The tax benefits of home ownership

Now that February is over, all those tax-related documents have likely started arriving in your mailbox. Whether you’re socking them away to use at a later date, or hoping to put them to work this weekend, there are a number of housing-related deductions and credits you should keep in mind as you go through the tax filing process. Pay particular attention if:

You’re a first-time homebuyer

Anyone who has purchased a home for the first time can claim a non-refundable tax credit of up to $750.

You’ve made your home more accessible

If you have mobility impairments and spent money making your home more accessible in the last year, you’re eligible to claim those renovation expenses under the medical expenses deductions.

You bought a new house

If you bought a new build for under $450,000, you may be eligible to claim the GST/HST new housing rebate—provided it’s your principal residence.

You own a rental property

The downside to owning a rental property is that you have to claim your rental income as, well, income. The upside is that you can claim many expenses that go into maintaining a rental property—such as advertising costs, insurance and mortgage interest.

You work from home

Whether you are self-employed, or a commissioned or professional employee who works from home, you can claim a portion of your home office expenses—such as heating, home insurance, electricity and mortgage insurance.

While your accountant or bookkeeper is likely the best person to ask about other household deductions, I can definitely help with any mortgage-related queries you might have! So whether you’re looking to renew, refinance or simply want to chat, don’t hesitate to drop me a line!

Homebuyers’ Tax Credit 101

If you bought a home in 2015, you may or may not be aware that you’re eligible for a Federal tax refund this upcoming tax season. If you’d like to learn more about the First Time Homebuyers’ Tax Credit—including how to qualify—the Canada Revenue Agency put together this informative video  with all you need to know!

If you have additional questions about the First Time Homebuyers’ Tax Credit—or about your mortgage—please don’t hesitate to reach out to me.

You can call our office at 905 372 7367

Having trouble affording your first home? You're not alone.

If you’re an aspiring first-time buyer getting frustrated by how hot—and expensive—your market is, you’re not alone. Many young people are in your exact position. In fact, this professor at UBC actually did research on the plight first-time buyers face, and determined that they’re by far worse off than their parents were.

That being said, there are ways to land a new home if you really want it. You may just have to employ creative measures, such as:

Buy with friends

You’d obviously have to be very careful which friends you choose—and make sure you employ the help of a good real estate lawyer when devising the contract—but this strategy has worked for some people. In one case I’m familiar with, a group of three roommates decided to just buy the home they were living in. It came up for sale and, after doing the math, they realized today’s low interest rates (coupled with a good down payment) made their mortgage payments cheaper than their rent payments. In another situation, a married couple and their friend bought a home together with a basement apartment. The bachelor lived downstairs and the couple—and eventually their kids—took the upstairs.

Be resilient

In a hot market, it’s easy to get discouraged—but it’s important not to let the endless bidding wars get you down. One buyer I know looked at every house that came up in her price range—regardless of what the photos in the real estate listing looked like. She eventually came across a gem—a recently-renovated home with a basement apartment in a decent neighbourhood. Not a single soul put an offer on the place because the agent hadn’t updated the listing photos—and the ones posted were pre-reno (and quite scary).

When necessary, settle.

Sometimes you just can’t get what you want. Sure, a three-bedroom three-bath detached home would be ideal, but sometimes a smaller townhouse is all you can afford (and find). If you can find a place that will make do for the next five years (that doesn’t overextend you), you may have to settle—and buy your dream home after you’ve built up some equity.

If you or anyone you know is trying to break into the housing market, please don’t hesitate to send them my way. Referrals are always appreciated!

How to quickly find your ideal mortgage payment

When shopping for a new home (and a new mortgage), it's best to work backwards-figure out how much you can afford to spend on your monthly mortgage payment and use that number to determine your ideal housing price point. How do you come up with that monthly number? Well, one way is to go through your last three months' worth of bank statements, figure out what your spending habits are decide how much you could comfortably spend on housing. The other (quicker) option? Try the 40X rule . The 40X rule is simple-and a calculation that's been used by New York City landlords for quite some time. Divide your annual salary by 40, and you'll end up with the approximate monthly payment you should be spending on your mortgage. Fiddling around with a mortgage calculator will help you translate that monthly number into a total mortgage amount-and, combined with your down payment, your housing price point. While this isn't a foolproof method, it will give you a starting point to look for houses in your price range (and avoid disappointment when you find out that the multi-million dollar mansion you had your eye on is actually not in your budget).

