Renting Vs Buying Real Estate - Evaluating - Part 2

Renting vs Buying Real Estate - is it right for YOU (PART 2)

Ok, so now you've considered your options and want to explore this buying a home thing more. Why not? More and more people are making that decision and traditional ways of waiting until marriage or having a partner. Even if in a relationship/married, perhaps you wanted to  have more time together first, pay off student debts, travel, or whatever your personal situation. It doesn't matter when and it's about being smart and analyzing whether it is or isn't good for your personal needs.

There is absolutely nothing wrong with renting and current lower vacancy rates here in Barrie (and Ontario-wide) are showing that more people are preferring this. So is home ownership over-rated? There's value in both methods and again, it's all about you whatever your lifestyle dictates. There are many programs available so let's look into no money down and rent to own which are many questions we get asked as well.

So, considering the ads with the Zero Down Payment Mortgage? Before you get sucked in and give your information, know what the requirements are. Always remember, if it sounds too good to be true, it probably is.

What you need to know: Credit Score Requirements

To qualify for a no down payment mortgage you need a credit score of at least 680. You are likely to have a 680 credit score if you pay credit cards and other loans on time, and there are no bill collections in your name. You will need to have three (3) years of consecutive employment in order to qualify for a zero down payment mortgage.

A no-down payment Mortgage is not for everyone. Please discuss your personal financial situation with your broker to get informed about this product - and find out if it's right for you. A no-down payment Mortgage is also known as a cash-back Mortgage. This product can also be used to help with mortgage closing costs - or for other things around the house such as furniture, repairs or appliances. Again, it's not for everyone and if you're not good at budgeting, and you also need to know whether the home qualifies (not overprices and will appraise for the value). You're also not going to have instant equity if not putting any money into it so if you need to resell for whatever reason in a shorter amount of time, well, you're not making money either.

How Down Payments Affect your Mortgage and Mortgage Size

• Your down payment is used to determine the maximum price of a home you can afford
• Your down payment will have an effect on your mortgage size and mortgage payments: 
• The more money you put down, the smaller your mortgage and the smaller your payments will be.
• Your down payment also determines the amount of CMHC insurance you pay: 
• As stated above, a down payment of less than 20% forces a CMHC mortgage default insurance requirement. The cost of the insurance will fluctuate depending on the size of the down payment for your mortgage.

How can you finance your down payment?

Besides traditional saving methods, or the sale of personal assets, various methods of obtaining money for your down payments exist. One of these methods is the Home Buyers' Plan (HBP). It is a program that allows you to withdraw up to $25,000 from your registered retirement savings plan (RRSPs) to buy or build a a home.

Home Buyers' Plan (HBP)

The Canada Revenue Agency outlines the Home Buyers' Plan (HBP) as a program that allows you to withdraw up to $25,000 from your registered retirement savings plan (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability .

Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP, or they may not be deductible for any year.

Generally, you have to repay all withdrawals to your RRSPs within a period of no more than 15 years. You will have to repay an amount to your RRSPs each year until your HBP balance is zero. If you do not repay the amount due for a year, it will have to be included in your income for that year.

Topics

Conditions for participating Do you qualify, how and when to withdraw funds from RRSPs	How to withdraw for the Home Buyers' Plan (HBP) Follow the steps to withdraw funds from your RRSPs
Cancelling Situations when you can cancel your participation, how to cancel and due dates	Repayments When and how much to repay, how to make a repayment and exceptions to repayment dates
Special circumstances What if the participant dies, becomes anon-resident, or reaches the age of 71	Important dates

Forms and publications

• Guide RC4135, Home Buyers' Plan (HBP)
• Form T1036, Home Buyers' Plan (HBP) - Request to Withdraw Funds From an RRSP
• Schedule 7, RRSP Unused Contributions, Transfers, and HBP or LLP Activities

RENT TO OWN

You see all the ads, have heard about it and wonder if this is a consideration. Sure, everything is a consideration if it gets you one step closer to your goals. We're here to help educate you and decide what program is or isn't right for you. Fortunately, we work with a lot of investors and mortgage brokers that offer many variations of programs available to people that choose to work with us and seek assistance. 

