12 Sep

The True Cost of Downsizing

General

Posted by: Kimberly and Cindy Walker

In the midst of the booming real estate market in Canada (mainly in Vancouver and Toronto), many Canadians are entertaining the idea of downsizing in order to sell their homes at a high value and purchase a smaller home or condo at a lower price.

Is downsizing the way to go? What are the costs associated with downsizing? The truth is, there are many costs to downsizing, and not all of them are obvious.

Why Downsize?

Canadians have many reasons to downsize. They include:
• Less house to upkeep
• Move closer to loved ones
• Spending the winter in a warmer place, therefore they don’t live in their home year round
• Getting equity out of their home to help fund retirement

Costs to sell your home

But let’s break down the more obvious costs of downsizing so that you can weigh the financial pros and cons. Keep in mind that the example below is for illustration purposes only. There may be other expenses not mentioned, but the key expenses are highlighted.

Let’s use the example of a home that will sell for $1,000,000 which is the approximate average cost of a detached home in Toronto. The home still carries a $200,000 mortgage, which would equate to a net amount of $800,000. However, there are costs that you must deduct from the total sale that can eat into your lump sum.
• Realtor commission (between 1%-7% depending on where you live in the country and what you are able to negotiate). In Toronto, the standard realtor rate is 5%. In this example of a $1,000,000 home, you would need to pay the realtor $50,000.
• Closing costs and legal fees – Approximately $1,500
• Miscellaneous costs – $1000
• This leaves you with approximately $747,500
• And an approximate cost of selling your home at $52,500

In addition to these reasons, these are some other costs that are associated with downsizing:

• The cost to fix up your home for the sale – Fresh coat of paint, minor repairs, kitchen/bathroom renovations, roof repairs and maybe even the cost to stage the home.
• The cost to part with old furniture – When you downsize, you typically have to get rid of furniture, books and other items that take up space. You may even decide to keep the items in a storage unit, which can cost money monthly (a typical 50 square foot unit can range from $125-$200/month plus HST, a mandatory monthly insurance premium and a set-up fee or refundable deposit)

Costs to buy your downsized home

There are also costs associated with buying your new downsized home. If you intend to purchase a smaller home (semi-detached, townhouse or condo), most of the money you earn from the sale of your home will go towards the purchase of your new downsized home. Here is an example of the expenses you may incur when you purchase your downsized home:

Let’s use the example of a condo with a cost of $500,000 which is the average cost of a condo in Toronto.
• Land transfer tax in Ontario for a $500,000 property is $6,475. Find out the land transfer tax in your province by visiting your local government website on land transfer taxes. For Ontario, visit the Government of Ontario land transfer tax page.
• There may be a Municipal Land Transfer Tax (MLTT) in addition to the provincial land transfer tax. For instance, in Toronto, the MLTT for a $500,000 condo would be $5,725. Visit your local municipality website to find out the calculation for your MLTT.
• Title insurance and legal fees – Approximately $1,500
• Moving costs – Approximately $2,000
• There may be a property tax adjustment – This would depend on when the seller paid the property taxes and when the buyer takes possession of the condo. In most cases, the buyer will have to pay the seller the difference depending on when they took possession of the property. If the seller is behind on payments, then the municipality requires that the seller pays off the taxes from the proceeds of the sale.
• Purchase of new furniture to fit smaller condo – Approximately $10,000 – $15,000
• Monthly maintenance fee for condo living – Approximately $500/month or $6,000/year
• This leaves you with approximately $221,800 from the sale of your $1,000,000 home before you deduct the cost of condo maintenance fees at $6,000/year.
• And the additional cost to purchase your downsized home at $25,700
• The total cost of downsizing from a $1 million home to a $500,000 condo would cost approximately $84,200 in your first year alone.

Although you sold your $1,000,000 home and downsized to a $500,000 condo, with all of the added expenses, you would only take home just over $215,800 after your first-year maintenance fees. This is the reality of downsizing. It isn’t as clear cut as the selling value of your home minus the buying cost of your downsized home. Although there is a return, the process of buying and selling has the added costs that can make or break your decision to move.