The New Mortgage Rules Effective February 15th. 2016

Breaking News:

Today Bill Morneau, Finance Minister, announced some significant changes to mortgages.  Effective Feb 15, 2016 the minimum down payment for house purchases over $500,000 will require a bigger down payment.

Here's how that works:

A purchase price of $800.000 until Feb 15th, 2016 would require a down payment of $40,000.  After Feb 15th the down payment changes to 5% on $500,000 ($25,000) and 10% on the amount over $500,00 (10% x $400,000 = $40,000).  Your new down payment required is $65,000.

This is a dramatic change and deserves to be read between the lines.  The Minister today said he was ensuring  credit worthy borrowers maintained enough equity to protect them. There is also a lot of talk of the US raising borrowing rates next month.   There appears to be a lot of pressure on the government to cool the housing market before it corrects itself.

A market that shuts out first time buyers is not a good thing.  First time buyers are shut out more by the price of housing than down payments.  At this time first time buyers have little hope of getting into the market because of the price and not because of their inability to save money.  They are also affected by the interest rates.

Lets take a look back to the early 1990's.  First time buyers were shut out of the market.  Prices were out of reach and buyers were flocking to the suburbs and small towns in big numbers.  Those lucky people that managed to get into the market soon found they owed more money than their houses were worth.  It would appear the government has not forgotten the lessons of that time.  While they won't out right say there is a correction on the horizons its getting ever more apparent.  The changes today will ensure those buying will have a cushion.


More to come on this for sure.

A simple way to save energy this winter

Now that the weather has gotten chillier, households across Canada are turning up the heat. But are they doing it efficiently?

If you're like most homeowners, you probably haven't combed through the instructions of your high-tech thermostat-but you should. Knowing how to properly take advantage of your thermostat's features could save you a ton of money in energy bills this winter. Read this article  to find out which features you should be paying attention to.

Winterize Your Garage

With the cold winter months fast approaching, there is no better time to reorganize your garage to make room for more important things-like your car!

If you're looking for some inspiration, check out this blog  post from the professional organizers at Tailored Living. It's full of really interesting floor-space-saving ideas and racking configurations (that make storing things like sports equipment and holiday decorations so efficient!)

Which part of your home is in most need of some reorganizing? Let me know-I'd love to hear!

The Secret to Avoiding a Housing Slowdown

We've been hearing about the risks of housing overvaluation in Canada for the last few years. While there’s no way to tell for sure when housing prices will stop increasing, as this article in the Globe puts it, it’s going to happen sometime. Whether it’s a more significant correction, or an extended period of stagnant housing prices, it’s best to prepare now for the inevitable.

This means abiding by the 10-year rule—buying a home that, if necessary, you could live in for the next 10 years. This sounds easier said than done—particularly in Canada’s more expensive housing markets—but, in many cases, it is possible. It might mean buying in a less desirable location, or purchasing a home with renovation potential should it become cramped within the next 10 years. It also means skipping the condo purchase if you’re a first-time buyer who might be starting a family within the next five years, or foregoing that large mansion if you’re going to find yourself with an empty nest in the same timespan.

When abiding by the 10-year rule, you’ll also have to consider your mortgage options as well. Sometimes the traditional 5-year fixed makes sense, but occasionally longer mortgage terms can benefit you as well. If you’re wondering what mortgage option is your best bet over the next decade, feel free to drop me a line and we can find a solution that makes the most sense for you.

Don’t lose money on foreign currency exchanges

When traveling out of the country, how much foreign currency should you bring? And how can you be sure you're getting the best exchange rate – without the hidden fees?

This article in the Globe tackles the topic, offering five money-saving tips for exchanging foreign currencies on vacation. The best tip, in my opinion? Find a credit card that doesn't charge an extra foreign exchange fee – there are a lot of them – and use it for as many purchases as you can. Supplement that with extra cash from the bank (obtained before you head to the airport) and you should have enough for cab fare, tips and cash-only emergencies. 

What is your foreign currency strategy? How much cash do you bring when leaving the country?

4 Ways to Measure your Financial Health

So you finally paid off your credit cards and you have a bit of money in the bank - but are you financially healthy? If you want a true reading of your financial health, you have to look beyond the obvious and dig a little deeper. Here are four numbers that can help you determine where you stand:

Credit Score
In Canada, a Credit Score over 600 is considered "good", while anything over 750 is considered "excellent". To uncover your score, you can purchase an online report from one of Canada's credit bureaus, Equifax or TransUnion.

Retirement Savings
Your retirement nest egg obviously depends on the type of retirement you hope to have. There are plenty of retirement calculators and articles out there to help you determine what your end number should be. Work backwards from there to see if you're on the right track.

