November 2013

Get mortgage wise, and debt-free faster

The days of humbly entering a bank, signing up for the first mortgage they offer, and paying it off passively for a lifetime are history. As a potential homebuyer you have more options and information than ever before. And that’s great, because the better decisions you make, and the faster you pay your mortgage down, the easier it is to enjoy life today, and prepare for tomorrow.

You have resources

Unlike past generations, prospective buyers can access so much information about borrowing. Instead of trusting the word of one banker, do your homework and read home-buying and first-time borrower tips from credible sources. There are great magazines, books and websites that explain personal finances in simple terms. Also, lean on family and friends for their experience and for names of lenders they’ve dealt with. Someone in your circle who got a mortgage in recent years can be a fountain of wisdom since they’ve had time to live with their decision and can provide relevant suggestions. But don’t rely on one ‘expert’, since their sincere advice might not be right for you. Armed with your research and advice, you’ll be ready to meet some lenders.

You have power

The biggest thing to keep in mind is that home buying is your decision. For example, it may be smarter to wait an extra year or more until you can save the largest down payment possible. While you might want to buy a home now, you’ll save thousands, and years of debt, by paying a larger down payment before you buy. Also, only you can decide how much debt to take on. Instead of being ‘house rich, cash poor,’ smaller may be better, since less debt leaves you room for other priorities like travel, entertainment or saving for the kids’ education. Your lender might pre-approve you for a large loan, but you must determine if you can afford those payments. Some day rates will go up, which could squeeze your finances. And, how would you handle a financial problem, like job loss or family emergency?

Since many housing markets have cooled off, and rates remain low, you have the power to negotiate with lenders. They should provide a few different mortgage products that fit your overall financial picture. Then, it’s up to you to decide which products and features really match your needs. Your instincts may help, but your research is critical. Next, you should make appointments with a few lenders, and consider a mortgage broker, to help you find the lowest rates. Shopping around is expected by lenders.

You have a voice

You should speak up when it comes to your mortgage. Based on your research, ask questions like:

  • Is this a fixed or variable rate, and what are my options to lock in the rate?
  • What are the pre-payment, pay-down and portability rules?
  • What fees or penalties does this product include?
  • And, what are the pros and cons of these different mortgages and who are they best suited to?

That’s just a start. Search online for lists of top questions to ask your mortgage lender. If you don’t get clear answers from your lender, look elsewhere.

You have short cuts

As the questions above suggest, there are ways to save money and pay down your mortgage faster. For example, take advantage of annual maximum pre-payment options to make a yearly lump sum payment on your mortgage. And, increase your payment frequency (eg. weekly vs. monthly), or the amount of each payment, when you can afford to. Your banker can calculate how these changes can make a dint in your debt.

You have a future

Buying a home is a big financial obligation, but by making the right borrowing decision for you, and paying off your mortgage sooner, you can enjoy your life today and also save for tomorrow’s priorities, including retirement.

What will retirement life really cost?

You know retirement is getting closer when your thoughts drift more often to images of golfing all day or wintering down south. While daydreams are great, it’s likely time to think about the actual price tag of those ideas, so you can make them happen.

Firming up our retirement lifestyle plans is important because, at some point, we must decide if they are realistic or if we need to change our saving habits to catch up and achieve our goals.

Often, individuals save diligently for years without a clear idea of how much they need. Or, upon reflection, they realize that their priorities have changed and their previous vision of retirement is no longer what they want. For example, could you really fish every day? Would you get enough use from a ski chalet? Maybe part-time work sounds appealing to keep active?

Where to start:

  1. Take some time to jot down your main goals for retirement (eg. escape winter, study painting, travel Asia). Involve your partner in this fun task, so that you agree on priorities.
  2. Discuss the associated factors, such as what age do you ideally see yourself retiring, would you work part-time, where will you live, and what obligations or constraints must you consider, like health, support for family members or financial issues.
  3. Begin to flesh out each of your main goals in more detail, thinking about where, how and when? For example, what frequency and style of travel do you desire? Hint: You may think about your retirement in stages (eg. active, busy early years, slower pace middle years, and sedate later years, possibly with care support or assisted living).
  4. Research the approximate costs of your wish list items. You don’t have to be precise, but at least get a ballpark idea of the costs of renting a winter home, starting your small business or other big goals.
  5. On top of the fun stuff above, estimate your daily living expenses. Will they go down or stay the same? Hint: A general rule of thumb is that you may need around 70 per cent of your current income to maintain your lifestyle in retirement.

Six steps to buying your first condo

Becoming a condo owner is a rite of passage for many young professionals. Not only is it a crucial investment for your future, but owning your place, instead of renting, can make your living space feel more like a home. No more worries about what your landlord will do if you paint the walls a certain colour.

Many first-time home buyers find the condo market more affordable and attractive than houses. Some buildings also have pools, gyms and rooftop terraces to suit young, urban lifestyles.

Here are six key principles to keep in mind when shopping for your first condo.

1. Find a realtor

Use word of mouth and recommendations from friends in your area to find a good realtor. You’re looking for someone with experience in condos and dealing with first-time buyers in your price range. A realtor who has bought and sold properties in your desired neighbourhood(s) is also important.

2. Condo fees

These are factored into the calculation of your monthly mortgage payment when determining your price range. Condo fees help pay for amenities and shared maintenance costs. They can also increase at any time. Just make sure you’re not paying for a gym and a pool that you may not need.

3. Condo boards

Condos are run by a corporation made up of a board of directors, elected by the owners. The corporation is responsible for ensuring the reserve fund has enough to cover any repairs and maintenance costs in the shared areas. After an assessment, the board may decide to raise condo fees to ensure there’s enough money in the reserves. In Ontario, if owners occupy more than 15 per cent of the building’s units, one spot on the board of directors must be reserved for an owner.

If you have any questions, you may contact your Morrow, Crossdale & Associates  Group Benefits Advisor we would be happy to assist you.

excerpts provided by: Benefits World Canada – 2013, Article provided by: SunLife Financial – Fall 2013

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