7 Sep

How to Talk to Your Kids about Finances

General

Posted by: Mike Hattim

A vast majority of parents are currently supporting their children (ages 18-35 years) financially, spending an average of$5,623 per year! This is an extensive additional cost that most parents cannot afford. In fact, over 30% of parents are seeing delayed retirement in order to help kids with post-secondary costs and are facing an inability or delayed timeframe in paying off their own debts.
As much as parents want to help their kids, it should not be done at the jeopardy of your own future. In fact, when it comes to teaching your children about money, there is no better time to start than now!

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 retirement! 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 on impulse, or take a long time to make a purchase? How much debt do you have? Your financial habits will shape your children’s. 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 exchange for chores) is an age-old way of teaching your kids about money. A good guideline is $0.50 to $1.00 per year of your child’s age. For a 10-year-old, this would be $5 to $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 $0.50 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 important, 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 they have to have? Teach them about 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 you pay 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.

7 Sep

Finding Your Perfect Home Type

General

Posted by: Mike Hattim

When it comes to finding your perfect home, there are so many more options for potential homeowners! From a single-family dwelling to a townhouse to a modular home, the choices are seemingly endless. Before you start widening your search, let’s take a look at what makes these home types different – and which one is perfect for you!
  • Single-Family Detached: This is a stand-alone house that sits on its own lot and is the most common type of home. As these are detached dwellings, they provide more privacy with less noise from neighbours. They also tend to be larger dwellings (complete with a yard!) which gives you the space and freedom to really make it your own.
  • Single-Family, Semi-Detached: These homes are suitable for a single family and are typically attached to another house on one side. Semi-detached homes are often more affordable to both buy and maintain. With this affordability does come somewhat less privacy and protection from noise due to the shared walls on one side.
  • Duplex: These structures contain two single-family units on separate levels and are great options for individuals looking to reduce home purchase and carrying costs – live in one unit, rent the second! This type of home also provides unique flexibility for older families, giving you the option to move adult children or aging parents into the second unit as needed. As expected, these units offer less privacy than single-dwelling homes and can sometimes have increased noise through the floor or ceiling.
  • Townhouse or Row House: These are a row of single-family homes, which are connected on both sides to the next home (excluding the end unit, which is only connected on one side). Townhouses typically have private yards but, in some cases, it may be freehold or condo-style with shared ownership rights and responsibilities. However, these homes are typically more affordable and easier to maintain, though you may have to consider strata or maintenance fees. Similarly to duplexes, these home types have less privacy and may have noise from shared walls.
  • Condominium: These are low- or high-rise buildings containing multiple apartment units. Condos are excellent starter homes for single adults, or couples, as they are affordable and require minimal maintenance. Some buildings even have shared amenities, such as a fitness center or swimming pool or party room. QUICK TIP: Always check for these amenities and if you would be interested in using them. If not, why pay for them? In this case, you might be better off finding a condo with less amenities and lower strata fees.
  • Modular or Mobile Home: Growing in popularity are modular homes, which are prefabricated homes delivered to a home-site for installation. These homes are owned by the individual, while the land it sits on could be rented or owned outright. These types of homes are highly affordable and extremely flexible; if you relocate, you can sell the mobile home with the property or keep the home and relocate it! If renting land in a mobile home community, there are also those costs to consider.
  • Carriage House or Urban Infill: A carriage house is located on the periphery of a single-family detached house. Similarly, are urban infill homes which are a modern solution to crowded cities. These homes are often located in interesting, urban environments and have their own character. They are also generally less expensive, but there is potential for noise pollution if you are in a busy location. Due to the size, there is also limited inventory and limited or non-existent yard space. But if you’re looking for something affordable and unique, these are a great option!

Finding the right home to suit your needs means considering your lifestyle and budget now, as well as where you’ll be a few years down the road. Want more information or need help deciding the best option for you? Contact me today to learn more about your options when it comes to buying and owning a home.

