Tag Archives: young families

The fast track to your first home

Thinking about buying your first home? Saving for a down payment sooner rather than later is easier than you think. Here are nine strategies to boost your financial fitness and fast-track your way to homeownership.

  1. GAUGE YOUR FINANCIAL FITNESS

You need an honest assessment to know which areas of your financial house are on track and which areas need improvement. Get your Financial Fitness Score by taking the Genworth Canada/Canadian Association of Credit Counselling Services Financial Fitness survey at caccs.ca.

  1. CHECK YOUR CREDIT

Order a copy of your credit report from TransUnion or Equifax so you can check your credit score and history, as well as ensure there are no errors. Contact the credit report-ing agency if you identify any mistakes.

  1. BUMP UP YOUR CREDIT SCORE

The higher your credit score, the better the lending terms you’ll receive, whether for a mortgage, car or consumer credit loan. The most effective ways of improving your credit score are paying your bills on time, dramatically paying down – or, better yet, clearing – your credit card balance each month and repaying any loans.

  1. CREATE A MONTHLY BUDGET – AND TRIM THE FAT

Find a template online or download a household budgeting app to your smartphone. How much do you spend each month on rent, utilities, transportation, groceries, child-care, insurance, gym memberships and clothing? You need accurate info about your income and expenditure to evaluate how much house you can afford. At the end of the month, you’ll be able to spot patterns and identify the most effective places to save money, whether your spending vice is a two-lattes-per-day habit or too many taxi rides each month.

 

  1. DETERMINE HOW MUCH HOUSE YOU CAN AFFORD

Use your budget to evaluate how much of a mortgage you can afford. A bank may approve you for monthly mortgage payments of up to 32 per cent of your gross monthly household income, but can you afford it? Work out what your future expenses will look like each month (mortgage + insurance + utilities + taxes + other expenses). Do you make enough to cover this – with enough left over to save? If not, maintain breathing room by opting for a more affordable first home.

  1. START “PAYING” YOUR MORTGAGE

If your future mortgage payments will cost approximately $1,800 per month and you currently pay $1,300 in rent, now’s the time to start setting aside an extra $500 per month, so you can get into the habit of budgeting $1,800 per month for shelter. That will grow your savings faster.

  1. BULK UP YOUR INCOME

Another way to hold on to your money is to make more of it! Consider a second job, extra hours or selling those collectibles on eBay. (Bonus: Fewer boxes on moving day!)

  1. PAY YOURSELF FIRST

Get serious about paying yourself first by setting up bi-weekly automatic transfers from your chequing account to your savings account. Beyond the down payment and closing costs associated with a new home, homeownership might come with surprise expenses like a leaky roof and a broken washing machine. A healthy savings account will make you less stressed about those possibilities.

  1. CONSIDER PROFESSIONAL ADVICE

Once you’re on track, see a financial advisor to work out short- and long-term strategies for your ongoing financial goals, from homeownership to retirement savings. You’ll get more from the meeting if you have already determined your goals and actions.

Source: HomeOwnership.ca

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Do You Know Your Clients?

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Mortgage Professionals – get to know your clients! Millennials are just one of the surveyed groups from our Mortgage Consumer Survey. 

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Kid-friendly condo features

Condo living: it’s not just for young single people anymore. In big cities like Toronto and Vancouver, many millennial parents are choosing to set down roots in vertical communities, raising their kids in the dynamic environment they love. As a result, developers are starting to pay attention to the priorities of this up-and-coming homebuying demographic. Is city living suited to your family’s lifestyle? Here are six features to look for when hunting for a family-friendly condo.

FAMILY-FRIENDLY FEATURE NO. 1: More bedrooms

As recently as 2011, many condo-dwelling families had to rely on design hacks to carve out “bedroom” space in a smaller unit. That’s because during the 2001-11 period, less than one per cent of condos on the Toronto market had three bedrooms; today, for example, one major developer dedicates, on average, about 10 per cent of its new buildings to three-bedroom units, and roughly 40 per cent to two-bedroom units. Similar changes have been afoot in Canada’s other major condo markets. The City of Vancouver mandated in 2016 that all rezoning projects hit a target of 35 per cent “family units,” defined as units with two or more bedrooms. In Montreal, developers are also reaching out to the urban family demographic, with one Habitat Design Award-nominated project incorporating not just three-bedroom but even four-bedroom units. Family-sized condos are now easier to find, which means it is less likely you’ll have to use bookcases and curtains to fake out an extra bedroom.

