13 Sep

Countertop Materials for Your Kitchen

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Posted by: Peter Paley

Countertop Materials for Your Kitchen.

They say the kitchen is the heart of every home, and what better way to treat this important space than by ensuring you have all the right materials?

When it comes to your kitchen, there are a variety of options for cupboards, appliances, and countertops. What you may not realize, is how much you actually utilize your countertop space and the importance of choosing the right material for your cooking habits and style.

If you are considering a reno, or looking to purchase a new home, understanding the pros and cons of different countertops can ensure you make the best choices.

  • Granite: A popular and durable option, granite comes in various colors and patterns. Along with being strong, it is resistant to heat and abrasion. However, it is a premium-price material and requires regular sealing every three to five years due to its porous nature.
  • Marble: One of the more high-end options, similar to granite, marble provides a much-needed level of uniqueness in its patterns as well as holding up well to heat, cracking, and chipping. On the other hand, marble is more sensitive to scratches and staining and should be resealed at least once per year to improve longevity.
  • Quartz: One of the most durable and maintenance-free countertop options, quartz comes in various options from vibrant to natural finish and is nearly indestructible under standard home conditions. Not only is quartz scratch-resistant, but it can also resist stains, bacteria, and heat damage.
  • Laminate: If you’re looking for a more budget-friendly option, laminate can be a great way to go. Not only can laminate be made to resemble stone, granite, or even quartz at a fraction of the cost, but it is also easy to clean and maintain while being resistant to mold, mildew, and stains. However, bear in mind that laminate is quite sensitive to heat and can be prone to peeling or scratches.
  • Butcher Block (or wood): Butcher-block wooden countertops have a great natural look while being a hardworking surface great for food prep and highly resistant to heat. However, as wood is quite porous it is important to properly seal and oil your countertops to reduce bacteria and moisture susceptibility.
  • Stainless Steel: Opposite the natural look of butcher-block designs, stainless steel provides a much more industrial kitchen vibe. Stainless steel has become extremely appealing over the years due to the ease of wiping it down and its ability to inhibit bacteria buildup. However, not without its limits, stainless steel has a tendency to result in lots of water spots and fingerprints on its smooth surface. It is also more pricey than other options, but being impervious to heat damage has its charms.
  • Soapstone: A wonderfully stain-resistant option, soapstone is entirely non-porous in addition to being heat and bacteria-resistant. However, to maintain this natural stone it needs to be treated regularly with oil and care must be taken to avoid surface damage such as scratches and dents.
  • Ceramic Tile: Tile is an inexpensive option for your kitchen (and bathroom) counters, which is easy to install by an experienced do-it-yourselfer. Not only is tile inexpensive, but it comes in a variety of options and colors as well as being hard, durable, and resistant to heat. Keep in mind, the sizing of your tiles as smaller tiles will be more difficult to clean as opposed to larger settings. Tile is also more vulnerable to cracking, though relatively easy to replace a broken piece. It is also important to note that grout can be prone to staining.

Regardless of what type of kitchen you are designing or moving into, knowing how to care for your countertops can help increase your kitchen longevity and enjoyment!

 

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6 Sep

Converting Your Basement To An Income Suite Or Adding A Secondary Suite

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Posted by: Peter Paley

Converting Your Basement to an Income Suite.

With the current interest rates and economic scenarios, many Canadians may be looking for ways to bring in some extra cash. One option for this is to put your home equity to work and consider renovating your basement into a legal income suite! You can do this by using a secured credit line (home equity line of credit or HELOC) to help fund the upfront cash to make changes to your home.

A few things to consider before you invest in renovating to create an income suite include:

Zoning: Before looking into doing anything with an income suite, always double-check if you are zoned accordingly for a smooth renovation. If your zoning does not allow for secondary suites, see if you can rezone.