7 Sep

5 Approval Roadblocks You Should Know

General

Posted by: Mike Hattim

When buying a home, there is nothing worse than having your mortgage broker or lawyer call and say “there is a problem”. If you have found your dream home and negotiated a fair price, and you have supplied all the documentation to your broker, you probably assume everything is fine.
The reality is that your financing approval is based on the information the lender was provided at the time of the application. If there have been any changes to your financial situation, the lender is within their rights to cancel your mortgage approval. To ensure that you don’t encounter any last-minute roadblocks on your home buying journey, there are five major things you must avoid for a smooth transaction:

1. Changes to Your Employment
When submitting a request for financing, whether for a mortgage or car loan or to handle personal debt, one of the most important aspects the lender looks at is employment. If you were working at Company X for five years at $80,000 a year and change jobs before your upcoming mortgage is finalized, the lender will require proof from your new employer. If you change industries, they will need more proof that you are capable of keeping the job. Plus, for employment involving overtime or bonuses, the lender often requests a two-year average, which is not possible from a new position. Another employment change that could hurt your financing approval would be moving from an employee to a self-employed contractor. A good rule of thumb is to wait to make any major employment or life changes until after the deal has gone through.

2. Down Payment Source
As mortgage financing is based on the initial information provided, you will most likely need to do a final verification of the down payment source. If it is different from what the lender has approved, it could spell trouble for your financing approval. Even if you said that your down payment was coming from savings and, at the last minute, mom and dad offer you the funds as a gift, it could affect your approval. This is an acceptable source of down payment, but only if the lender knows about it in advance and has included this in their risk assessment.

3. Existing Debt
A week or two before your possession date, the lender will obtain a copy of your credit report and look for any changes to your debt load. Since mortgage approval is based on how much you owed on that particular date, it is important not to increase your debt before the deal is finalized. Buying a new car or items for the new home must be postponed until after possession; even if they are “do not pay for 12 months” campaigns because you will need to fulfil those payments, regardless of when they start.

4. Bad Credit
One of the biggest roadblocks to mortgage approvals is credit card payments. When you are in the process of getting financing or waiting to take possession of your home, it is important that your credit score remains positive. If your credit score falls due to late payments, this can cause major issues with your financing. Even if you have a high ratio mortgage in place which requires CMHC insurance, a lower credit score could mean a withdrawal of the insurance and removal of any financing approval.

5. Missing Identity Documents
Before a mortgage is finalized, the lawyer is required to verify your identity documents and see that they match the mortgage documents therefore it is important to use your legal name when you apply for a mortgage. Even if you go by your middle name or a nickname, all legal documents should match.

To help avoid last minute roadblocks and catastrophes with your mortgage application, be sure to keep in touch with me at all times during the mortgage process. If there are any changes from your initial mortgage application, it is important to advise them well in advance and to run those changes by myself to ensure they will not affect your application.

3 Aug

8 Steps to the Perfect Summer Social!

General

Posted by: Mike Hattim

There’s something magical about summer and no matter where you live in Canada, backyard BBQ season is the perfect opportunity to spend a little time with family and friends. Nothing says party vibes more than food on the grill and summer drinks flowing. Whether you live in a country house, a suburban townhome or a city condo, gather your crew and these few essentials:

  1. Good Eats: To have the most success with your backyard party, you must pre-plan! Take a few hours the night before and meal prep. This includes planning an easy menu with bite size snacks, easy salads and flavour packed options to keep your guests satisfied. And don’t forget to make sure the barbecue has plenty of propane!
  2. Cold Drinks: Depending on your guests, you can either have a cooler full of pop and water. If it is a more adult affair, add a little alcohol to the mix! Boozy lemonades or spiked ice teas are pretty easy to make and very fun to drink. Craft beer, ciders or chilled white wine are other fun options for a hot day!
  3. Did Someone Say Desert? If you’re planning an all-day affair, you might want to keep some quick and easy desserts or snacks on hand for the evening. Homemade ice cream bars, fruit kabobs or a veggie platter, or even a couple bags of kettle chips can make great options for any peckish guests. And as the sun sets, you can break out the marshmallows and get your S’mores on in front of the fire!
  4. Decor & Ambiance: For suburban hosts, your backyard party would include a sitting area, maybe umbrellas to offer some shady spots and some water fun! But, if you find yourself in smaller city digs, that doesn’t mean your party still can’t be one for the ages. Consider throw pillows, paper patio lanterns and plastic glassware which are all affordable and easy to find to help create that perfect party space!
  5. Choosing Your Tunes: While music can set the ambiance, you need to know your guests. It’s not easy to pick a playlist that will appease all ears, but streaming services like Spotify and Apple iTunes have plenty of mixed playlists that should do the trick.
  6. Entertainment: Backyard games such as a bocce ball set, Frisbee and even a football can keep the fun and competition going for hours! If you’re looking for a more chill hang, consider setting up a card table or some board games for those who want to partake.
  7. For the Kids: If your party involves kids, you’ll want to keep the food simple and easy to eat with hands, so burgers, hot dogs, chips and some watermelon are the way to go. You’ll also want to keep them occupied with simple games or more active options such as a soccer ball, mini trampoline or a sprinkler to run through and keep them cool. When daylight starts to fade, you can set up a backyard movie or camp-out with some tents to settle the night down. It never hurts to tire the young ones out so the grownups can have some chill time for themselves!
  8. Other Considerations: Depending on the temperature and time of day for your party, you might want to remind guests to bring sunscreen, hats and/or bug spray to make sure their visit is as comfortable as possible!
3 Aug