The most important things to know about rent to own?

• it's not for everybody
• it must be a win/win
• must be disciplined or be willing to learn to be disciplined about monthly payments because it's forcing you to save for a downpayment if you're not already able to do so
• it's not for everybody
• must be a win-win

That's right. Intentionally said those twice because that's the only type of clientele we work with. Those that analyze each scenario on a case by case basis to make it beneficial to you, the home buyer and the investor wanting to help you. That's right. The investor purchasing the home to help you be able to buy it and get you one step closer to home ownership that you've only dreamed about. 

Not going to mislead you. It is a business and there is an invested interest for the investor of course because there are books out there, courses and online resources teaching people to get on the "rent to own" bandwagon. This is why we interview our investors to find out their intentions of wanting to offer rent to own programs. Yes, we turn people away and only work with a select, elite few and must be referred to us. Why? Here's why...

You've never owned a home before or have owned but got into a financial situation and think rent to own is a good option for you. You seek us out for information and develop a trust. You want to own a home so badly and will practically do anything (legal of course) to get it. Perhaps you may not read the papers before you sign and willing to borrow from anyone to get whatever down payments are necessary so you can be a home owner. We can honestly tell you, this is not the way to be at all. You're setting yourself up to fail before you've even started and actually this is taking you further away from your goal of home ownership. You lose time, money, effort and give yourself even more stress that you bargained for. 

If you've never owned a home before, how do you understand those legal documents? You're trusting someone to explain them to you that have an invested interest because they're making commission or sale right? Realtors are governed to be ethical and have a business standards of course. However, there's also the obligation to inform you of everything and probably a good idea to have a conditional clause that you have the right to have reviewed by a lawyer. That's what the professionals are trained for and really important for you to know your rights and entitlements.

After typing, realize rent to own is a whole other topic. So let's make a Part 3 and call this a series!

Happy investing in you and happy new year!

*not intended to solicit anyone with any written agency agreements. This blog is intended to provide information for educational purposes only

Sources:
Canada Revenue Agency

New Year - New Fitness Regime - New You - Stick With It! Here's a Plan How

Can't believe I have missed out on this site but love it! SquawkFox.com  "where frugal living is sexy, delicious and fun". It's a great site to find valuable information not only on finance/wealth but health too! It's created by Kerry K. Taylor and below is her bio and you can find her page on Facebook as well.

(bio: Kerry K. TaylorKerry strives to make frugal living sexy, delicious, and fun. She is the author of the book '397 Ways to Save Money' and is the creator of Squawkfox.com. Kerry is also a two-time Ironman triathlon finisher who resides in B.C.)

You're probably putting together your New Year's Resolutions and one of those most notably, will be fitness. So, all credit to her as she created this workout log.


Here's her input on how to use the Workout Log and how it can help you get fit:

• Stay frugal by tracking your fitness for free.
• Easily track weekly and daily workouts.
• Monitor fitness goals and achievements.
• Get trim, slim, and fit by honestly logging your exercise sessions.
• Keep a pulse on weight fluctuations, heart rates, and energy levels.
• Plan daily workout schedules.
• Track time spent exercising, distance traveled, and workout intensity.
• Have fun with fitness by using an attractive workout log or exercise log sheet. 

This two-page free printable exercise log covers a whole week. So keep yourself motivated by tracking your weekly fitness goals, hours of exercise, and workout type. There’s no time like the present to start with a simple and frugal walk to get your heart racing.


Need a beginner, intermediate, or advanced walking plan? The free eBook Frugal Food & Fitness: Get fab without spending a fortune outlines three free walking exercise plans for your workout pleasure. 