If you are downsizing because you need extra cash to help you with your retirement, an alternative is the CHIP Reverse Mortgage. With a reverse mortgage, you can stay in your home and still have the extra cash to help you with your retirement. To find out how much money you can get with a reverse mortgage, talk to your Dominion Lending Centre mortgage specialist today or if you decide to downsize, talk to your mortgage broker or a lawyer to find out your true cost of downsizing before making the final decision.

11 Sep

Apartments, townhomes lead demand for Fraser Valley

General

Posted by: Kimberly and Cindy Walker

Home sales increased in the Fraser Valley last month compared to July but remained lower than a year ago.

Townhomes and apartments took the lion’s share of home sales (54%) with 1,018 of the 1,879 total sales in August. Total sales were up 10.9% month-over-month but down 3% year-over-year.

“It’s not surprising to see demand like this still so late into the summer; the Fraser Valley has never been a better place to live than it is now,” said Board President Gopal Sahota. “Our communities are thriving, and there are still affordable options throughout our region. Also, it doesn’t hurt that removing the bridge tolls gives us even greater access to the Lower Mainland.”

Inventory was down 4.3% month-over-month and 6.4% year-over-year to 5,712 while new listings tumbled 20.2% from July and 7.3% from August 2016.

The benchmark price for single-family detached homes was down 1% from July and 10.2% from August 2016 to $976,000. Townhome prices gained 1.2% month-over-month and 16.6% year-over-year to a benchmark of $491,900. Apartments reached $349,300, up 2.4% from July and 32.8% from August 2016.

11 Sep

Mortgage basics to keep you in the Know – Property Taxes

General

Posted by: Kimberly and Cindy Walker

Sometimes it is a good idea to revisit the basics when looking at a complex thing like a mortgage.  There can be misunderstandings which crop up.   The mortgage process can be very stressful as you wait for some anonymous entity to decide whether or not you are able to buy the home of your dreams.  It is no wonder that things can get missed.  Fear not!  We will take a look at some of the basics so you can avoid things best avoided.

Property Taxes – There are 3 ways to pay the property taxes.

  1. Have your mortgage company collect them with your mortgage payment. This can be a nice way to keep the withdrawals from your account to a minimum.  The taxes are collected at the same time as your mortgage payment and remitted to the municipality on your behalf.  Your property tax bill will still be sent to you but it will clearly show that the taxes have been paid by the mortgage company.  Things to make note of: some banks charge a fee for this service which could be avoided if you chose a different option.
  2. TIPPS or the Tax Installment Program Payment System – Most municipalities allow you to sign up for free for the program. Generally an amount of 1/12 of the tax amount is withdrawn from your bank account on the last business day of the month.  Your property tax bill will come to you showing that you have opted in to the TIPPS program.  Depending what time of year you took possession of the home the amount can reflect a balance owing or a tax credit but you can rest assured that you are OK and will not have to come up with a large amount at the end of the year.
  3. Lump Sum – You can make a once a year payment to the municipality. This is not ideal for everyone as it requires you to come up with a large amount of funds. Your tax bill will show clearly that the funds are outstanding.

What else should you know about property taxes?

  1. Tax Adjustment – Depending on the time of year that you are purchasing your home, you may have to reimburse the seller if they have pre-paid the taxes for the year. This is why you are required to have an extra 1.5% of the purchase price available for closing costs.   Your lawyer will be the one to determine this and if you opt for the TIPPS program you can avoid the extra lump sum all together.
  2. You have to pay your taxes. We all know that but you should know what happens if you do not.  First of all you will begin to incur penalties and extra fees.  Then they can put a tax lien on the title and finally they can seize the property and sell it.   Mortgage lenders have the legal right to ask for verification that your property taxes are being paid.  Should they discover you have not done so, they will charge you a fee and take over the payment of the property taxes.  At that time they will collect a monthly amount from you to cover the past due and the amount owing going forward.  Taxes trump mortgages and the bank could lose out if the property was siezed.   It can be very hard to get a mortgage if you have a tax lien.  Lenders tend to shy away from this scenario.
  3. It is not always up to you. Given the issues raised in the previous point, many banks will not allow to you to choose the yearly option.  They require verification that you are on the TIPPS program or have the taxes included in the mortgage

I strongly recommend that after your mortgage funds you contact the mortgage company and confirm that you are set up the way you wanted.  I have witnessed a few cases where things went sideways and all of a sudden people had to pay double property taxes for a year until they were caught up.