FAMILY-FRIENDLY FEATURE NO. 2: Better storage

A tiny hall closet just won’t do when you’ve got strollers, trikes and other gear to stash. If you’ve got a growing family, maximum closet capacity is key. One way developers max out storage space is to design smaller bedrooms; that’s a small sacrifice to make if it makes getting in and out of your unit easier each day.

FAMILY-FRIENDLY FEATURE NO. 3: Indoor play zones

Just as the party room is a grown-up condo mainstay, indoor kids’ rooms are becoming hot tickets in family-oriented condo developments. With activity-friendly flooring, furniture and play stations, these indoor play centres are the perfect spot to hang out during a rainy morning or to meet up when you think your home is too messy for a play date!

FAMILY-FRIENDLY FEATURE NO. 4: Outdoor play areas

Many planned communities include parks and playgrounds in their adjacent outdoor space. Other kid-pleasing features include gardens, fountains, splash pads and pathways where kids can bike, in-line skate and play safe from car traffic. Who says you can’t have your own backyard if you live in a highrise?

FAMILY-FRIENDLY FEATURE NO. 5: Parking

If moving your brood around includes four wheels, you’ll be looking for a parking spot. Parking is a hot commodity, and many big-city condo buildings have significantly fewer parking spots than they do units. Keep in mind that a parking spot isn’t just a one-time purchase; it’s subject to additional monthly maintenance fees. If you’re an occasional driver, check the building’s proximity to a car share location. Avid cyclist? Look for a building with a secure bike room to avoid condo clutter and cut the risk of bike theft outdoors.

FAMILY-FRIENDLY FEATURE NO. 6: Location, location, location

One of the perks of urban living is proximity to work and big-city attractions. There’s something appealing about walking to the museum on a Saturday morning, or picking your kids up at daycare after work and leisurely strolling to a nice restaurant for dinner. Consider walkability and access to public transit when condo shopping. Trimming your commute and streamlining your day makes family life less stressful and way more fun.

Source: HomeOwnership.ca

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Rent control is doing little to curb Toronto’s soaring rents

Haider-Moranis Bulletin: In the long run, rent controls reduce the growth in available rental stock, which further accelerates the increase in rents

In April 2017, Ontario’s then-Liberal government introduced the Rental Fairness Act, which expanded rent control to all private rental units.Cole Burston/Bloomberg

Do stricter rent control laws slow the increase in residential rents? Housing advocates and left-leaning governments believe they do. However, recent data from Ontario appears to offer further proof that this is not the case.

In April 2017, Ontario’s then-Liberal government introduced the Rental Fairness Act, which expanded rent control to all private rental units. The Act restricted rent increases to 1.5 per cent in 2017 and introduced additional provisions to protect tenants from being evicted.

The Act was enacted to protect against “dramatic rent increases.” Chris Ballard, then the Minister of Housing and Poverty Reduction, claimed that the Act would ensure that Ontarians “have an affordable place to call home.”

 

The Toronto Real Estate Board’s (TREB) Rental Market Report for the second quarter of 2018 revealed that the Rental Fairness Act has had no observable impact on market-based rents, which grew at similar rates from 2017 to 2018 as they did from 2016 to 2017. In fact, three-bedroom apartments experienced a significant increase in average rents in 2018.

TREB’s data is based on its rental listing service for the Greater Toronto and surrounding areas. From April to June 2018, almost 12,000 apartments were listed while 8,497 were leased. One and two-bedroom apartments constituted the largest segments of rental units. Also, almost a thousand townhouses were listed and 665 leased for the same period.

TREB data provides more of a market-based view of the rental market than what has been reported by the CMHC. Unlike TREB, which lists market-based units (condominiums and townhouses) that are primarily owned by private investors, CMHC’s reporting of rental markets is largely for, but not restricted to, purpose-built apartment rentals.

Despite the differences in rental stock between CMHC and TREB, even CMHC’s data reveals that instead of a break, rental rates accelerated in 2017. For instance, rents for two-bedroom units increased by 3.3 and 3.2 per cent in 2015 and 2016 respectively but jumped 4.2 per cent in 2017. If proponents of stringent rent controls were hoping for a decline in rent acceleration, it didn’t happen.

The purpose-built rental universe has remained steady across most of Canada. In the Greater Toronto Area (GTA), the number of purpose-built rentals has remained around 330,000 units for more than a decade. During the same time, the number of rental condominiums in the GTA increased from under 50,000 to more than 100,000 units.

CMHC data for October 2017 reported average rents for two-bedroom units at $1,392 and $2,263 in purpose-built rental buildings and condominium apartments respectively. In comparison, TREB reported the average rent for two-bedroom condominium apartments in the fourth quarter of 2017 to be $2,627. Even for the condominium apartments, TREB reports higher rents attributed most likely to the higher quality of the underlying stock.