Free Printable Workout Log

**Note: there are also some GREAT apps now to keep track. But if you're a "paper person" it's good to keep a visual whether posting on your fridge, desk, etc. Wherever you will see it often,

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Other FORMS from Squawkfox you may also like:

Printable Free Exercise Plan: 12 Week Advanced Walking Program

Printable Free Exercise Plan: 12 Week Intermediate Walking Program


7 Tips for Starting a Frugal Walking Exercise Plan


Printable Free Exercise Plan: 12 Week Beginner Walking Program

So...much success to you in Health, Wealth and Fitness!!

Renting Vs Buying Real Estate - Calculate and Evaluate!

So the New Year is upon you and you're probably thinking about making changes in your life. One of those, whether single, with a family or not, is thinking about whether you should keep renting or perhaps time to buy a house. Great goal for sure!
So by now you're scouring the internet, checking out Realtor.ca aka MLS.ca and other sites to see what the going prices are, what pretty houses you like, etc. But really, can you AFFORD it and is home ownership right for you at this time in your life? This is a Part 1 Series and Part 2 will follow immediately tomorrow.

Before you make hasty financial decisions, you're a smart person so analyze before just jumping in. You've probably come across a rent vs buy calculator or two which is also a great start. However, the problem with most rent versus buy calculators is that they fail to account for the additional costs that come from moving from an apartment or townhouse with little to no yard or driveway, into a 2,500 square foot home complete with a yard and a driveway.

When you move into a home that is double the size of your rental home, there are costs  you need to be aware of that Mortgage Brokers, Real Estate Lawyers and Realtors may or may not be bringing to your attention. Facts to consider are:

• You will now have to pay the utility bills on heating and cooling twice the square-footage.
• You have twice the space to furnish and decorate (and you WILL buy more furniture to fill up that space)
• You will now have a yard and driveway to maintain (if moving up from an apartment - more grass to cut, trees to plant, gardens and flowers in wanting to "showcase your home to be proud of).
• You will now be paying property taxes on the value of the entire property.
• You will now have to get homeowner insurance to protect you from loss (requirement of having a mortgage)
• You will now have to repair, maintain, and replace ALL fixtures, appliances, heating-cooling equipment, plumbing, landscaping (lawnmower/shovel/snowblower/rakes and such equipment), floor coverings, windows, shingles/roof/eavestroughs, brick, siding, driveway, etc as they break down or experience wear and tear, dated or, or become obsolete. And if you fail to properly maintain your property, don't plan on the value appreciating as much as the real estate agent is boasting it will.

Don't have your head in the sand....really. Just don't bury your head and always ask are the expects having your best intentions at heart of ulterior motives in wanting to sell you a house. If you don't have the down payment, don't take a second mortgage out just because you want to own a home. It may sound good at the time but then you're also paying more interest and your monthly out of pocket expenses are higher.  Unfortunately,  home buyers failed to recognize that those experts do stand to gain so make sure you research and have the right team that will disclose to you the costs of home ownership and also disclose the right neighbourhoods that suit your needs. Ask questions and always trust your gut instinct (but that will be another blog one day)

The choice is yours, you can choose to ignore the costs of home ownership when contemplating a home purchase, or you can take painstaking steps to accurately forecast and budget for them now, while you can, in the save haven of your rental that you've already budgeted for. 

So, with that in mind, take a look at this Rent Vs Buy Mortgage Calculation on the image below. Calculations and values were entered to calculate and compare the cost of renting to the true cost of buying a home. It's not honestly all bad and yes, absolutely beneficial but IS IT RIGHT FOR YOU?

Let's say you pay $1100 per month and you stay in that home for 5 years.  You've spent $66,000

Now, let's pretend you were paying $1500 and that was a mortgage. If you put $500 away each month in the same amount of five years, that's $30,000 you could have saved. That's right. That's more than the minimum 5% required** (see note) for a down payment if you were to purchase a home for $250,000.  You can use that money to allocate for closing costs and/or use more towards a down payment to reduce your monthly mortgage amount or put that into a savings account for "a rainy day" and any unexpected maintenance costs.