Local Regulations: Depending on your location, there may be particular regulations that you need to follow or be aware of regarding your suite. A few examples of how the regulations can differ between provinces or cities include:

  • In Winnipeg, you cannot have a  suite that is larger than 33% of the combined floor area of the principal dwelling and the secondary suite, or 800 sqft, whichever is less.  The suite cannot be less than 350sqft.   The entrance of the suite must face the street and contain two off-street parking spaces.  Secondary suites are permitted in all zoning districts that allow single family dwellings (A , RR5, RR2, R1, R2, RMF, RMU AND C1).
  • In Coquitlam, you cannot have a suite that is more than 40% of the main house floor plan. You are also required to offer a parking spot for tenants.
  • In Kelowna, you can only have one secondary suite and the home must have an “S” designation.
  • In Calgary, updated zoning legislation has now made it easier to add income suites.
  • Toronto has also proposed reforms that will make it easier to add suites.
  • In Montréal, anyone carrying out a project involving the addition of at least 1 dwelling and a residential area of ​​more than 450 m² (equivalent to approximately 5 dwellings) must agree with the City of Montréal to contribute to the supply of social, affordable and family housing. It can be a new building, an extension, or the conversion of a building.

Visit the official municipal websites or consult local building departments to obtain accurate and up-to-date information on the rules and requirements in your area BEFORE getting started.

Insurance & Legal Considerations: Before adding your secondary suite, ensure that you have proper insurance coverage or the ability to add additional coverage to protect both the primary residence and suite. In addition, you will want to consult a lawyer and draw up a tenant or rental agreement for any potential tenants. Ontario has a mandatory standard lease agreement that all landlords must use.

Unit Layout and Design: If the zoning and regulations in your area allow you to build an income suite, the next steps are to look at the suite layout and dimensions. Confirm any size restrictions or minimum ceiling height requirements as you are laying out the design for the unit. The unit should have, at minimum the following:

  • A separate parking space or two for the renter.
  • A separate entrance, kitchen, bathroom, and living/sleeping areas.
  • Ventilation and soundproofing measures to enhance livability.
  • Consideration of natural light.
  • Interlink smoke detectors for primary and secondary residences.
  • Separate, independently-controlled ventilation and heating system.
  • Proper drainage, sewage connections, and utility separations.
  • Outlets, circuits, and lighting that meet electrical code requirements.

Ensure that however your income suite is designed, you are hiring the appropriate building, plumbing, and electrical experts to ensure your suite is up to code and avoid any potential disasters.

Building & Trade Permits: Once you have confirmed that you are properly zoned and able to add an income suite and understand all the regulations for your area, you will want to draft your blueprints and submit a permit application, along with the fee, before you get started. For instance, in B.C. you are required to have a Building Permit for any suite to be considered legal.

IMPORTANT: Even if you are not required to have a building permit, it is important to get these permits for other aspects including insurance coverage should anything happen. Having a building permit will help protect your investment.

In addition to your building permits, you will need to get permits for any plumbing, electrical, and gas renovations before beginning your work.

Inspections & License: Once you have your permits and have begun construction, make sure you understand what inspections are required throughout the process and you schedule them accordingly with local authorities to ensure compliance with building codes, fire safety standards, and health regulations.

If the work meets all requirements, your suite will be approved. The last step is determining if you need a business license. This is not required if your family (parents, children, etc.) will be living in the suite. In Vancouver, for example, if you intend to rent out your suite long-term, you DO need a license. Be sure to check any rules on this in your area.

