My Picks for budgeting resources

When it comes to managing your household finances, there’s nothing more useful than a regularly-updated budget. There’s also nothing more difficult to monitor – or stick to.

To help you out, here are a few online resources to peruse:

  1.    Simplifying your budgeting approach.
Part of the reason budgets don’t work is because they require too much effort. In this article on the website doughroller.net, the author – who admits to failing at attempts to use budgeting software and the envelope method – walks you through his simplified approach to budgeting. Basically, it involves focusing on your problem areas – something most of us are more than aware of – and finding ways to curb them.

http://www.doughroller.net/personal-finance/a-simple-approach-to-budgeting/

2.    Track your spending.
If you’re not aware of your household’s problem areas, it’s time to track your spending. This can be relatively easy if you use debit as your primary form of payment, because most of your transactions should be available online. If you’re more of a cash person, you may want to download this simple (but convenient) weekly expense record and keep it in your wallet. Track your expenses for a month – or more, if you can manage it.

http://www.foxway.com/weekly_exp_record.html

3.    Online budgeting tools.
If you have the patience to set up an online budgeting tool, they can be extremely helpful in helping you stick to your budget. Many of them link to your online bank accounts, so you can see exactly where your money is going. While Quicken is one of the most popular forms of accounting software out there, you may also what to try:

You Need a Budget
http://www.youneedabudget.com/

Mint
https://www.mint.com

Canadians feeling good about debt

When it comes to debt, it turns out that it's not how much you have that affects your ability to repay it, but instead how comfortable you are with it and the overall concept of debt. That was one of the findings of the Genworth Financial International Mortgage Trends Report.



The report revealed that, among other things, members of developed countries are much more comfortable with accumulating debt (particularly mortgage debt), and as a result are more likely to pay it back. Case in point is Australia, where the country's homeowners spend 45% of their after-tax income on servicing debts (compared to 38% average of other countries). At the same time, Aussies are much more likely than any other country to make extra payments on their home loans with 45% making extra payments on their mortgages, compared to the average 26% of other countries (Canada, India, Ireland, Italy, Mexico, the UK and United States).



Canadians, on the other hand, are right up there when it comes to debt accumulation, spending 45% of their after-tax income on debt servicing. Positive attitudes regarding the country's strong economy (32%) and housing market (47%) seemed to fuel the accumulation of mortgage debt and increase Canadian's appetite for it. With costs of living increasing, 28% of Canadians said they were comfortable taking on an LTV greater than 80% compared to the 20% average.



The higher debt levels haven't seemed to affect Canadian's ability to repay, however, with 79% saying they either made prepayments or easily met their repayments, and 83% expecting to easily make repayments over the coming year. Canadians were the most optimistic about their ability to meet mortgage payments behind only India. Only 19% were actually exceeding their payments, however, compared to the eight-country average of 26%.



Low interest rates also seem to play a huge role in this sense of debt confidence. With Canada's target overnight rate set at 1%, compared to an average of 2.4% of other countries, Canadians are experiencing very low mortgage rates. Of the 47% who believed that now is a good time to buy a home, two thirds said it was due to low interest rates. Of those who said now wasn't a good time, 23% cited high property prices.



To view the whole report, click here.

How to use Child and Spousal Support to qualify for a Mortgage

Time for some straight talk.  Ending a marriage is never easy no matter what the circumstances.  I previously wrote a post on The Business of Divorce and for the sake of this advise it might be a good time review it.  If you are planning on owning a home once the dust settles there are a few things you need to know.

Once your final separation is in place you can now qualify for a mortgage without your spouse's consent.  If this sounds odd please go back and read my previous post.  When applying for your new mortgage on your own lenders will consider your Child and Spousal support as income.  Just exactly how they do it varies from lender to lender but not significantly.  Let me generalize. 

Child Support:  The first thing you will need in order to use Child support payments as income to qualify for a mortgage is your separation agreement.  Lenders need to know the support was agreed on by both parties and the amount was clearly defined in your agreement.  Only the child support is eligible.  Any agreement to pay other expenses is not considered.  Some lenders have an age limit on the children of 12.  Anything older than that they consider a risk because the support will stop long before the mortgage ends.  Another thing some lenders will ask for is confirmation of 3 months receipt of payment.  This can be verified with bank statements showing the funds going into your account over a three month period.  This may sound silly to most but trust me there is a very good reason for this.  Don't forget, lenders have seen a lot more situations then you will ever encounter.  It's really protection for you but that's another post.

