down to sales data from Teranet, which runs Ontario’s land registration system.

“We look at sales — property sales transactions that occur between a willing buyer and a willing seller,” says Baxter. “By analyzing the sales and by analyzing the data that we have on those properties, we’re able to arrive at the current value assessment.”

The value that MPAC gives to your property every four years is what MPAC believes your property would have sold for on a given “valuation date.” The most recent valuation dates have been Jan. 1, 2012, Jan. 1, 2016, and Jan. 1, 2019. That means if MPAC assessed the value of your property to be $1 million on Jan. 1, 2012, the next four tax years — 2013 through 2016 — saw your property taxes calculated based on a $1 million home value.

While valuation dates have typically happened in the same year as assessment updates (see 2012 and 2016), recent legislative changes made it necessary for MPAC to set its latest valuation date a full year ahead of the upcoming assessment update in 2020 — the valuation date for the 2021 through 2024 tax period was on Jan. 1, 2019.

But how does the housing market itself come up with prices? “For residential purposes, there’s about five main factors that account for roughly 85% of the value of a property,” Baxter explains. These include:

  • The age of the property
  • The size of the home structure
  • The location of the property
  • The size of the lot
  • The quality of construction

Earlier, we mentioned that MPAC continues to review major property changes — like new structures being built or demolished — in between official assessment updates. When MPAC calculates a new value for your property after a big change, that new value will still be based on the last set valuation period.

If you’re confused, consider this example: let’s say your property was assessed at $500,000 on Jan. 1, 2012, so your property taxes would be calculated based on a $500,000 property value between 2013 and 2016. In 2014, however, right in the middle of that tax period, you demolished your home but still owned the property — which is now an empty lot. MPAC will reassess the value of your home for the 2015 tax year based on this change, by estimating what the current state of your property — an empty lot — would have sold for on Jan. 1, 2012.

How can you prepare for your assessment?

“Really, property owners are not required to do anything to prepare for an assessment,” says Baxter. “We complete a province wide assessment update every four years, based on the legislative valuation date. And then we mail to property owners a property assessment notice.”

Again, the next assessment update is schedule for 2020, and will apply to the tax years between 2021 and 2024.

To review the information that MPAC has on your home, Baxter advises homeowners to visit aboutmyproperty.ca. If any of the information is incorrect, you should contact MPAC to have it updated.

Baxter encourages all property owners to visit the site, which also allows them to compare their property to properties within their area. In general, it also helps homeowners “gain clarity on the information that we have on their file related to their property.”

Will a new MPAC assessment affect my home insurance rate?

Given that your home insurance rate is partly determined by how much it would cost to fix your home in the case of an emergency, the question is worth asking.

Turns out, it doesn’t affect your rate at all.

“The assessed property value for taxation is not material for property insurance,” confirmed Vanessa Barrasa at the Insurance Bureau of Canada.

Source: Lowestrate.ca – By: Jessica Mach on January 15, 2019

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