Emergency Savings
Anything you put aside in an emergency savings fund is better than nothing, but most experts suggest saving between three and six months' worth of living expenses to safeguard your household against such factors as unemployment, injury or illness.

Net Worth
When you take your assets and subtract your debts, what are you left with? If the answer is "nothing", this is an area to work on!

If, after looking at these numbers, you're lacking in a few areas—that's okay! This exercise is simply to determine where you stand, and help you devise a plan of action for improvement. Sometimes your home can speed up this plan of action. Feel free to give me a call to see how you can use your home to improve your financial health.

Flaherty Targets CMHC

Earlier this month, the Federal government announced that, in an effort to further curb mortgage lending and prevent a housing bubble, it will now charge Canada Mortgage and Housing Corporation (CMHC) a "risk fee" on the insurance it writes.

 

CMHC offers mortgage default insurance for homebuyers who have less than 20% down. This insurance protects lenders if you can't fulfill your mortgage obligation - but the homebuyer is actually the one who pays the premium.

Unlike private insurers Genworth and Canada Guaranty, however, CMHC is a Crown corporation. If lenders are forced to use their CMHC insurance, it's actually the tax payer who's going to be picking up the tab. To add to the CMHC controversy, the Crown Corporation is backed 100% by the Federal government. If it gets into trouble, the government will completely bail it out. The other default insurers are only backed 90%.

To limit its exposure, as of January 1 the government will be charging CMHC a "risk fee" of 3.25% on all its insurance (a rate that is higher than the one already paid by private insurers), as well as capping the amount of insurance CMHC can issue at $600 billion.

Despite the steps to reign in CMHC's business, most experts believe the average consumer won't notice a difference. If you have any questions or concerns about your ability to qualify for a loan -- or any other mortgage-related questions -- please don't hesitate to drop us a line.

 

Happy People Live in Small Houses

If you've felt stressed and short on time lately, maybe your house is to blame - at least that's what Joshua Becker at Becoming Minimalist believes.

After visiting his parents' new downsized home, he sat down with his mom to figure out why they were so much happier living in less square footage. She came up with 12 reasons. Here are some of our faves:

Less time spent cleaning. 'Nuf said.

Less expensive. Smaller homes are less expensive to purchase and less expensive to keep (mortgage, insurance, taxes, heating, cooling, electricity, etc.).

More time. Many of the benefits above (less cleaning, less maintaining, mental freedom) result in the freeing up of our schedule to pursue the things in life that really matter - whatever you want that to be.

Less temptation to accumulate. If you don't have any room in your house for that new treadmill, you?ll be less tempted to buy it in the first place (no offense to those of you who own a treadmill? and actually use it).

Wider market to sell. By its very definition, a smaller, more affordable house is affordable to a larger percentage of the population than a more expensive, less affordable one.

Have you downsized recently? What do you love most (or least) about your new smaller home?

How to make money off your home.

One of the reasons you likely got into home ownership in the first place is because you saw it as a good investment. But real estate appreciation isn't the only way owning a home can make you money. This article in Canadian Living magazine does a great job of highlighting 7 Ways your Home can Make you Money.

In addition to the obvious (i.e. renting out your basement), the article highlights a few less common ways to make money from your home - like running a bed and breakfast (definitely not for everyone) or renting your home out to a television or film company.

Depending on where you live, you may also want to look into making some green renovations. Not only will this save you money in energy costs (which is essentially the same as making money, isn't it?), but some jurisdictions allow you to sell additional energy (like that generated from the installation of solar panels) back to the grid.

Starting your own backyard vegetable and fruit garden may also be an option for you. Not only will this save you money on your grocery bill, but if your garden is big enough - and productive enough - you may also want to look into selling some of your homegrown food at a local farmers' market.

Has your home helped you earn additional income? If so, we'd love to hear how!

Costs up upsizing your home.