Alternative Financing and What You Should Know

General

Posted by: Mike Hattim

When conventional lenders (such as banks or credit unions) deny mortgage financing, it can be easy to feel discouraged. However, it is important to remember that there is always an alternative!

If you’re seeking a mortgage, but your credit score is damaged in some way and big institutions won’t lend you the money, you’ll find yourself in what’s commonly referred to in the industry as the “Alternative-A” or “B” lending space.

Much like the A Lender space (big banks, credit unions, etc.), there are various companies which operate in the B lending space. Alternative lenders cater to individuals who lack a strong credit history, or a guaranteed income (recent immigrants, or the self employed, for instance). As a result, these lenders generally have lower entry qualifications, which are offset by higher interest rates.

Why is alternative lending necessary? 

  • CRA arrears
  • Income issues such as non-traditional income as with self-employed borrowers
  • Credit issues such as low credit score, credit arrears, current mortgage or even bankruptcies
  • Unexpected liens on title
  • Foreclosure situations
  • Unique financing needs/opportunities

Beyond B-lenders are another alternative, which are known as Private or Unregulated lenders. These could just be individuals with money who are looking to invest. They are not regulated by any agency, and their rates and fees could be quite high.

These lenders are not required to stress test mortgage applicants, but many will abide by lower qualification rates. As a result, getting approved for a loan through an alternative or uninsured lender can be much easier than going through a traditional bank or credit union. Again, it is vital to pay close attention to the deal an unregulated lender offers. Lower qualification rates tend to come with baggage in the form of high interest rates or penalties.

Considerations for Alternative Mortgages Due to the “B” Lender space, it is important to take a good look at the conditions for these mortgage products to ensure that you won’t get trapped with rates you can’t afford.

Before considering an alternative mortgage, there are a few things you should ask yourself:

  1. What issue is keeping me from qualifying for a mortgage today?
  2. How long will it take me to correct this issue and qualify for a mortgage?
  3. How much do I currently have available as a down payment?
  4. Am I willing to wait until I can qualify for a regular mortgage, or do I want/need to get into a certain home today?

If you are someone who is ready to go ahead with an alternative mortgage due to a bruised credit score, or you don’t want to wait until you’re able to qualify with a traditional lender, these are five questions you should ask when reviewing any alternative mortgage product:

  1. How high is the interest rate?
  2. What is the penalty for missed mortgage payments? How are they calculated? What is the cost to get out of the mortgage altogether?
  3. Is there a prepayment privilege? For example, are you able to avoid penalties if you give the lender a higher mortgage payment once a month?
  4. What is the cost of each monthly mortgage payment?
  5. What does it look like when it comes to renewal?

When it comes to the alternative lending space, things can get a bit murky. If you are struggling to obtain an A-Lender mortgage, I would be happy to discuss your options with you and help you source an alternative.

3 Aug

Get the Scoop on Rental Properties

General

Posted by: Mike Hattim

You might be surprised to learn that you don’t need to be one of the uber rich or make six figures to have a second property. You just need to have knowledge, determination and financial planning!