CMHC reported rents for purpose-built rental buildings are significantly lower because of their less than ideal location and dilapidated condition, a result of age and deferred maintenance. These buildings have remained under rent control for decades, and their owners are disincentivized to improve the quality of the rental stock. TREB data, by contrast, is based on privately owned rental condominiums whose owners, until recently, were incentivized to maintain their units in a state of good repair.

Since April 2017, condominium rentals and other dwelling types have also come under the rent control regime, thus creating the same disincentives for structural improvements of units as the ones observed for the purpose-built rentals.

The CMHC data reveals that, as expected, average rents in older buildings were lower than rents in newer buildings. Furthermore, rents on average are higher in the high-density urban core than the low-density suburbs, making suburbs significantly more affordable to rent than in or near the downtowns.

With high turnover rates where new tenants are not subjected to rent restrictions, rent controls are ineffective tools for addressing rapid rent increases. The average rent for units in purpose-built rentals and condominium apartments has risen far above the stipulated rate since the Rental Fairness Act was enacted. In the long run, rent controls reduce the growth in available rental stock, which further accelerates the increase in rents.

Rent stability is achievable primarily by increasing the supply of the rental stock. This requires changes in regulations to facilitate, instead of hindering, new residential development.

Murtaza Haider and Stephen Moranis September 5, 2018

Murtaza Haider is an associate professor at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at www.hmbulletin.com.

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Tips for homebuying with family members

Pooling resources with parents or siblings opens possibilities when it comes to buying a home everyone can afford. Homebuying requires careful planning though, since there’s so much at stake—and money is the least of it; we’re talking love and loyalty here.

If you want to buy a home with family members (and still be on speaking terms during family functions) this is what you need to consider.

Answer this: Why are you moving in together?

Perhaps mom and dad need to downsize and want to be closer to their children. Maybe one of those children needs after-school care for the kids, or someone has gone through a divorce and needs family support…

Besides saving money, families considering buying a home together often have non-financial issues that make it a good choice. Agree on how you’ll all help each other—cooking communal meals; driving parents to medical appointments or kids to school; etc.

Now you need to separate those personal arrangements from the legal aspects of buying a home together. This isn’t Thanksgiving dinner, it’s business.

Hire a lawyer.

All homebuyers should use a lawyer, and that’s especially true for families buying together. Be prepared to spend more on legal services too. Why? There’s more to cover.

The following commitments and promises should be considered when preparing  binding legal documents.

Disclose your financial standing.

All potential co-owners should share their credit report (it’s free here) with the group. You may want wine for this meeting.

If you’re applying for a mortgage together (the Family Plan Program is designed to help with this) you need to know where each person stands to determine how that could impact all family members.

Be prepared to tell your clan how much you have for a downpayment and how much you can pay monthly. Add up everyone’s contribution and use our calculator here to figure out how much family home you can afford.

Imagine the future.

A home should be a long-term commitment, but life happens: job loss or out-of-town promotion, a baby, illness—those are just a few things that impact your life. Discuss what impact they could have on your housing arrangement.

For example, under what circumstances could the property be sold? For instance: What happens if not all co-owners want to sell at the same time?

Consider setting a minimum amount of time that everyone will commit. (Your mortgage term is a good place to start.) Then plan for what could happen after that.

For example, you may want to do some research around what financial options are available to you when one owner wishes to leave – such as buying out that owner’s share. Or, the empty unit could be rented to generate income that would pay back, over time, the owner who wanted to sell.

The solutions will be as unique as your family. Talk it all through first.

Consider upkeep and upgrades.

Decide how to cover emergency expenses, like a roof or HVAC repair, and less urgent improvements, such as exterior painting.

An easy approach is to open a high interest-rate savings account and have everyone contribute to it monthly.

Here’s where things get tricky: Let’s say you want to upgrade bathroom and kitchen fixtures. That will make your personal space extra nice, but it could also improve the building’s energy efficiency and resale value. Will all family members contribute financially to your upgrades?

These may seem like details for later, but small grievances can snowball into big resentments. Tackle them before signing day. And remember, for any transaction of this nature, it is crucial to consult with a mortgage professional before proceeding.

Source: HomeOwnership.ca

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BREAKING THE CYCLE OF BAD MONEY HABITS IN BLACK FAMILIES

African American girl puts money in piggy bank

One thing that traditionally hasn’t been a strong suit in the Black family – and simultaneously, a detriment – is passing down healthy money habits to ensure financial stability for future generations.

In the technology age, however, that is beginning to change as more Black parents are building a foundation for their children to learn financial responsibility at an early age, hoping it’ll drive their decision making in adulthood.