8 Sep

It’s never a bad time to plan

General

Posted by: Kimberly and Cindy Walker

Do successful entrepreneurs just open their doors for business without a business plan? Does a chef open a restaurant without a menu? Do pilots depart the hanger without a flight plan? Can you build a house without architectural plans?…I could go on forever! The answer is NO to all the above.

I’m a planner. Whether it’s for personal or business purposes, I always have a plan. I operate best when I know what is happening and how I’m doing it. Planning is the key ingredient to crossing the finish line successfully.

Case in point…

When it comes to acquiring a mortgage, whether it’s your first, second, third…or tenth you need to establish a PLAN! You need to connect with your trusted Dominion Lending Centres mortgage broker to start the application process.

Am I suggesting you need to create a full blown SWOT analysis (Strengths Weaknesses Opportunities and Threats) to seek mortgage financing?

No… but it wouldn’t hurt.

All joking aside, you should have an action plan: PLAN A and possibly a PLAN B. If you need a PLAN C then there should have been more preparation put into PLANs A and B.

THERE ARE 4 PARTS TO EVERY MORTGAGE.

  1. DOWN PAYMENT – How much skin-in-the-game are you putting in? Where is it coming from, saved or gifted? Where is it now?
  2. CREDIT – How long have you had it? What are the limits and how do you utilize it? How many forms of credit do you have?
  3. INCOME – How long have you been at the current job? Salary or hourly? Have you jumped around to different industries or stayed within? Self-employed or employee?
  4. SUBJECT PROPERTY – Where is the property? What is the property? Condo, townhouse, detached, farm on acreage with coach house and out-buildings? Age? Materials used to build? Remaining economic life? Square footage? Past or present issues?   

Before you find the subject property to purchase, the best course of action is to prepare. Why try to obtain financing in three to six days when you could have reduced the stress level by planning ahead of time. Mortgage Brokers call it the Pre-Qualifying Process. As a mortgage professional, I review the first three parts of the application and lock in a rate for up to 120 days.

Some people may ask WHY plan or WHEN to start planning. The main reason one should plan is to simply make sure there are no hidden surprises. If there are any negative aspects to the file, a plan would give us time to find a solution. When the decision has been made to purchase or re-finance (and mortgage funds are required), that is the exact time to connect with your Mortgage Broker. The time is now… immediately. A plan will double your success rate for obtaining approval for mortgage financing.

8 Sep

Almost half of Canadians would struggle if paid a week late

General

Posted by: Kimberly and Cindy Walker

7 Sep

Prime Rate Change

General

Posted by: Kimberly and Cindy Walker

Prime Rate Change

-Provided By One Of Our Lenders

– All Lenders Will Be Sure To Follow:

 

Good Morning, another change to Prime, hoping the last for quite some time.  See below for details.  No change to rates, still amazing deals.  2.84 or Prime less 75.

 

P.S.  Take advantage of Street’s low rates – 5 Year Fixed Insured Promo 2.84% and 5 Year ARM CEO Insured P-0.75%!

7 Sep

10 steps to home sweet home

General

Posted by: Kimberly and Cindy Walker

Congratulations – you are moving into your new home! Whether you are starting with a plain new build or an older resale home, there’s no better way to make it yours than by putting your stamp on it. Invest a weekend or two into warming up a featureless space or refreshing someone else’s old homestead. It’s easy with our 10 steps to home sweet home.

Step 1: Change the locks
Secure your home by changing the locks as soon as you take possession.
Even DIY beginners can change a deadbolt lock. A replacement deadbolt set can be installed in place of the current lock – no drilling required.