If you are purchasing a secondary property with the intention to rent, here are a few extra things to know:

  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.
  2. Only a portion of the rental income can be used for qualifying and determining 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 while subtracting your expenses. This can have a much higher impact on how much you can afford.
  3. Interest rates typically have a premium on them 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.
  1. If you do eventually want to sell this property, do note that it 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.

Prior to taking on a secondary property, you will need to have your down payment in order (whether from savings or home equity) based on the minimum requirements, and also have sufficient credit score to qualify. In addition to the down payment, you will also need to pass the stress-test and prove that you can financially carry your existing mortgage and the new application.

If you are looking to purchase a rental property, give me a call before you start. I would love to help review your financial situation, current mortgage and equity, and help you make a plan. The keys to success are right around the corner with a little bit of expert advice!

6 Jul

Backyard Renovation Ideas!

General

Posted by: Mike Hattim

With summer underway, it might be time to consider a backyard upgrade! These don’t have to be luxurious or expensive, but a couple tweaks can give your yard a facelift and make your outdoor space feel brand new! Check out my backyard renovation ideas below:

  1. Reviving Your Deck: You don’t necessarily have to tear it down and start over to have a fresh deck. Chances are the structure is in good shape. A remodel job featuring new decking, rails and stairs can save a ton of money over a full rebuild.
  2. Creating a Peaceful Area: If you enjoy spending time in your yard or on your deck, but are finding that nosey neighbours, traffic noise or barking dogs are impacting your serenity, don’t fret! A privacy fence is a great option to replace sections of your existing railing and make your deck more private, quiet and comfortable!
  3. Watch Your Step! Another great way to give your backyard a quick makeover is to add a practical walk path. Gravel is the easiest to handle and the least expensive option. While it looks less formal than brick or stone, it can be complemented with a stone or flower border for that extra appeal.
  4. Did Someone Say Water Feature?! If you have space in your yard for a unique water feature, such as a fountain, pool, artificial waterfall – or even a cute pond! – this can make your space feel that much more magical.
  5. Set the Mood: When it comes to setting the mood for your backyard space, proper lighting can go a long way. From string lights to lanterns or path lighting, the options are endless (and affordable!) allowing you to create the perfect summer escape.
6 Jul

Avoid These First-Time Homebuyer Mistakes

General

Posted by: Mike Hattim

As a first-time buyer, I am here to give you some tips on homebuyer mistakes to be on the lookout for so you can avoid them for the best experience possible!

Thinking You Don’t Need a Real Estate Agent
You might be able to find a house on your own, but there are still many aspects of buying real estate that can confuse a first-time buyer. Rely on your agent to negotiate offers, inspections, financing and other details. The money you would have saved on commission can be quickly gobbled up by a botched offer or overlooked repairs.

Going With The First Real Estate Agent You Find
As much as not having a real estate agent can be a disadvantage, having the wrong one can also make the process more difficult. You don’t want to get halfway into house-hunting before realizing your real estate agent is wrong for you. Ideally, you want to source an agent from a friend or family referral. However, if you are stuck or looking for more options, I would also be happy to provide some referrals as your mortgage professional.

Getting Your Heart Set on a Home Without Doing Your Homework
The house that’s love at first sight may not always be what it seems, so it is important to keep an open mind. If you jump in too fast you may be too quick to go over budget or you might overlook a potential pitfall. Taking the time for proper inspections, budget comparisons and long-term family planning can go a long way in ensuring your first home is the right home!

Committing to More Than You Can Afford
This is one of the most common mistakes that first-time homebuyers can run into, but to ensure your future financial security it is imperative to truly consider your budget. You don’t want to sacrifice retirement savings, an emergency fund or potential holiday for mortgage payments. You need to stay nimble to life’s changes and overextending yourself could put your investments—including your house—on the line.

Fixating on the Lowest Interest Rate
A reasonable interest rate is important, but not at the expense of heavy restrictions and penalties. Make a solid long-term plan to pay off your mortgage and then find one that’s flexible enough to accommodate life changes, both planned and unexpected. I would be happy to discuss all of your mortgage options with you to ensure that you get the best overall mortgage product with an affordable rate that suits YOU!