Incentives: Beyond the ability to earn extra income per month, there are a few additional government incentive programs when it comes to suites including:

  • First Nations: If you live on a First Nations reserve, you may be eligible for federal funding that will provide up to $60,000 to help you build an inexpensive secondary suite rental linked to your principal home. If you live in a northern or remote area, this amount is increased by 25%. This is a 100% forgivable loan that is not required to be paid back assuming all guidelines are followed.
  • Residential Rehabilitation Assistance Program (RRAP) – Secondary and Garden Suites: This program is open to all First Nations or individual First Nation members, particularly those who own a family home that can be converted to include a self-contained suite for a senior or adult with a disability.
  • Multigenerational Home Renovation Tax Credit: A credit for a renovation that creates a secondary unit within the dwelling to be occupied by the qualifying individual or a qualifying relation. The value of the credit is 15% of the lesser of qualifying expenditures and $50,000.
  • British Columbia: Beginning in early 2024, BC homeowners will be able to access a forgivable loan of 50% of the cost of renovations, up to a maximum of $40,000 over five years, for income suites.
  • Ontario: There are multiple secondary suite programs throughout Ontario, depending on your region. These loans provide $25,000 to $50,000 in funding and are forgivable assuming continuous ownership for 15 years.

While it is important to look online and do your research. Your best resource will be visiting local authorities at the “City of” to confirm that you completely understand the considerations before moving forward with implementing an income suite.

 

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30 Aug

Mortgage Portability

General

Posted by: Peter Paley

Mortgage Portability.

When it comes to getting a mortgage, one of the more overlooked elements is the option to be able to port the loan down the line.

Porting your mortgage is an option within your mortgage agreement, which enables you to move to another property without having to lose your existing interest rate, mortgage balance and term. Thereby allowing you to move or ‘port’ your mortgage over to the new home. Plus, the ability to port also saves you money by avoiding early discharge penalties should you move partway through your term.

Typically, portability options are offered on fixed-rate mortgages. Lenders often use a “blended” system where your current mortgage rate stays the same on the mortgage amount ported over to the new property and the new balance is calculated using the current interest rate. When it comes to variable-rate mortgages, you may not have the same option. However, when breaking a variable-rate mortgage, you would only be faced with a three-month interest penalty charge. While this can range up to $4,000, it is much lower than the average penalty to break a fixed mortgage. In addition, there are cases where you can be reimbursed the fee with your new mortgage.

If you already have the existing option to port your mortgage or are considering it for your next mortgage cycle, there are a few considerations to keep in mind:

  1. Timeframe: Some portability options require the sale and purchase to occur on the same day. Other lenders offer a week to do this, some a month, and others up to three months.
  2. Terms: Keep in mind, that some lenders don’t allow a changed term or might force you into a longer term as part of agreeing to port your mortgage.
  3. Penalty Reimbursements: Some lenders may reimburse your entire penalty, whether you are a fixed or variable borrower if you simply get a new mortgage with the same lender – replacing the one being discharged. Additionally, some lenders will even allow you to move into a brand-new term of your choice and start fresh. Keep in mind, that there can be cases where it’s better to pay a penalty at the time of selling and get into a new term at a brand-new rate that could save back your penalty over the course of the new term.

To get all the details about mortgage portability and find out if you have this option (or the potential penalties if you don’t), contact a Dominion Lending Centres mortgage expert today for expert advice and a helping hand throughout your mortgage journey!

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29 Aug

What do Your Teenagers Need to Know about Money?

General

Posted by: Peter Paley

What do Your Teenagers Need to Know about Money?.

As adults, we all know the critical importance of managing money wisely and the impact our financial situation has on our overall well-being. As parents, we do our best, but there are plenty of life lessons we need to teach our kids, and personal finance doesn’t always top the list. We may also not be the best person for the job since around 50% of adult Canadians live paycheque-to-paycheque! So how do we choose which financial lessons, habits, and tactics to teach our children, especially if our own money management skills may be lacking?

Wants vs. needs & cost vs. value

Tweens and teens need to differentiate between needs and wants and how to prioritize what they spend their money on. Value and cost are two more important concepts they need to understand. A top-of-the-line iPhone or a carbon fiber mountain bike will really impress their teenage friends, but a cheaper version may perform very similarly and provide a lot more value, especially given the limited amount of funds they have. Kids are bombarded by marketing messages, and they need to learn how to avoid hype and be objective, so they can make smart financial decisions. There is a reason plenty of rich folks (even billionaires like Warren Buffett) drive basic cars – it’s all they really need.   If your teen or tween wants the latest and greatest must-have item, challenge them to explain the value beyond being new, trendy, or fashionable. When they want to buy something, encourage them to research the product, read reviews, and compare prices to make informed decisions.