Spousal Support:  This one is easy.  In most cases it's taxable income and much more easy to verify especially if you have been receiving it for a number or years.  Again you will need a copy of your separation agreement to confirm the support is a firm and binding legal agreement.  The agreement will also lay out any terms of the support such as length of time it will be paid etc.  If the support is new lenders will like to see a three month history of payment. 

It's easy to get your back up with a lender at this time in your life.  Try to remember that lenders are in the business of making "safe and sound" loans and they need to know you will be okay going forward.  Where things become difficult is when you're trying to do everything at the same time.  Separating, selling, buying, and dealing with the emotional fall out of up rooting lives and changing routines.  It's a lot of stress. 

Personally I think this a perfect time to work with someone you can trust.  In my practice we make a point of hand holding these transactions from start to finish.  We also tell it like it is.  We too want you to have a safe and secure life going forward. 

As always I welcome your comments, opinions, stories and any and all feedback.  Have a great day. 

It's Not Easy Being Green - Especially if you're a mortgage

This week there was an article in the Montreal Gazette about "Green Mortgagees" .   First of all I need to state I am not a bank basher.  I don't think the bank is your enemy and they have some very creative products to help you with home-ownership. It's their marketing departments that I take issue with.
The "green" movement is the latest darling that marketing departments have latched onto to churn out the same stuff under a different picture.   Let me explain using the article as my reference.

RBC Energy Saver Mortgage

— Receive a $300 rebate on a home energy audit

— Get a five-year, fixed mortgage with an annual interest rate of 4.34 per cent, more than one per cent lower than the regular posted five-year offering.

Really?  Okay the $300 towards an energy audit you were planning on having done anyway seems like a nice perk but hardly a motivator.  Especially when you consider most 5 year mortgages at Royal Bank, or anywhere, are getting booked at 3.79% at the time this article was written.  #fail

TD Canada Trust Green Mortgage

— Offers customers one per cent off the posted interest rate on a five-year, fixed-rate mortgage

— Customers also receive a cash rebate of up to one per cent of the amount of the mortgage when home buyers make Energy Star qualified appliance purchases and home upgrades or purchase CSA approved solar panels

— TD will also donate $100 to the TD Friends of the Environment Foundation charity for each Green Mortgage opened.

Again, at the time this article was published most 5 year mortgages were being offered at 3.79% and 1% off posted rates would be 4.49%.  But wait!!  The cash rebate seems like a good deal until you read the fine print.  That's "up to" 1% and when I call the TD bank nobody could give me the formula on how this is calculated.  I did find out that if you don't fulfill the 5 year term of the mortgage any cash would need to be repaid in part or whole depending on when you cash out.  And the donation?  Yes you are helping make the TD look good but if this is a charity you support it may be worth your while.  #soso

BMO Eco Smart Mortgage

— Offers buyers of green properties a 3.89-per-cent annual interest rate on their mortgage

— In order to qualify for the BMO Eco Smart Mortgage, the home must meet certain requirements as confirmed by a third party appraiser (or energy auditor) arranged by BMO.

This is a little better and probably the most straight forward.  But really, you can get this rate at BMO or any other bank without any third party anything.  #better

 

Canada Mortgage and Housing Corp. (CMHC) incentive

— If a person uses CMHC insured financing to buy an energy-efficient home or purchases a house and makes energy-saving renovations to make it more energy efficient, a 10 per cent refund on the mortgage loan insurance premium may be available.

 This, in my opinion, is probably the most useful "green" incentive.  The process to qualify is cumbersome but if you're planning to go into a whole lot of debt to green up this is worth your while.  Personally I think you should keep your financing under the CMHC radar by keeping 20% equity in your home but if you can't and you don't mind paying it's a good deal.  #best

 

And now my question to you is this:  

Would you consider a lender because of a "green" product?