**(downpayment definition:  A mortgage down payment is a specific sum of money deposited towards the purchase of a new home. It is not required in all cases, however, in the case that it is, there is a minimum amount required. This amount is relative to the value of the home you are looking to purchase. 

Note: the bigger your down payment is, the more affordable your mortgage loan will be. This is because a larger down payment results in smaller overall interest payments (a smaller loan). Down Payment Requirements For a Mortgage in Canada - Minimum Down Payment

For home buyers that are paid hourly or earn a regular salary, a minimum of 5% is required as the down payment for a home. For self employed home buyers a minimum of 10% is required to purchase a home. More could be required if your credit is poor (learn more about your credit score). Anyone choosing to put less than 20% of the value of the property as a down payment will be required to obtain CMHC (Canada Mortgage and Housing Corporation) mortgage default insurance. This protects the lender from losses in the event that you were to default on your mortgage.

Ok, don't want to overwhelm you. Not here to talk you into or out of buying. Again, just want you to make a well-informed decision because don't want you to be taken advantage of. The world is not all about Barbie's, sunshine and rainbows. Part 2 tomorrow


Happy New Year and happy new you!


sources: 
Mortgages Canada
Canada Revenue Agency


(The comments contained on this site are for information purposes only and do not constitute legal advice or intended to solicit anyone with any written agency agreement.)

Financial Planning Series - Time to Take Action! It's Not As Boring or Intimidating As You Think!

All credit to Kerry K. Taylor, Author of the book "397 Ways to Save Money" and the Creator of SquawkFox.com Excellent suggestions and ideas on how YOU can get started today. This information is never dated and can be implemented now. It's never too late to move forward. So here's her take and hopefully you'll get some valuable insight.

*************

Despite it’s reputation for being boring, time consuming, and out-right tedious, creating a budget can actually be a liberating experience. Now, I’m not squawking about the kind of liberation where you’re running around naked with millions of dollars flying around you. Yeah, that’s my dream too. Sigh.

But seriously, keeping on track with a budget can show you where your money goes and help you plan for life’s expenses — whether you’re saving for a home, buying a car, going on vacation,saving for school, getting out of debt,starting an emergency fund, or just finding ways to save money. Whew!

A simple budget can also help you reach your financial goals sooner with less stress and worry.

About the How to Make a Budget Series

I want to make budget planning fun by squawkifying the process in a useful way. I would love for you to experience the many financial benefits from keeping track of your money. It is your money, after all. I want the “budget word” to cease being a 6 letter monstrosity by demystifying the process and making it simple to follow.

What is a budget? Simply, a budget is a financial plan for tracking the flow of money into and out of your life. The idea is to find the sneaky money outflows, plug the lucrative leaks, and save more of the inflowing cash for the stuff the really matters in your life. A budget will also expose the spending habits you’re not aware of and help you to better plan where to spend your money.

The How to Make a Budget series can help you to:

• Learn how to set up a budget
• Find your net worth
• Set financial goals, define your needs, know your wants
• Start expense tracking and track household expenses
• Get tips on budgeting for any income
• Make a household budget
• Download free budget worksheets and budgeting spreadsheets
• Benefit from budget planning tools
• Discover financial budgeting software
• …and have fun with it! 

I’ve been thinking a lot about budget spreadsheets. I don’t stay awake at night dreaming of Excel cells and mathematical equations — because that’s weird — but back in my days of student debt I did lose sleep over accounting for my missing money. What a nightmare!

I turned things around when I started a simple budget to track my spending, income, and expenses. Knowing how much I earned and spent on a monthly and yearly basis helped me catch those needed Zzzzs and find my financial way. If you’re losing sleep over missing moolah or can’t account for your expenses, then getting on track with a budget may be the secret to a six-figure slumber. Ka-ching!