Another alternative is to rekey the lock. Purchase a rekeying set from the same manufacturer as the existing door lock, and reset it for a new key.

Step 2: Get a professional deep cleaning
Hire professional cleaners to deep-clean and detail your home before you move your possessions in. Without any furniture to work around, they’ll have access to every nook and cranny. Yes, you’ll have to clean again after moving day, but the heavy lifting (scouring, scrubbing and scraping) will have already been done!

Step 3: Clean the guts of your home
Years of dust, pet dander and detritus collect in the mechanicals of any home. One of the most effective ways to refresh a resale home is to get right into the guts of it: the mechanicals. Have your ducts, furnace and air conditioning unit professionally cleaned. Change the filters as required to maintain that clean, fresh air.

Step 4: Apply a fresh coat of paint
Painting provides the most bang for your home improvement buck. Whether the walls of your home are dingy or you’re simply not feeling the magic of “beige,” it takes just hours to repaint your space with a colour that makes your heart sing.

Step 5: Freshen up the floors
Worn out floors can put a damper on that new-home buzz.
If your hardwood has seen better days, hire pros to refinish it, or tackle the project yourself by renting a floor sander and varnishing over a weekend.

Steam-clean wall-to-wall carpet and clean laminate flooring with special laminate floor cleaners, although if either is too far gone, you may want to replace it.
Personalize your space while protecting your floors by adding area rugs and runners throughout your new home.

Step 6: Neutralize any odours
Resale homes, particularly fixer-uppers, can come with lingering smells. Steps 2, 3, 4 and 5 will dramatically reduce any unpleasant odours. Stubborn odours require spot treatments, such as the following:

• Put dishes of activated charcoal, also called activated carbon (available from aquarium stores), in musty, damp basements. Run a dehumidifier during the spring and summer.
• Place a sock filled with dry coffee grounds or baking soda in closets, refrigerators or freezers to absorb stale odours.
• Pour white vinegar down a stinky drain.

Step 7: Give your windows a new view
Dirty windows and screens can make rooms feel dingy. A thorough cleaning will have your windows shining, and your indoors will feel brighter and fresher, too.

If your home came with the previous owner’s window coverings, be sure to clean or launder them (it’ll remove allergens as well as reduce any lingering odours). Or consider replacements more specific to your design tastes.

Step 8: Brighten your lights
A well-lit home feels inviting and warm. If your rooms feel dim, replace the existing bulbs with bright, energy-saving CFL bulbs. Dated lighting fixtures can foil your redecorating efforts, so consider replacing them. You can donate them to a Habitat for Humanity ReStore shop – after all, your taste may be urban-contemporary, but someone else may be looking for the perfect retro pendant!

Step 9: Replace the switch plates
A screwdriver is all it takes to swap out lighting switch plates. This easy change gives an instant lift to any room. With a little DIY expertise, screwdrivers, pliers and a voltage tester, you can install energy-saving dimmer switches, instead.

Step 10: Display your art
Finally, dress up your walls with your favourite artwork and family photos. Get your kids’ kindergarten masterpieces onto the fridge, and deck out your mantel with family photos.

There’s a reason why we remove personal photos and mementos when selling a house: it’s so potential buyers see a clean slate. Now that you’re in your own home, go wild and make it yours

6 Sep

Can You Afford That Business Loan? Tips to Figuring It Out

General

Posted by: Kimberly and Cindy Walker

Figuring out whether you can afford to borrow money for your business is a crucial step in the loan process and one you should definitely take before approaching potential lenders. But determining if you have the resources to make your loan payments can be a bit tricky.
Think Outside The Borrower’s Box

If you want a loan, you’ll need to start thinking about the loan process from the lender’s point of view. So, before you take out your calculator, familiarize yourself with a few key questions. These are the questions lenders have in mind when determining whether you’ll get a loan:
1. Can you pay back the loan?
2. Will you pay back the loan?
3. What are you going to do if you can’t pay back the loan?
If you can answer those three questions, you’re going to find success with small business lenders.

Can You?