The perks of using a real estate agent

With the Competition Bureau pushing for a more publicly-accessible Multiple Listings Service (MLS), and for-sale-by-owners sites, such as Property Guys, picking up steam, you may be tempted to forgo the services of a real estate agent and tackle your home sale yourself.
Before you invest the inevitable time and money to this endeavour, however, you may want to reconsider the pros of using a real estate agent.
If you’re a seller...
-    With an estimated 85% of homebuyers opting for the services of a real estate agent, a selling agent (and his/her fellow colleagues) have more access to potential buyers. This means more Open House traffic, more ad visibility, and more of your “ideal buyers” coming through your door.
-    While your home may look perfect to you, it may not meet the style and trend preferences of today’s buyer. Because real estate agents are in tune with the latest “must haves”, and deal with modern buyers on a day-to-day basis, they can offer the fresh set of eyes your home needs. This translates into simple but successful self-staging ideas that have the potential to move your home much quicker.
-    Listing at the right price is crucial if you want to sell your home as quickly as possible. Because real estate agents have access to past sales and comparables, they can help you find that magic number that will get the right people through the door.
If you’re a buyer...
-    Purchasing a new home can be daunting (and a lot of hard work) if you’re not quite sure what you’re looking for. A real estate agent who specializes in your ideal area is up-to-date on the homes for sale in your market. As a result, they can save you a lot of legwork and show you homes that fall in line with what you’re looking for.
-    Because they know the ins and outs of specific areas (and surrounding areas), they may be able to help you find your dream home in an unexpected place.
-    Real estate agents negotiate for a living – and yours will negotiate hard in your favour. Depending on the circumstance, they may also add in certain clauses that will make the sale as beneficial to you as possible  -- such as closing timelines and other conditions.

Before you renovate - Calculate!!

Canadians still seem to have the reno bug – if a recent BMO homeowners study is accurate. According to the report, Canadians are planning on spending $46 billion on home renovations in 2011 – up from $45.3 billion in 2010.  If you’re thinking about joining the masses and improving your home this year, make sure you’re doing it for the right reasons – or you could be flushing unnecessary funds down the proverbial toilet.


As an example, many homeowners don’t realize that every renovation isn’t guaranteed to show them a return – and most of them won’t even make you your money back when it comes time to resell. According to the Appraisal Institute of Canada, only interior and exterior painting, kitchen and bathroom renovations have the potential to achieve a 100% return on investment.

That doesn’t mean you shouldn’t renovate other parts of your home – you just shouldn’t do them with the sole purpose of making money upon resale. Instead, focus on home improvement projects that will actually improve your home – and your quality life while you plan to live there. A basement renovation, for example, might be a necessity if your growing family needs some extra space. Installing energy efficient windows can also help you save a lot of money on heating and cooling costs, if you’re planning to be around long enough to reap the rewards.

If you find yourself in a strong buyers’ market right now – and you need to sell quickly – then you may have to fore-go some of these rules. After all, if every house for sale on your block has hardwood flooring, and your home only has 20-year-old carpet, you might have to bite the bullet and spend a bit of cash upfront if you want your home to sell for top dollar.

If you’re wondering how much of a return on investment your coveted renovation project might get you, check out The Appraisal Institute of Canada’s calculator and before you renovate - calculate. Above anything else, avoid launching an expensive renovation project just to keep up with the Jones’s – especially if it’s going to launch you into debt. No granite counter-top is worth that!

Canadians Love Their U.S. Properties

For the fourth consecutive year, Canadians led the pack of foreign buyers sweeping up properties in the U.S. Twenty-three percent of foreign buyers were Canadian, with the next-highest group coming from China (9%).


It’s easy to understand why Canadians are deciding now is the time to purchase properties south of the border – more than 45% of those properties purchased by all foreign buyers in 2010 had price tags under $200,000. For a vacation property, that’s not a price to sneeze at!

If you’re thinking about becoming a U.S. property owner, here are a few things to consider:

1.    Cash is King.
Very few, if any, U.S. lenders are offering mortgages to foreign buyers right now – so if you’re thinking about buying a property, you’re best to buy with cash. If you don’t have $200,000 in cash on hand, many buyers are opting to take out a line of credit on their Canadian property and using the money to buy a U.S. home flat out.

2.    What are others saying?
If you can, talk to as many people you know who have recently purchased a U.S. property. Find out where they purchased the property, what their experience was like, and what tips they have to offer.

3.    Avoid buying in a ghost town.
While a super-low price tag may be tempting, make sure it’s not the only factor guiding your property-buying decision. Where you buy is equally as important – and a “ghost town” or “ghost building”, ridden with for closures, is likely not where you want to be. Aside from further reducing property values, foreclosed homes are not contributing to local maintenance (or HOA) fees, which means the amenities and maintenance services your building is supposed to offer may not be kept up to snuff.

4.    Buy with the long term in mind.
Nobody knows when the “bottom” of the U.S. housing bust will occur – or how long it will last. So it’s best to purchase U.S. properties with the long term in mind, rather than the mindset of turning a quick profit.