Published by DLC Marketing Team

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, 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 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!

Published by DLC Marketing team.

It can get pretty exciting to see campaigns around “cash-back mortgages” but, before you get too far along, here are three things you might not know about these types of mortgages:

1. Occasionally you will see campaigns on cash-back mortgages, so don’t jump at the first one you see! These types of mortgages are available through a few major lenders so it can be helpful to shop around to see what different terms and conditions are available, as this will affect the overall loan.
2. When it comes to cash-back mortgages, you’re really getting a loan on top of your mortgage. The interest rates are calculated to ensure that, by the end of your term, you will have paid the lender back the money they gave you (and perhaps a bit extra!). Be mindful that these loans can come with higher interest rates and, in some cases, the extra is more than you got in cash-back.
3. The average cash-back mortgage operates on a 5-year term. While you may not be planning to move before your term is up, sometimes things happen and it is important to be aware that if you break a cash-back mortgage, you have to pay the standard penalty but you will also have to pay back a portion of the loan you were given. For example, if you are 3 years into a 5-year term, you would have to pay back 2 years or 40% worth of the cash-back. Combined with the standard mortgage penalties for breaking your term, this can add up if you’re not careful!

Before signing for a cash-back mortgage it’s better to discuss your needs with your local Dominion Lending Centres mortgage expert. They can advise regarding all cash-back mortgage availability, lines of credit, purchase plus improvement loans or also flex down mortgages that may be better for your situation.

Published by DLC Marketing team.

An investment (or rental) property, can be a great option for generating additional monthly income and growing your wealth over time, if done properly.

This strategy has multiple options and outcomes that can benefit Canadians such as:

• Supplementing income now and boosting pension in the future creating more financial freedom
• Allowing you to buy your dream retirement home now and rent it out until you’re ready to use it
• Increase monthly cash flow for potential expenses beyond retirement savings
• Utilize a multi-unit home (such as a duplex) by renting out one of the units

However, before you buy an investment property, there are a few things to know. Firstly, buying a property for the purpose of renting it out to someone else comes with different qualifying criteria and mortgage product options than traditional home purchases.

Before you look at purchasing a rental property, be aware that:

1. The minimum down payment required is 20% of the purchase price, and the funds must come from your own savings; you cannot use a gift from someone else. Another option is to utilize existing equity in your primary residence and refinance for the cash to purchase your rental or investment property. Be sure to factor in funds for closing costs, potential repairs and maintenance in your amount.
2. Only a portion of the rental income can be used to qualify and determine how much you can afford to borrow. Some lenders will only allow you to use 50% of the income added to yours, while other lenders may allow up to 80% of the rental income and subtract your expenses.
3. Interest rates usually have a premium when the mortgage is for a rental property versus a mortgage for a home someone intends on living in. The premium can be anywhere from 0.10% to 0.20% on a regular 5-year fixed rate.

With the right purchase price and rental costs per month, this can be a great way to supplement income and make the most out of your retirement. Not only does it offer monthly cashflow, but you also will have the ability to sell the property down the line if you so choose. However, bear in mind, the sale will be subject to capital gains tax. Your accountant will be able to help you with that aspect if you do decide to sell in the future.

Before getting started, it is important to calculate the cost of your investment (purchase price and closing costs), as well as consider maintenance amounts (approximately 1% of the property value for the year) and compare to current rental prices to be sure it is a profitable investment before purchasing.

If you’re looking to purchase an investment property, be sure to reach out to a Dominion Lending Centres mortgage expert to discuss your options and understand what is required.

Published by HomeEquity Bank

If you are a Canadian living in debt, you are not alone. According to Statistics Canada, household debt grew faster than income last year, with Canadians owing $1.83 for every dollar of household disposable income to debt(1).

• Canadian households use almost 13.48% of income for debt re-payment(2).

• Rising inflation and interest rates (1).

• The cost of living is projected to increase in 2022 (2)

So how can one ever get out of debt? Debt consolidation.

What is debt consolidation?

Debt consolidation means paying off smaller loans with a larger loan at a lower interest rate. For example, a credit card bill debt with interest of 19.99% can be paid off by a 5-year Reverse Mortgage with an interest rate of 7.70%* from HomeEquity Bank. (*5 year fixed rate as of June 28 , 2022. For current rates, please contact your DLC Mortgage Broker).