How to use the Budget Spreadsheet


What is a budget? A budget is a financial plan for tracking the flow of money into and out of your life. A simple budget can expose where you’re leaking money (the outflows), plug those drips, and find ways to save more of the inflowing cash for the stuff that matters. A budget can also highlight the spending habits you’re not aware of and help you better plan for future spending. The hard part is getting started. After a bit of practice though budgeting becomes easy.

The Budget Spreadsheet is pretty darn easy to use. I’ve kept things super simple by listing the biggest budgeting categories and showing you how it all adds up. Here’s what you can do:

• Budget by month: List your monthly expenses, track your income, tally your monthly averages, and see how it all adds up. Helpful for those with variable incomes too.
• Yearly budgeting: Get an annual snapshot of your success by entering all the monthly budget details. Yearly totals are listed below.
• Make a personal budget: Single and loving it? No worries. This budget spreadsheet works for individuals too.
• Household budget: Families can budget too. Just tally your spousal income and set your total household budget.
• Budget worksheet: If you’re not fond of spreadsheets, then go ahead and print it out as a monthly budget worksheet. Stick in a binder and keep track of your moolah by writing it all down.
• Budget calculator: Adding everything up can be a pain in the purse. Use the budget spreadsheet as a calculator to show you when you’re in the red. Just scroll to the bottom and see if your Total Difference is positive (black) or negative (red).
• Customize like crazy: Go ahead and customize this Excel budget spreadsheet by adding your own categories.

Download: Free Budget Spreadsheet

Step 1: Download!

Click to download your copy of the Budget Spreadsheet.

Step 2: Track your spending

Tracking every cent you earn and spend sounds like work, but it’s easy to do if you carry a notebook with you or save all your receipts. The idea is to track your cash, credit card, and debit card purchases to identify the costly culprits.

• Get a notebook. Place a small notebook and pen in your purse. OR carry an iPhone, iPad, or iWhatever with you.
• Write it down: Every time you spend money — write it down. Make a note of each and every purchase (grocery, coffee, shoes) and add the date. Ask for a receipt.
• Add it up: Tally your expenses during the month and add them to the Budget Spreadsheet under the right category. See where your money is really going. Results may shock you.

Step 3: Get budgeting!

Grab your receipts, sort your bills, and check your bank accounts. It’s time to fill in the blanks and account for your cash in the budget worksheet. Here are the columns to consider:

• Income: Enter your monthly salary, all bonuses, and investments to get a grip on your total income. Did you make enough? Do you need to earn more? Be sure to include your spouse’s income too.
• Home Expenses: Doesn’t matter if you rent or own. Enter your housing costs, insurance, maintenance, and property taxes.
• Transportation: Enter all your automobile costs, transit passes, fuel, and maintenance. If you’ve got a bike that needs a spare tire, enter it under Other.
• Utilities: There is no mystery in this category. Go through your bills and find the REAL costs to surfing the internet, watching TV, and chatting on the phone. Enter your electricity and water bills too!
• Medical: Not my favorite category, but we’ve all got something medical, right? Add up your prescriptions, dental bills, and health insurance.
• Financial: Tally all your financial bits and pieces, including: bank fees, interest payments, debt repayment, and various savings accounts.
• Enjoyment: Yay! Time for fun stuff! Keep track of all gifts, holiday expenses, pet costs, entertainment (don’t forget your liquor), restaurants, and hobbies.
• Routine Expenses: Groceries, clothing, and all anti-wrinkle creams need to be listed here. Yeah, wrinkles happen. Grumble.
• Family: Get the kids involved by showing them how the money is spent. List childcare expenses, allowances, activities, sports, books, toys, tuition, school supplies, and field trip costs. A financially savvy kid is likely to grow into a financially wise adult.

Phew! It seems like a lot, I know. But budgeting gets easier as time goes by. So get downloading, tracking, and take the time to see where your money goes each month. You may just find some lost loot.

All credit to Kerry K. Taylor, Author of the book "397 Ways to Save Money" and the Creator of SquawkFox.com 

All credit to Kerry K. Taylor, Author of the book "397 Ways to Save Money" and the Creator of SquawkFox.com