Very few people stay in their starter home forever. Most of the time - whether it's because of a growing family or a growing income that allows you to purchase something better - homeowners opt to move to a larger abode. If you're finding yourself in this situation, keep in mind that with a larger home comes larger costs. Below are just a few things to consider when you're determining how much more house you can afford: 1. Mortgage Unless you're moving to a significantly less expensive area, chances are you're going to require a larger mortgage as your home's square footage increases. You can opt for a higher amortization to keep your monthly payments low (think 25 years), but this will also increase the amount of mortgage-paying years you have left. 2. Regular Maintenance (lawns, cleaning, snow removal) This will be a particular shock if you're moving from a condo to a house. Lawns, gardens, snowy driveways - these all need to be maintained. Also, the bigger the house, the more you're going to have to clean (if you're into that sort of thing). Whether you hire people to perform these tasks or you opt to do them yourself, you're either looking at more money or more time spent on them. 3. Property taxes Again, unless you're moving to an area that has lower taxes, chances are you're going to be paying more for a larger home. Find out from your Realtor roughly what the taxes are in your ideal neighbourhoods, and factor this into your budgeting before you start looking. 4. Utilities Bigger house means more rooms to heat - and cool. You may also have to pay for water, sewage and other costs such as water heater rentals. 5. Emergencies If you're already living in a house, this likely won't be an issue because you're used to the threat of unforeseen maintenance issues. If you're moving from a condo, however, it's important to note that you're no longer paying maintenance fees for a reason. If something goes wrong, you have to foot the bill yourself. Make sure you have a reserve fund ready. 6. Home insurance With a bigger home comes a bigger home insurance payment. 'Nuf said. Depending on where you're moving to, some of these costs might be offset. Particularly if you're moving closer to work - which will likely lead to lower gas bills and car insurance. If your new home is newer, and more energy efficient, you may not notice a huge difference in utility bills. And if you're moving out of a larger city, your cost of living might decrease all around. Make sure you figure out roughly how much new house you can afford before you start looking. There's nothing worse than finding your dream home only to realize it's going to make you house poor.

Is home buying about to become more difficult?

Just when you thought mortgage rules couldn't be tightened any more, the Office of the Superintendent of Financial Institutions Canada (OSFI) said it's "looking into" doing just that, by potentially eliminating amortizations over 25 years.

Thanks to last year's mortgage rule changes, amortizations over 25 years are no longer available to high ratio buyers - or those with less than 20% down. But individuals with larger down payments can still access 30- and 35-year amortizations.

That's what OSFI is looking to potentially stop. It's currently consulting with financial institutions on the matter to see if this solution is something that makes sense, and if it could potentially help stabilize the housing market (and its ever-rising prices), curb consumer debt levels and reduce the risk of exposure to rising rates.

It's a shame that the government is looking to eliminate this mortgage tool as a means of curbing household debt. Individuals already have to qualify for the five-year posted rate at a 25-year amortization - you'd think that would be enough.

That being said, interest rates have been extremely low for quite a while, and the housing market seems to have resisted previous attempts to cool it down. Finance Minister Jim Flaherty - along with the Bank of Canada - have repeatedly expressed concern over the housing market. They'd rather see a soft landing than a bust - and really, who can blame them?

If you're in the market for a new home or refinance, and were hoping for an amortization longer than 25 years, you may want to give us a call sooner rather than later. You never know when the rules are going to change again!

What don't you miss about renting?

In this day of low interest rates, the temptation to buy a home versus renting one is higher than ever. This article in the Globe offers some great insight into the buying versus renting debate, and how to determine what's right for you.  While it's true that homeownership isn't an ideal choice if it's going to leave your house poor, or if you're not ready to settle down in one location, there are definitely a lot of positives involved for those willing to take the plunge. Below are some things our clients appreciate most about home ownership. 

1.      Forced savings

While some people are good at saving their extra income, others are not. For the less-than-savvy savers among us, home ownership can be a great thing, as it's forcing you to sock away money every month. Instead of paying someone else's mortgage, you're paying off your own - and building equity in the process.

2.     The freedom to make the place "yours"

When you own your own home, you're not stuck with someone else's choice of paint colours, flooring or fixtures. How you customize your home is only limited by your imagination - and, maybe, your savings account.

3.       The desire to keep your place nice

Even though you live there, when you rent a place it's never really quite yours. While you may want to keep it nice and presentable, if something major goes wrong - or if you crack a tile here or there - it's not that big of a deal because someone else will pay to get it fixed and, if they don't, you can always move into a nicer place without much of a hassle. When you own, you always have resale in the back of your mind. This motivates you to deal with potential issues before they become major (costly) problems, and upkeep your home so you have less headaches should you eventually decide to move.

4.     Freedom from crazy landlords

If you've rented for a while, you've likely come into contact with a landlord or two who wasn't quite, well, ideal. One of the biggest perks to owning your place is you don't have to answer to anyone - but, on the flip side, you have to handle all of those household issues on your own. Still, it's a small price to pay for freedom. 

How much is your credit score costing you?

It's always important to keep an eye on your credit score, whether you're in the market for a new mortgage or not. Not only does regular monitoring alert you to potential identity theft, but it will also allow you to deal with any potential credit errors before the eleventh hour.