A lot of confusion surrounds debt consolidation; many of us just don’t know enough about it. Consider the two sides:

The pros

• The lower the interest rate, the sooner you get out of debt. A lower monthly interest allows you to pay more towards your actual loan, getting you debt-free faster.

• You only have to make one monthly debt payment. This is more manageable than keeping track of multiple debt payments with different interest rates.

• Your credit score remains untarnished because your higher interest loans, such as a credit card, are paid off.

The cons

• Consolidating your debt doesn’t give you the green light to continue spending.

Consolidating helps you get out of debt; continuing to spend as you did before puts you even further into debt.

• A larger loan with a financial institution will require prompt payments. If you were struggling to pay your debts before, you may still be challenged with payments. The CHIP Reverse Mortgage may be a better option; it doesn’t require any payments until you decide to move or sell your home.

• You may require a co-signer who will have to pay the loan, if you’re unable. Note that the CHIP Reverse Mortgage does not require a co-signer, as long as you qualify for it and are on the property title.

So how do you know if debt consolidation is the option for you? Start by contacting your DLC mortgage broker and ask if the CHIP Reverse Mortgage could be the right solution for you.

SOURCES:

1 Debt-to-disposable-income ratio eases down from record 185% | CBC News

2 Key household debt-to-income ratio down in Q1 as income rises faster than debt | The Star

Let’s talk about interest rates.  Like most things in life, seldom do they stay the same. Since roughly 2009, if your mortgage was variable you had the benefit of very low borrowing costs.  Back in the early 2000’s my first mortgage was $86k.  The payments were roughly $130 principal and $400 interest per month with roughly a 5.69% fixed interest rate. This was the norm before 2009.    Since then rates have been so low, that over time I have forgotten I used to pay more to interest than principal.

According to the source tradingeconomics.com,  the interest rates in Canada averaged 5.79% between 1990 until 2022 from a high of 16% in February of 1991 till a record low of .25% in April of 2009.  If you had a variable mortgage you have enjoyed extremely low rates and ultimately more money to spend on other things.

Starting in April/May of 2022 most of the real estate demand disappeared.  Realtors are back to holding open houses, and for sale signs are up for longer.    Depending on the products, fixed mortgage rates are pushing 5% +. Home prices have never been higher in most areas of Canada, and people are unsure of whats next.

Time for some perspective.  Interest rates, although high compared to the last few years.  Are actually just below the average of the last 30+ years. Gone are the unconditional and blind bids.  Once again you have time to actually look at the house before purchasing.  More selection.  Overall, a better buying experience.  The interest rates are always going to fluctuate, and we have to prepare for it. Talking to your mortgage agent will set you up for success for the long term.

Written by Derek Cole DLC Canuck Mortgage group Lic#12503

Published by FCT.

The right real estate agent will help you through every step of buying or selling your home. Like any relationship, you want to ask questions, get to know your agent before agreeing to have them work with you.  Let’s take a look at some of the things you should consider when looking for an agent.

Where to begin when buying a home

When looking for an agent, you want to find an individual who you are confident will listen to your needs and help find a property within your budget.

Before you start your search, you’ll want to determine the maximum price you want to pay.  Keep in mind that there are additional fees when purchasing a home that aren’t included in the home’s price.  These include lawyer fees, moving expenses, and land transfer taxes.

Be Aware: if you put less than a 20% down payment on a home, you will have to purchase mortgage insurance.  Determine the amount you can afford as a down payment, then add in the cost of insurance if necessary when budgeting.

Next, consider where you want to live. Look at property listings within that area and see what real estate companies and agents are present.  While agents can help you buy a property in any neighbourhood, they will be more knowledgeable in the areas in which they are actively selling properties.

Talk To Prospective Agents

Now that you’ve figured out where you want to live and what you can afford, speak to agents to get a better idea of how they work.  How many years experience do they have? Are you able to contact them directly or do they have a team that works for them?  How often will they send you listings?

It’s a hot market, so you want to be confident your agent is getting you in to see properties as soon as possible.  The window for making offers on houses is usually tight, so you want to ensure that your agent can get you the appointment.

Tip: Regularly check real estate listings yourself. You might find a gem that your agent overlooked.