Choosing a Fixer-Upper Simply for the Cheaper Listing Price
That old character home may have loads of potential, but it is vital to be extra diligent during the inspection period. What will it really cost to get your home to where it needs to be? Negotiating a long due-diligence period will give you time to get estimates from contractors in case you need to back out.

Diving Into Renovations as Soon as You Buy
Whether or not you choose a fixer-upper or simply want to update some things in your new home, it is important not to rush into them. While renovations may increase the value of your home, overextending your credit to get upgrades done fast doesn’t always pay off. Take time to make a solid plan and the best financial decisions. Living in your home for a while before renovating will also help you plan the best functional changes to the layout.

Not Researching the Neighbourhood
It may be the house of your dreams, but annoying neighbours or a nearby industrial zone can be a rude awakening. Spend some time in the area before you make an offer and talk to local business owners and residents to determine the pros and cons of living there.

Opting Out of Mortgage Insurance
Your home is your largest investment and it is imperative that you protect it. Mortgage insurance not only buys you peace of mind, it also allows for more flexible financing options. Plus, it allows you to take advantage of available equity to pay down debts or make financial investments. If you are ready to search for your first home, don’t hesitate to reach out to me today for expert advice, referrals and mortgage solutions that are right for you!

6 Jul

Changes to the Stress Test and What You Need to Know

General

Posted by: Mike Hattim

As you may have heard, the Bank of Canada recently changed the stress test rules as of June 1, 2021. With these changes, now both insured and uninsured mortgage borrowers will be subject to a stricter stress test when qualifying for their mortgage.

The new qualifying rate on uninsured mortgages – where the down payment is 20% or more – is now the contracted rate plus two percentage points or 5.25%, whichever is higher.

This means that any buyer whose down payment on a home is one-fifth of the purchase price or higher must show they can afford the mortgage payments if the interest rate was two percentage points higher than what the bank is offering, or the new five-year benchmark rate per the Bank of Canada.

Overall, the implementation of these tougher stress test rules will reduce buying power by roughly 4-5% for borrowers. To help illustrate  how this change affects you, consider the following scenario with $100,000 gross income:

The previous stress test at 4.79% would give this individual the ability to borrow $469,530 (based on good credit score with max GDS/TDS qualifications at 39/44%). Now, with the current scenario of 5.25% stress test rate, the they can now only borrow $448,880 (based on good credit score with max GDS/TDS at 39/44%). This is a difference of $20,650 which reduces your home options.

To ensure you are searching in the right price range and budgeting accordingly, it is important to consider this stress test change. If you are looking to purchase your first home or move, please don’t hesitate to contact me today for a better understanding of the rules and what you qualify for.

2 Jun

Throwing the Perfect Summer BBQ

General

Posted by: Mike Hattim

It’s the season of outdoor parties and a summer BBQ is the perfect way to enjoy time with friends and family! For some tips on how to make this year’s BBQ your best one yet, check out my list below:

  1. Set the Mood: String up fairy lights, plug in a radio with some of your favourite tunes in the background, put out a lawn rug and throw a fresh table cloth over your outdoor dining area. A few quick items can really spruce up the yard and make it feel ready for guests!
  2. Put Out Snacks: This may seem like a no brainer, but having a table filled with fun ‘grazing’ snacks can help stave off any stress about perfectly grilling your meals! Try a veggie and dip tray, fruit shish kabobs or cured meats and cheeses.
  3. Have Drinks on Hand: Set up a table with pitchers of fun summer drink concoctions (alcohol optional!) or consider filling a kiddie pool or wheelbarrow with ice to keep those beers chilled all afternoon.
  4. Choose Your Mains: It can be easy to get carried away grilling steaks, fish, chicken, hot dogs, burgers – you name it! For a more successful party, choose two options. Maybe you go with hot dogs and veggie burgers, or perhaps fish and chicken. Choose items that cook well on the BBQ together and suit the tone of your get-together.
  5. Don’t Forget to Play! If you’re hosting an adult-only BBQ, setting up a table for a card game can be a great way to pass the time and get in some laughs. If you have children in attendance, consider setting up a lemonade stand or fill up some water balloons for an extra splash!