Introduce basic investing concepts

Introduce your teens to basic investing and the concept of how to make money with money. Explain how investments can grow over time and the power of compound interest. Should you buy a stock (or an ETF, GIC, mutual fund, or some other financial product) for a 14-year-old… absolutely!  There are lots of kids out there with parents who invested the time to explain shareholding and how it works at a level they can understand.

Kids are very familiar with many publicly traded companies like Disney, Roblox, Mattel and McDonalds. Holding a few shares (in an informal trust account or simply in your name) may not return enough to put them through college, but it will teach them the basics of investing, risk, and return for managing their finances in the future. It’s true that a savings mindset develops early and pays back over the course of a lifetime, but developing an investing mindset pays back HUGE over the course of a lifetime and will set your kids up for long-term financial security and wealth-building. As soon as your kids turn 18, have them open a tax-free savings account (TFSA) and invest the funds, even if they can only muster $50 or $100 monthly to contribute.

Teach the bad (and good) about credit and debt

Credit is very easy to access these days and even first-year post-secondary students are often able to get a credit card. Responsible use of this first credit card can help establish a credit score and they are very convenient — almost a necessity for some online transactions. On the other hand, easy access to credit cards (with generous spending limits and 20% interest!) and a few spontaneous/poorly thought-out spending decisions can derail a future before it even gets started.

Failing to understand the impact and obligations of a student loan can also lead to a nasty surprise when it comes time to repay that money or get a car loan or mortgage down the road. Although federally issued Canada Student Loans are now interest-free, provincial loans may still carry interest. Either way, your kids need to realize that a student loan isn’t free money and that paying it back will definitely crimp their post-graduation lifestyle.

Remember that financial education is an ongoing process. Encourage openness about money and create an environment where your children feel comfortable discussing money matters with you. Starting to instill good money habits from an early age and being a supportive resource as they develop their financial skills will help your money-savvy kids grow into financially responsible, money-savvy adults.

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28 Aug

How To Talk To Your Kids About Finances.

General

Posted by: Peter Paley

How to Talk to Your Kids about Finances.

Financial independence is a critical skill for future success that your children will not learn anywhere else. Not only does financial literacy help your children have more success in life, but it allows them to move out sooner and it avoids delaying your retirement with additional expenses to support them.

So, how do you teach your children about money?

  1. Review Your Attitude Towards Money: The first and most important thing is to examine your own attitude towards money. Are you a penny pincher? Frivolous spender? Do you buy impulsively, or take a long time to make a purchase? How much debt do you have? Your financial habits will shape your children. To ensure that you are setting them up for their best financial future, parents need to consider what messages they are sending with their own money habits.
  2. Give Your Children an Allowance: Providing an allowance to your children (especially one in exchange for chores) is an age-old way of teaching your kids about money. A good guideline is $1.00 per year for your child’s age. For a 10-year-old, this would be $10 per week.
  3. Teach Your Child to Save: If you are giving your child $10 per week in allowance for chores, encourage them to put even just $1 per week into a piggy bank. In six months, show them how much money they have saved and talk to them about why it is essential, and what they can do with that larger amount now.
  4. Encourage Kids to Think Before They Buy: While it’s hard to get a 10-year-old excited about an RRSP, there are other ways to help them plan ahead. One is to encourage them to think about their purchases before they commit. They saw a toy on TV and have to have it – teach them how advertisements are designed to make you want something. Ask them to wait a week. Do they still want it?
  5. Involve Your Children in the Family Finances: It is more valuable than you might think to let your kids see and hear you discuss financial planning; let them be part of opening and paying bills or planning vacations. Explain why and how much you pay for certain things and discuss affordable choices. This helps them be part of the conversation and will work to instill a sense of financial responsibility as they grow up.