Where to begin when selling a home

If you were happy with the agent you used when buying your home, you’re off to a good start.

If you’re seeking a new agent, start by looking at local properties for sale.  Take a walk or drive around, and check out online sales listings.  Pay attention to whose name keeps appearing, and what companies have good representation.  An individual with multiple listings in a community is probably familiar with the neighbourhood, and most likely getting good deals for their clients.

Be bold in your search: knock on the doors of houses that have for sale signs, and ask the homeowner how their experience has been with the agent.  Most people are more than happy to share their opinions.

Next Steps

Once you’ve found the name of a few reputable agents, take a look at some of their listings online.  Are the pictures attractive? How do they describe the properties? Consider the listings from the perspective of the buyer.  Are they attractive, or would you skip over them? This is the same agent who could be representing you, so you want to feel confident that your home will be presented in the best possible light.

TIP: Pay attention to how long properties have been listed for. If the agent’s properties have been on the market for quite some time, chances are that something they are doing isn’t effective.

Ask prospective agents the same questions you would ask when buying a home. You’ll also want to consider things such as whether or not they like to list the property at a fair market value, or price it under market in hopes of setting up a bidding war?  Do they offer one open house, or multiple times and days? While it’s ultimately up to you to decide which approach works best, it’s good to have an idea of what you’ll be in store for.

Be Advised: When you’ve found an agent, they will require you to sign a listing agreement.  This is a contract that allows the agent a certain number of days to sell your home. If you break this contract by deciding to go with another agent, you will most likely have to pay penalties.

When you’re selling your home, you have a lot of things to consider.  Finding the right agent – one who works both with and for you – can help ease the stress of the experience.

Published by DLC marketing team.

A few simple steps to healthy credit…

Just like you should have a physical every year to make sure you’re healthy, you should do the same for your credit report and score.

Don’t wait until you go to buy something and you are turned down. And don’t worry… chequing your own credit does not affect it. So, what should you be looking for?

MISTAKES

Make sure your personal information is correct and up to- date. Also check that your date of birth and any other identifying information is correct as well.

ERRORS

Even creditors make mistakes sometimes so carefully look over any negative information appearing on your credit that isn’t true. Creditors are required to change any errors that you find on your report.

HINT: Send a letter to the credit bureaus, as well, to let them know there was an error and send a copy to the credit agency who incorrectly reported to motivate them to take care of it in a timely manner.

OUTDATED INFORMATION

Credit agencies are required to remove certain information from your credit after a certain number of years. For example, if you got behind on your payments but then went back to your normal payment schedule, that late history is to be removed after 6-7 years. Don’t assume it will be. Be proactive and follow up to make sure it was done.

FRAUD

We all know someone who has had their identity stolen and nothing wrecks a credit score and report more than someone hijacking it. It doesn’t necessarily have to be a stranger either. Family and friends have been known to “borrow” someone’s credit. Be smart and make sure to protect your credit from the known and the unknown.

WHY DO ERRORS MATTER?

Even minor errors like a misspelled name or a wrong address can keep you from getting a loan or even lower your credit score. Keep your credit as healthy as possible by checking it every year. Choose a day that will be easy to remember like your birthday or the day you file your taxes.

Published by DLC marketing team.

People don’t always want to talk about home insurance, but when it comes to your house there is no better investment than insurance. But, with the number of insurance products available, it can be hard to know where to start! While it can seem overwhelming, it’s a good idea to get familiar with the basics of some of the required and optional insurance coverage when it comes to your home.

default insurance

The first and perhaps most common form of insurance when discussing the mortgage space is known as “default insurance”. The purpose of mortgage default insurance is to protect the lenders, allowing them to lend money more aggressively.

This type of insurance is mandatory for any homes where the buyer puts less than 20 percent down on the purchase. In fact, default insurance is the reason that lenders accept lower down payments, such as 5 percent minimum, and actually helps these buyers access comparable interest rates typically offered with larger down payments.

In Canada, there are only three companies that offer default insurance: Canada Mortgage and Housing Corporation (CMHC), which is run by the federal government and two private companies: Genworth Financial and Canada Guaranty.

Default insurance typically requires a premium, which is based on the loan-to-value ratio (mortgage loan amount divided by the purchase price). This premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments.