 

According to this infographic by Canadian lender Xceed, the most common credit reporting error is a Tradelines (or Consumer Reports) error. This is a negative item on your report that, while it may be yours, features some sort of mistake - like the incorrect number of days a payment is late, incorrect balance or missing account information. If the information is wrong, you can dispute it - and if the credit bureau is unable to verify the information within 30 days, the entry has to be removed from your credit file.

Other ways mistakes can find their way onto your credit report is if you have a hard-to-spell last name or a name that changed after you were married. This can lead to confusion among creditors -- and increases the possibility that someone else's missed payments will find their way onto your report. Occasionally, collections agencies also fail to report when a collection has been paid in full - and the mark on your credit report continues to bring your score down.

If you spot an error on your credit report, it's important to dispute it in writing to either (or both) of Canada's two credit bureaus - TransUnion and Equifax. A low credit score can cost you thousands when it comes to your mortgage, primarily because the best rates are reserved for those with a good score. Once you fix any outstanding errors - or pay off outstanding debts - you'll be amazed at how quickly your score can improve.

Must-have tools every homeowner should own

Since deciding to sell my house I've had to do a few repairs.  You know that list of "things that need doing but don't really bug me enough to invest the time"?  Rummaging through the basement I found enough tools to do most of the work but I did have to make a few trips to the hardware store. 

I have decided to share my "must have" list with you.  Hardware stores can be overwhelming if you don't know what you're looking for. Whether you've bought your first home or have decided that 2013 is the year you become "handy", below is a list of "starter" tools every homeowner should have on hand:

1. Toolbox
2. Hammer
3. Pry bar
4. Vise grips
5. Needle-nose pliers
6. Screwdrivers (mixed set
7. Wire cutter/stripper
8. Tape measure (16-foot)
9. Reversible drill with bit set
10. 9-inch torpedo level


If you don't feel like buying each of these tools individually, there are some great starter tool kits available that have everything you need - from screwdrivers to pliers to measuring tapes - in one handy box. With the basics on hand, you can buy additional tools - like hand saws or sanders - as the need arises, which might be a little easier on your wallet.

How to live with less.

 

 

 

If you've already started your spring cleaning, chances are you're all too familiar with our society's obsession with "stuff"?. For those of you looking for some inspiration to purge those unneeded things, you might want to check out this New York Times article , "Living with less -- a lot less" by Graham Hill.

 

Hill made a killing during the Dot Com era, and immediately spent his fortune on material items - houses, gadgets, cars, you name it. The article explains how managing these items became a job in itself, and how it eventually started to suck the life out of him.

After achieving his "ah-ha"? moment, he purged everything and now lives in a 420 square foot condo in Manhattan. Without a lot of extra stuff taking up space, he's been able to organize it in a way that allows him to entertain dinner parties for 12, accommodate overnight guests (in their own room) and watch TV in his own "media room"?.

Here's a video of what his new lifestyle looks like:

http://gizmodo.com/5967622/the-tiny-transforming-apartment-that-packs-six-rooms-into-350-square-feet

Hill is hoping his next business venture will get more people living a minimalist lifestyle. Life Edited offers similar living solutions to those that exist in his condo.

http://www.lifeedited.com/

Whether you're living in a 420 square foot condo or not, it's always good to partake in some regular decluttering to avoid letting things get out of control. If this is what you're planning on doing this spring, good luck and happy purging!

How to tell if your home is overvalued

It seemed natural that with the introduction of record-low interest rates, threats of housing bubbles wouldn't be far behind. For years, the Federal government, Bank of Canada - and now, the International Monetary Fund - have warned about potential housing overvaluation across the country.

The thing is, saying that houses across Canada are, on average, 10% overvalued doesn't make much sense. Canada is a vast country - and housing markets vary drastically from one area to the next.
So how can you tell if your house is overvalued? Well, that's a difficult - if not impossible - question to answer (unless you're an economist - but even then...). That being said, I've always liked this concept that was printed in the New York Times way back in 2005. It employs a mathematical equation similar to that used in the stock market, to determine if stocks are overvalued. The equation looks at a house's "rent ratio": You take the price of a house in a typical area and divide it by the cost to rent it for an entire year. The result is the rent ratio - and the lower the ratio, the better. Typically anything under 20 is considered "bubble safe".
The article acknowledges this is an imperfect measure - mainly because it's not always easy to find out what your house would get on the rental market. That being said, it has proven to be somewhat useful - and is definitely worth a shot if you're worried about buying a home that's potentially overvalued!