Remember, you are the best example to your children about money. Don’t be afraid to share the ups and downs with them. Be patient with your kids, but don’t give up! The best thing you can do as a parent is to promote financial security and independence.

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13 Dec

Canada’s Residential Real Estate Ban

General

Posted by: Peter Paley

This article was published on MLT AIKINS Website on November 8, 2022.  The authors were Saravan Veylan and Dax Moir.   It was one of the best summaries of the anticipated legislation that I have read so far and had to share it.

Beginning January 1, 2023, non-Canadians will be subject to a two-year ban on the purchase of certain residential real estate in Canada – and anyone who knowingly helps a non-Canadian buy a house could find themselves in hot water.

In an effort to make housing more affordable, the federal government introduced the Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”)[1] in its 2022 budget. The act received Royal Assent as part of Bill C-19 on June 23, 2022, and is expected to come into force on January 1, 2023, prohibiting non-Canadians from directly or indirectly buying residential property in Canada for a period of two years (the “Ban”).

Broadly speaking, the Ban prohibits foreign corporations and individuals who are not permanent residents of Canada or Canadian citizens from purchasing residential real estate in Canada between January 1, 2023, and December 31, 2024. Any contractual obligations arising or assumed prior to January 1, 2023, will not be subject to the Ban.

Certain key components of the Ban have yet to be determined and will be subject to additional regulations (the “Anticipated Regulations”) expected later this year. For example, the classes of persons exempt from the Ban and whether the Ban will apply to vacant land that could be subject to residential real estate development in the future have yet to be determined, among other items.

Who Is Impacted by the Ban?

Beginning January 1, 2023, persons who meet the definition of “non-Canadian” under the Act will be subject to the Ban, including:

  • corporations incorporated outside of Canada;
  • corporations “controlled” by foreign corporations or individuals who are not permanent residents of Canada or Canadian citizens (with “control” to be defined in the Anticipated Regulations);
  • individuals who are neither a Canadian citizen nor a permanent resident of Canada; and
  • such other individuals and entities to be listed in the Anticipated Regulations.

Types of Property Affected

The Ban will apply to certain property located in Canada that meets the definition of “residential property” under the Act, including:

  • detached houses or similar buildings containing three dwelling units or less;
  • a part of any building that is a rowhouse, semi-detached house, residential condominium or other similar premises intended to be owned apart from other units in the building; and
  • such other residential properties to be listed in the Anticipated Regulations.

Available Exemptions

Notwithstanding the Definition of “non-Canadian” set out in the Act, the Ban will not apply to the following persons:

  • refugees;
  • non-Canadian individuals who purchase residential real estate with a spouse or common law-partner provided that their spouse or common law-partner is a Canadian citizen, a permanent resident of Canada, a person registered as an Indian under the Indian Act, or a refugee;
  • temporary residents who meet certain criteria to be prescribed in the Anticipated Regulations; and
  • such other classes or persons to be set out in the Anticipated Regulations.

Penalties and Enforcement

Notably, every person or entity who contravenes the Ban and every person or entity who knowingly helps someone who is subject to the Ban buy a residential property will be guilty of an offence and liable to be fined up to $10,000. Furthermore, any directors, officers, agents, mandataries, senior officials or managers of a corporation or entity that contravenes the Ban may be held personally liable if they direct, authorize, assent, acquiesce in or otherwise participate in contravening the Ban.

If a person or entity is found guilty of an offence under the Act, the Minister will have the authority to apply to the local superior court to seek an order that the residential property be sold in accordance with the Anticipated Regulations.

Because the offence provisions under the Act are not limited solely to the purchasers of residential properties, liability may arise for a plethora of persons involved in Canada’s residential real estate industry, including sellers, real estate agents, developers, assignors, assignees, lawyers and other professionals involved in any alleged contravention of the Act.