“There is nothing righteous about struggling for your financial security,” Sabrina Lamb, a financial literacy educator, explained in the Pittsburg Post-Gazette. “It is actually a perfect storm of low self-esteem, lack of knowledge and generational conditioning.”

In order to break bad generational habits of spending money, parents must first take an introspective look to see how they’ve been holding up financially – only then can a parent truly impart wisdom on their child about good spending habits.

Here are some tips to start the conversation with your young ones.

Save, save, save!

It’s never too early to show your child the importance of saving money. On birthdays and holidays, for example, teach your child to put at least 30 percent of the cash they received into a piggy bank  – or, an actual bank savings account.  This will become routine so every time your little one gets some extra cash as a gift, they’ll immediately think to save it.

Teach the value of money.

So many children actually think money just appears into their parents’ pockets. Be direct in teaching your child that that’s not the case. Think about ways to make your child work for the money they’re seeking to purchase toys, video games or anything else they like – perhaps, a weekly payout for chores. This way your children will feel some type of way when spending the money that they actually worked their butts off for.

Discuss bills and budgets openly.

Now, it’s typical in many traditionally Black households that adults frequently tell children to stay out of “grown folks business.” Because of this, Black parents tend to never discuss any financial hurdles they may be facing – such as problems making mortgage payments – or even the growing costs of bills. It’s important to show your children how bills work. Like, for example, how leaving the lights on in every room translates into how much money the family owes on the monthly electricity bill.

Practice what you preach. 

Children mimic everything they see their parents do. So, if you recklessly use your credit cards to buy clothes, jewelry and other non-necessities at the mall, your children will adopt that behavior without understanding the consequences of it. Be the financially responsible person that you want your children to be.

 

Source: BlackDoctor.org – 

African American girl puts money in piggy bank

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Top dollar: How high can you go?

Affordability is a major concern for today’s aspiring first-time homebuyers. In hot real estate markets like the Greater Toronto and Greater Vancouver regions, however, the desire for affordability can be challenged by the competitive fervour caused by escalating prices and bidding wars. As anyone who has researched homeownership in these markets knows, it’s easy to feel the pressure to bid higher than you’d like.

Resist the urge. It’s important to go house hunting with a firm price range in mind. If something is outside of your budget, it’s not affordable – period. A successful home purchase isn’t about beating out 20 other offers; it’s about sealing the deal on a home you can afford, with money left over each month after your mortgage is paid, to cover your other expenses, savings and a little bit of fun, too.

It’s a tall order, but there is a formula to help you find that sweet spot.

FIND YOUR RIGHT PRICE

Lenders and mortgage insurers look at two debt service ratios when qualifying you for a mortgage (and mortgage insurance, which you will need if you make a down payment of less than 20 per cent the cost of the home).

  • Gross debt service (GDS)
    The carrying costs of your home, such as mortgage payments, taxes, heating, etc., relative to your income.
  • Total debt service (TDS)
    Home carrying costs (mortgage payments, taxes, heating, etc.) plus your debt payments (credit cards, student loans, car loans, etc.), again relative to your income.

The highest allowable GDS ratio is 39 per cent, and the highest allowable TDS ratio is 44 per cent.

Want a shortcut to determining affordability? Use Genworth.ca’s “What Can I Afford?” online mortgage calculator. Input your income, current monthly debt payments and other details for an instant result that shows how much mortgage you can comfortably afford. (Note: For the interest rate, be sure to input the Bank of Canada’s conventional five-year mortgage rate, as that is what lenders use when determining GDS and TDS.)

DOWN PAYMENT STRATEGIES

Once you know how much mortgage you can manage, limit your house hunt to homes that keep you in that price range. That way, you won’t panic or find yourself in financial trouble if interest rates go up in the future.

 

You can buy “more house” for the same total mortgage if you have a larger down payment. Saving aggressively is one way to do that. Pair that with other strategies, such as the following:

  • Borrowing money from your RRSP under the government’s Home Buyers’ Plan.
  • Asking family for help via gifts or loans. (Don’t be embarrassed: 23 per cent of respondents in the 2017 Genworth Canada First-Time Homeownership Study say they’d do it!)
  • Taking on a side gig or second job.
  • Gulp! Moving back home with your parents so you can save on rent.

LOCATION, LOCATION, LOCATION

The other way to end up with a smaller mortgage is to buy a less pricey house. Fixer-uppers help, but the most dramatic payoff may come from expanding your search to a wider radius.

Consider buying in a nearby city or suburb that you can commute to work from. Or blaze new ground by moving farther afield in search of a new home and new adventures – with the spare cash to enjoy them both!

Source: HomeOwnership.ca 

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