According to CMHC, the minimum down payment required for mortgage loan insurance depends on the purchase price of the home:

• For a purchase price of $500,000 or less, the minimum down payment is 5 percent.
• When the purchase price is above $500,000, the minimum down payment is 5 percent for the first $500,000 and 10 percent for the remaining portion.

It is also important to note that default insurance (or mortgage loan insurance) is available only for properties with a purchase price or an improved/renovated value below $1 million.

title insurance

Another insurance policy that potential homeowners may encounter is known as “title insurance”. This is an insurance policy that protects residential or commercial property owners and their lenders against losses relating to the property’s title or ownership. In fact, it is so important to lenders that every single lender in Canada requires you to purchase title insurance on their behalf. It is not a requirement to have coverage for yourself, but that doesn’t mean you should dismiss it outright.

Title insurance can protect you from existing liens on the property’s title, but the most common benefit is protection against title fraud. Title fraud typically involves someone using stolen personal information, or forged documents to transfer your home’s title to him or herself – without your knowledge. The fraudster then gets a mortgage on your home and disappears with the money. As the old adage goes: “It’s better to be safe than sorry” and the same goes for insurance.

Similar to default insurance, title insurance is charged as a one-time fee or a premium with the cost based on the value of your property. Title insurance for the lender is typically $250 to $300, while title insurance for yourself runs around $125 to $150. You can purchase title insurance through your lawyer or title insurance company, such as First Canadian Title (FCT).

mortgage protection insurance

Before you sign off on your mortgage, there is one more type of insurance your mortgage broker should tell you about – Mortgage Protection Insurance. Despite being optional, it should still be considered. Almost every mortgage broker in the business has a story of someone who passed on the extra coverage and tragedy hit.

Unfortunately, life happens but it doesn’t have to happen to your home. While you may not want to spend the money now, or maybe you already have some type of life insurance policy through work, don’t discount this option as it is often a blessing in disguise – especially when it comes to homeowners with a spouse and children. Can they carry on with the mortgage payment? If not, they would be forced to sell on top of everything else. For a few extra dollars a month, mortgage protection insurance provides that safety net in the event it is ever needed.

When it comes to choosing a mortgage protection plan, there are a number of different policies available depending on your budget. Manulife’s Mortgage Protection Plan offers immediate insurance and can be canceled at any given time. If you think you may be covered through your work, it can’t hurt to take a closer look at the policy.

Mortgage insurance is what we consider “debt replacement” and life insurance is more fitting as an “income replacement”. This is an important distinction and you should understand the difference. You also need to see just how much you’re going to get through your life insurance policy; you may be surprised just how little it amounts to.

property + fire insurance

Lastly, after you’ve signed off on your mortgage you need to close on the home. Before you do this, your lender is going to require home insurance. When it comes to home insurance, there are many different types of coverage however it generally protects you from damage to the home that is accidental or unexpected, such as a fire.

Home insurance can also cover the contents of your home, depending on your insurance package. For individuals looking at purchasing condos or townhouses, this is especially important! The insurance from strata typically protects the building itself and common areas, as well as your suit “as is”, but it will not account for your personal belongings or any upgrades you made. Be sure to cross-check your strata insurance policy and take out an individual one on your unit to cover the difference.

One final thing to consider with regards to home insurance is that, just because you have home insurance you’re not necessarily covered in the event of a flood or earthquake. Depending on where you live, you may need to purchase additional coverage to be protected from a natural disaster. It’s best to talk to your insurance provider to confirm that you are covered.

At the end of the day, purchasing a home is a huge investment. Why risk it when there are so many great insurance products to ensure your investment – and family – remain protected? Reach out to a Dominion Lending Centres Mortgage Professional today to find out what coverage is needed and how to go about getting it!

Published by HomeEquity Bank.

Everybody wants to live a long and healthy life with time to enjoy their golden years. But while living to 100 years old is a lofty and laudable goal, there may be some unexpected aspects that are worth considering.

Here are some of the good and the bad when it comes to making it to 100.