Contractual Validity

It is important to note that a contravention of the Ban will not affect the validity of the sale of a residential property. As a result, buyers and sellers of residential property subject to the Ban will still be legally required to comply with their contractual obligations despite any contravention of the Act and, accordingly, the provisions of such contracts are still likely to be enforceable pursuant to standard legal mechanisms.

Moving Forward

Looking to the future, a variety of important details of the Ban have yet to be determined. We will know more once the Anticipated Regulations are published by the Government of Canada. However, what is clear based on the language of the Act is that those involved in the residential real estate industry will need to be cautious and make reasonable efforts to identify non-Canadian buyers and sellers who cannot utilize an available exemption under the Act.

To mitigate the risks associated with violating the Ban, developers and other persons involved in the purchase and sale of residential property in Canada may wish to consider whether the addition of protective contractual provisions to a purchase and sale agreement may be appropriate. For further information on the upcoming Ban and how the Act may affect you or your business, please contact a member of our Real Estate Group.

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.

 [1] Prohibition on the Purchase of Residential Property by Non-Canadians Act, SC 2022, c 10, s 235 [the “Act”].

Thank you for the amazing summary.  If you have any mortgage question please reach out to us using the contact form.

 

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10 Dec

Financial Mistakes to Avoid in Today’s Economy.

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Posted by: Peter Paley

Financial Mistakes to Avoid in Today’s Economy.

2022 has been nothing but bad news financially for most Canadians. Our stock portfolios are worth a lot less, everything we buy costs more, and interest rates are making our mortgages and other loans a lot more expensive. More than ever it is time to tread carefully and avoid any financial mistakes, so we gathered up the top 5 missteps you definitely want to steer clear of for the rest of this year and beyond!

1. Not understanding your loan agreements.
It is shocking to see how many people fail to understand the terms and conditions before entering into potentially life-changing contracts like a mortgage or student loan. Don’t assume your student loan will have a low-interest rate and make sure to investigate the amount of your monthly payment post-graduation, and how many years you will be paying.

Mortgages can be complicated, but that’s no excuse and a good mortgage broker will take the time to answer all of your questions. Trigger rates in mortgage agreements have recently been in the news with rising interest rates and are a good example of people not fully understanding what they signed.

2. Not having any system to track your expenses.
“I don’t know where my money goes” is a common refrain as prices continue to rise. However, given the number of mobile applications, web programs, and other online tools available to simplify this task (or just use a pencil!), there isn’t any excuse. Regardless of how much income you have coming in, monitoring and controlling expenses is a critical step as plenty of high-earning-now-bankrupt athletes and actors have proven!

3. Investing before paying off debt.
The question of whether it’s better to invest any “extra” cash or pay down debt needs a re-think given recent economic changes. In 2021, mortgages and lines of credit could be had for around 2% and most stock indexes reported double-digit gains. Paying down those debts with money you could have invested in the markets was not the best option.

A year later, borrowing rates have doubled in many cases (mortgages for example) and financial markets are wobbly at best, with many deep into the red year to date. These aren’t the only factors to consider, and you need to do the math for your situation, but the case for paying down debt is getting stronger by the day.

In case you are wondering, credit card debt is another deal altogether! In almost every case you would be much better off by throwing all you have at the unpaid balance before investing any of that money.

4. Not saving and investing.
As higher prices and interest rates suck up more of our disposable cash, something has to give, and putting a little bit of money away each month may be on the chopping block. If you need the money for essentials like food or rent, then you have no choice but to be honest with yourself about what is essential! Once you break the saving habit it’s hard to get it back and saving is not really a discretionary expense unless you have an alternative plan to fund your retirement.  Catching up on savings might be possible when things get better, but that could be years and the earlier you start, the more your savings will grow.

5. Spending too much on a car.
You should be aiming for 15% of your take-home pay for total car costs including the loan payment, insurance, and gas. This leaves you between $30K and $35K for a vehicle if you make $100k annually. That’s not a lot given that new and used cars have been in short supply in 2022 and prices are rising. Although repairs aren’t cheap and you won’t get that new car smell, hanging on to your current ride may be the best option financially.