Banks and other lenders use several tools to determine if a business entity is a good candidate for a loan, one of which is a debt service coverage ratio (DSCR). On one side of this ratio is the cash that you, the business owner, have available to pay back a loan in a given year. On the other side is the amount of money you’re borrowing per year, plus interest.
Figuring out your own DSCR isn’t as difficult as some lenders might have you believe. Start by calculating the cash available for your business. Cash available, or cash flow, is the movement of money into and out of your business, measured over a certain period of time — usually weekly, monthly or annually.
To calculate cash flow, start by adding the money that you have on hand at the beginning of the month (starting cash) to the money that comes into your business throughout the month (cash-in). Cash-in includes all the money you receive in sales, paid receivables and interest in a given month. Adding your starting cash to your cash-in will give you your total cash for the month.
Next, you’ll need to calculate how much cash is going out of your business every month (cash-out), including all your expenses for the month. Subtract this number from your total cash for the month to determine the monthly cash flow for your business.
Once you have a number for your monthly cash flow, multiply it by 12 to get your annual cash flow. Then, you can take a deep breath, because the hard part of figuring out your DSCR is over.
The other side is simple – You just do a calculation to determine what the annual debt payments would be on the proposed loan.
Of course, it’s hard to know exactly how much money you’ll end up receiving from a lender or what the terms of the loan will be, but you can make an estimate based on what you know you need to grow your business and the published interest rates for the lending institution you wish to use.
Now that you have both numbers calculated, you can put them side by side and start answering the question you started with: Can you afford a loan?
Business owners with a DSCR of 1.25:1 — also known as 1.25 times coverage — are considered to be a good credit risk, and are usually able to afford, and therefore secure, financing. However, sometimes, businesses that are growing very quickly and those that are expanding to bigger commercial spaces get loans despite having less cash flow.

Will You?

Figuring out your cash flow is crucial to determining whether you’ll qualify for a loan. However, lenders aren’t just looking at your business’s finances when determining your credibility. More often than not, they’ll also want to know whether you, the business owner, are financially up to par.
Lenders use another tool, called a debt-to-income ratio (DTI) to determine your suitability for a loan. Figuring out your DTI is easy after you’ve already calculated your DSCR. First, tally up your monthly personal debts, including car loans, credit card payments and other debts you might have. Also include your housing expenses, like mortgage payments, property taxes and homeowners insurance.
Divide your total monthly debts by your monthly gross income and then multiply that number (which should be a decimal) by 100 to get a percentage. Most traditional lending institutions look for DTIs no higher than 36 percent.
If, when calculating your DTI, you found that your income far exceeds your debts, you can expect lenders to add some of this excess income to the available cash of your business. This could be a good thing for businesses whose debt service coverage ratios are in need of a boost.
Of course, the question of whether you will pay back a loan can’t be answered by numbers alone. This is why lenders turn to credit scores in addition to DTIs, DSCRs and the other number-crunching tools of their trade.
Lenders pull credit scores to determine if the business owner is a good credit risk. Basically do they have a history of paying their bills.
If the prospective borrower’s answer to that question is no, then chances are that he or she isn’t going to get a loan. However, traditional lending institutions — like banks — tend to put more emphasis on credit scores than other, nontraditional lenders. So if you don’t have great credit, you should consider shopping around.

What If?

If you can answer, can you pay back your loan, and will you pay it back? — in the affirmative, then you’re well on your way to securing financing. But first, you’ll have to answer one final question: What will you do if you can’t pay back the loan?
This question is certainly not as easy to answer as the other two, because it means admitting a hard truth: You need to have a plan in case your business doesn’t work out.

So What’s The Right Answer?

For some business owners, the right answer is a backup plan in the form of collateral or capital — having assets that the bank can claim if you don’t pay up or extra cash flow that you can redirect toward your loan payments. But for business owners without this cushion, the backup plan takes the form of what lenders call a personal guarantee.
Signing a personal guarantee on a business loan means that, if you can’t pay back the loan through the business, you’ll be required to pay it back out of your own pocket.
But taking personal responsibility for your business debt is a risky move