Pro #1: More time to learn

Learning a new skill is truly one of the great joys in life. And with more time comes more opportunities to pick up skills people often don’t have time for in their younger years. While your first six or so decades might be spent working, raising children, and building a foundation for long-term wealth, you can spend your retirement trying new things. Whether that means learning a new language, starting a new hobby, or volunteering, living to 100 means you can have more time to do what you love.

Con #1: Financial shortfalls

While there are many perks to getting older, and possibly living to 100, people often don’t account for the extra funds needed. Many retirement plans are based on a life expectancy of 85, so it’s important to look ahead at what you’ll need and plan as best you can. Something like a reverse mortgage is a great tool to provide any needed funds for your later years – so you can live your best lifestyle as long as possible.

Pro #2: Seeing family members grow up

While many people plan and expect to raise their children, and even their grandchildren, one of the great joys of becoming a centenarian is the opportunity to meet, raise, and spend time with great grandchildren. A reverse mortgage offers the chance to provide these family members with an early inheritance, fund their education, or even help them break into the real estate market with money for their down payment.

Con #2: Health issues

It’s hard to make plans around your health, but when it comes to living a long, fruitful life, it’s likely that some health-related issues will arise. And while many people have an idea of what they’ll do if they fall ill, and perhaps have health or critical illness insurance, a reverse mortgage is another option that should be considered. With the average cost of nursing care ranging from $2,000-$10,000 per month, a reverse mortgage can provide the cashflow to cover these costs or retrofit your home to allow you to age in place.

Pro #3: New horizons

Whether it’s travelling to a dream destination, or starting a new project close to home, retirement allows many people the time to chase their dreams, but a reverse mortgage can allow you to afford those dreams and tick off your bucket list. Perhaps there is a business you’ve always wanted to start, an organization you’d like to volunteer with, or a dream trip or hobby you want to fund; in any case, heading toward year one hundred means more opportunities to attain your retirement dreams.

Con #3: Aging in place

Did you know 93% of Canadians want to stay in the home they love? To ensure your home stays just as you love it, and to help you maximize the lifestyle you enjoy, unlocking the equity in your home with a reverse mortgage is a great way to continue living your dream life in your dream house well into retirement.

Contact your DLC mortgage broker to find out how the CHIP Reverse Mortgage by HomeEquity Bank can be a viable option to help you live your best retirement!

Published by DLC Marketing team.

Did You Know? The average Canadian owes $23,000 in consumer debt and has at least 2 credit cards. Source: CBC.ca

If you live paycheque to paycheque, the idea of somehow having enough money to invest and eventually have financial freedom seems about the furthest thing possible.

But experts in financial education like to point out, no matter your income and place in life, a few changes to the way you’re living life can make all the difference. It’s never too late to start learn and reverse course. If you’re still not convinced, here are a few simple ideas to get you started:

PRETEND YOU EARN LESS THAN YOU DO

Give yourself a cut in pay. The goal is to put 10% in savings from each paycheque into your savings account. The easiest way is to do an automatic direct transfer from your chequing account to your savings every pay day.

CREATE A BUDGET

In order to stop living paycheck to paycheck, you need to know where that paycheck is going. Creating a budget is simple with Google docs, or look into other online tools and sites to get started.

BUILD AN EMERGENCY FUND

Once you have your budget in place, review it and break it down into non-discretionary expenses (rent, groceries, utilities, etc.) and discretionary expenses (eating out, entertainment, clothes, etc.). See where you could cut down on discretionary spending and put that money towards your emergency fund. Even starting with just a little amount is great and helps you build the habit of saving.

CONSIDER DOWNSIZING

It may be time to consider a lifestyle change. Consider moving to a smaller place. Get rid of that cost of going to that expensive gym with a trip to the local park. Think about if you really need that brand new car or if a used one would work just as well.

PAY DOWN DEBT

If you have a lot of credit card or unsecured debt, try paying the minimum on all but one of them and aggressively pay down that one card. Once it’s paid off, attack the next one. If you’re so deep in debt that you can’t fight your way out, consider consulting with a company who specializes in debt consolidation. They will help you negotiate your debt into smaller amounts that you can begin to pay off.

DON’T FORGET YOUR FUTURE

Putting at least 3% of your paycheck into a retirement fund is a great idea, or maybe when you get your first raise instead of thinking of it as free money, simply put it into a fund and forget about it. You’ll be glad it’s there when you need it in the future.