At the end of the day, financial knowledge is the best defense for avoiding mistakes and we hope you continue to learn with us.

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27 Sep

Second Mortgages: What You Need To Know

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Posted by: Peter Paley

One of the biggest benefits of purchasing your own home is the ability to build equity in your property. This equity can come in handy down the line for refinancing, renovations, or taking out additional loans – such as a second mortgage.

What is a second mortgage?

First things first, a second mortgage refers to an additional or secondary loan taken out on a property for which you already have a mortgage. This is not the same as purchasing a second home or property and taking out a separate mortgage for that. A second mortgage is a very different product from a traditional mortgage as you are using your existing home equity to qualify for the loan and put up in case of default. Similar to a traditional mortgage, a second mortgage will also come with its own interest rate, monthly payments, set terms, closing costs, and more.

Second mortgages versus refinancing

As both refinancing your existing mortgage and taking out a second mortgage can take advantage of existing home equity, it is a good idea to look at the differences between them. Firstly, a refinance is typically only done when you’re at the end of your current mortgage term so as to avoid any penalties with refinancing the mortgage.

The purpose of refinancing is often to take advantage of a lower interest rate, change your mortgage terms, or, in some cases, borrow against your home equity.

When you get a second mortgage, you are able to borrow a lump sum against the equity in your current home and can use that money for whatever purpose you see fit. You can even choose to borrow in installments through a credit line and refinance your second mortgage in the future.

What are the advantages of a second mortgage?

There are several advantages when it comes to taking out a second mortgage, including:

  • The ability to access a large loan sum (in some cases, up to 90% of your home equity) which is more than you can typically borrow on other traditional loans.
  • Better interest rates than credit cards as they are a ‘secured’ form of debt.
  • You can use the money however you see fit without any caveats.

What are the disadvantages of a second mortgage?

As always, when it comes to taking out an additional loan, there are a few things to consider:

  • Interest rates tend to be higher on a second mortgage than refinancing your mortgage.
  • Additional financial pressure from carrying a second loan and another set of monthly bills.

Before looking into any additional loans, such as a secondary mortgage (or even refinancing), be sure to speak to us at DLC – Mainstream Mortgages.  Regardless of why you are considering a second mortgage, it is a good idea to get a review of your current financial situation and determine if this is the best solution before proceeding.

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4 Aug

TFSA vs RRSP – No Losers in This Battle!

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Posted by: Peter Paley

TFSA vs RRSP – No Losers in This Battle!.

The worst financial mistake you can make is believing that a Registered Retirement Savings Plan (RRSP) or Tax-Free Savings Account (TFSA) is something to look into when you are a little older and more able to set some money aside. The fact is, you don’t use these accounts for saving at all, you use them for investing. Your retirement fund could grow to seven figures, even if you only contribute a fraction of the allowable yearly maximums. They also come with huge tax-saving benefits.

A lot of people get discouraged by the sheer amount that you are allowed to contribute to these registered accounts and the mere pittance they may be able to come up with — don’t fall into that mindset!

If you make 60,000/year from your job, you could contribute over $10,000 to your RRSP and another $6000 to your TFSA every year. Considering you are only going to have about $45K in your jeans after taxes, finding a spare $16K would require more than 30% of your take-home pay!

The good news is that your yearly contribution limits can be carried over and as you grow older (and theoretically have more disposable income) you can catch up. The bad news is that playing catch up isn’t going to happen unless you are very disciplined with your spending. Sure, you may earn more, but you will spend more… kids, cars, vacations, and even the cat is going to cost you $800/year!

That extra disposable income you were envisioning may not materialize until you are in your mid 50’s, if ever! You need to scrape together whatever investment savings you can now, even saving just 5% ($200/month) of a $60K salary would make a huge impact.

Putting off getting started is going to cost you way more than you ever imagined in lost investment returns. Ignore the pitiful interest rates you see on bank savings accounts, holding cash will actually cost you money at current interest and inflation rates. However, the average annual return on many stock indexes (S&P, TSX, DSJ) over the past 40 years is around 7%. If you do a little math, you are soon going to realize that even on a relatively small investment of $200 per month, the difference between starting when you are 18 versus starting at age 28 is jaw-dropping.

Investing $200/month from age 18 to 65 at 7% would give you $790,139. The same $200 at the same rate from age 28 to 65 would yield just $384,810. Sure, you would be contributing $24,000 more over that extra 10 years, but your nest egg at 65 would be double — more than enough to keep you poolside at a nice resort every winter while those late starters are stuck in the snow!

There are plenty of rules, regulations, and strategies to consider and every angle of the TFSA vs RRSP debate has been extensively written about. While you do need to understand the basics of how they work, the simple goal for the vast majority of us should be to put something, anything, into one (or both) of these accounts on a regular basis and start investing — you can’t go wrong!

 

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26 Jul

Tips to Create a Monthly Budget

General

Posted by: Peter Paley

One of the quickest ways to take back control of your finances and understand where your money is going is to create a monthly budget. This will help you get a snapshot of your income compared to your spending, and provides an avenue to review outgoing costs and determine areas for improvement to help you increase your monthly cashflow or just feel less stressed!

Step 1: Calculate Your Income

The very first step to creating any budget is determining your income – knowing exactly how much money do you bring in, per month, is important to understanding what you have available to spend. Remember to focus on NET INCOME versus gross salary as thinking you take home more than you do can lead to overspending and failed budgets.

Step 2: Track Your Spending

Once you have determined your income, you will want to take a look at your spending. Reviewing and categorizing all your monthly bills can help you breakdown exactly where your money goes and your priorities to see where changes can be made.

To start, first list out your fixed expenses – these are things like car payments, loans, rent or mortgage costs that do not change on a monthly basis.

Next, you will want to take a look at your variable expenses – things like groceries, gas, entertainment, etc. and determine your average spend. This is typically the area where people are able to cut back.

Step 3: Set Realistic Goals

Realistic goals are vital for long-lasting financial health. It is important to determine what you cannot live without and where you can cut costs or scale back on spending.

Ideally, when it comes to your monthly budget, you want to consider the 50/30/20 rule, which applies the following:

  • 50% of your spending is for NEEDS such as rent or mortgage payments, car payments, utilities and groceries
  • 30% of your income goes to WANTS such as shopping, vacations, streaming services, etc.
  • 20% of your income goes to SAVINGS OR DEBT such as emergency funds, retirement, child’s education and/or credit card payments

Step 4: Make a Plan

Once you have your goals set, you can now make a plan to tackle your financial position and ensure a healthy cashflow each month.

There are a few different ways you can plan to handle your monthly budget. For some, setting realistic spending limits for each category works well. For others, taking a look at the importance of the items on their expenses list and re-prioritizing can free up funds.

Step 5: Adjust Your Spending

Now that you have determined how much money you bring in per month and what you spend it on, you can take a look at adjusting your spending to ensure you remain on budget. Taking a look at any wants is a great place to cut out frivolous spending beyond a reasonable amount.

This is also a great time to review your fixed expenses. Perhaps you can save money by getting a better interest rate on your mortgage or changing your payment schedule for your loan.

Be sure to connect with a Dominion Lending Centres mortgage expert before making any changes!

Step 6: Stay on Track

Lastly, once you’ve tracked all your spending and income and determined your monthly budget, you will want to stay on track. Tracking your budget on a monthly basis is important to catch any changes in your spending habits. As well, it is a good idea to conduct an annual review and take into account any increase in expenses or wages that may require shifts in your overall plan.

Remember! A healthy, well thought-out budget is key to financial freedom and comfort.

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