Hamilton Real Estate: The Want List vs. The Need List

Hamilton Real Estate: The Want List vs. The Need List: One of the biggest problems I encounter with buyer's is differentiating between a 'want' and a 'need'. Too often people...

The Fast Lane to Mortgage Freedom

(NC)—A low interest rate is often seen as the best way to save money on a mortgage and the quickest route to becoming mortgage-free.

But that's only one part of an effective strategy. Don't focus all your time and energy on rate comparisons. It is equally important to look for a mortgage with flexible terms, say specialists in this field.

The average Canadian homeowner will pay his or her mortgage off in 15 years, according to a recent RBC Home Ownership Poll. Less than half (42 per cent) of homeowners are taking advantage of options that allow them to shave years off their mortgage and save on interest costs.

Here are three tips to get you on your way to mortgage freedom:

1) Adopt a bi-weekly payment schedule

An accelerated bi-weekly payment is often the easiest adjustment that can help you save on mortgage interest - especially if you line it up with your paycheque. You end up making 24 bi-weekly payments a year versus 12 monthly payments resulting in interest cost savings as you pay down your principal faster.

2) Take advantage of prepayment privileges

A flexible mortgage may include features such as doubling up a payment or putting down a lump sum at the end of the year. These additional payments are applied directly to your mortgage principal and will reduce your amortization period. Consider putting a work bonus, tax refund or extra savings towards your mortgage balance.

3) Round up your payment

You can chip away at your mortgage without missing a beat by rounding-up your payment amount. Say your accelerated bi-weekly mortgage payment is $557. By rounding up your payment to $600 a month, you could put more than $1,000 per year extra towards principal and be mortgage-free faster.

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6 Months to a Better Budget

One of the challenges with proper budgeting is that it has to become habitual in order to be effective. You can survive without knowing how to budget if you manage to keep more money coming in rather than going out or have credit cards to cover the gap, but this won't last forever.

Emergency Fund

The crux of this six-month plan is the emergency fund. Ideally, everyone should have at least one or two months' wages sitting in a money market account for any unpleasant surprises. This emergency fund acts as a buffer as the rest of the budget is put in place, and should replace the use of credit cards for emergency situations. You will want to build your emergency fund as quickly as possible. The key is to build the fund at regular intervals, consistently devoting a certain percentage of each paycheck toward it and, if possible, putting in whatever you can spare on top.

What's an Emergency?

You should only use the emergency money for true emergencies: like when you drive to work but your muffler stays at home. Covering regular purchases like clothes and food do not count, even if you used your credit card to buy them.

Downsize and Substitute

Now that you have a buffer between you and more high-interest debt, it is time to start the process of downsizing.  It’s odd that the natural solution to "not enough money" seems to be increasing income rather than decreasing spending, but this backwards approach is very familiar to debt counselors. The more space you can create between your expenses and your income, the more income you will have to pay down debt and invest. This can be a process of substitution as much as elimination. For example, if you buy coffee from a fancy coffee shop every morning, you could just as easily purchase a coffee maker with a grinder and make your own, saving more money over the long term.

Focus on Rewards

Another trick that will help your budget come together faster is to focus on the rewards. A mixture of long- and short-term goals will help keep you motivated. This can be as simple as saving for a small luxury, or even something bigger like buying a car with cash. Watching these goals slowly but surely become a reality can be very satisfying and provide further motivation to work harder at your budget.

Find New Sources of Income

Why isn't this the first step? If you simply increase your income without a budget to handle the extra cash properly, the gains tend to slip through the cracks and vanish. Once you have your budget in place and have more money coming in than going out, you can start investing to create more income.

Now, it is possible that it will take you more than six months to get your budget balanced out as it all depends on your situation, including how much or what kind of debt you have. But, even if it does take you longer than six months to get your budget turned around, it is time well spent.        

          
(Source: Investopedia.com) 

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Essential insurance tips for first time home buyers

(NC)—From mortgage approval, to making an offer, to paying closing costs, buying your first home is both exciting and scary. At the top of this list, for example, is home insurance. Not only will insurance protect you should anything happen to your home or its contents, but it is also necessary to secure a mortgage.

“First time home buyers can become overwhelmed with all the steps required to purchase a home and often need to make a quick decision about home insurance,” says John Jenner, vice-president of marketing and communications at Western Financial Group. “But a quick decision might not be the right decision and first time buyers should be aware of the important choices they need to make.”

As a starting point, here are three concepts that first-time home buyers should understand:

All Perils vs. Named Perils. A named perils policy provides protection against hazards or events, such as fire or vandalism, which are specifically listed on your policy. Named perils policies are usually less expensive, but you run the risk of being struck by a calamity that isn't on your list. An all perils policy will cover you against everything expect perils that are specifically excluded in your policy. Check over your insurance policy to ensure that you have adequate coverage, and consider taking safeguards, such as installing a sump pump, to prevent disasters that aren't included in your policy.

Contents Insurance. Your insurance policy will likely cover more than just your home, it will cover your possessions as well. There are two typical types of coverage that apply to the contents of your home: actual cash value or replacement cost. The actual cash value coverage will reimburse you for how much your possessions were worth when they were lost or damaged. For quickly depreciating items such as TVs or computers, you may not receive enough money from your insurance claim to actually replace the item that was lost. If you have many items that have depreciated quickly, but you would be forced to replace if disaster struck, you should consider a policy that covers the actual replacement cost of your possessions.

Loss of Use. Make sure you understand the loss of use section of your insurance policy. It outlines the living expenses you'll receive should you be forced to leave your home because of a disaster. It often will cover your increase in cost of living while you are displaced from your home.

“Every first time home buyer needs to understand their insurance policy to make sure it is right for them,” Jenner continued. “And they should also understand the changes they can make to their home, such as installing an alarm system to lower their insurance premiums. Spending some time now to know how your policy protects you can save you headaches and confusion later should a disaster strike.”

More information is available online at www.westernfinancialgroup.ca.

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Hamilton Real Estate: May Mortgage Rates

Hamilton Real Estate: May Mortgage Rates: Mortgage rates current as of May Current Discount Mortgage Rates May 2013 Variable Rate 2.79% 1 Year 2.74% 2 Year 2.69% 3 Year 2....

An Investment of a Lifetime

(NC)—Owning your own home is an exciting proposition and an achievable goal for most Canadians. The number one reason many become homeowners is pride of homeownership and the stability and security that comes with it.

Buying a home can also be a solid investment and provide tax benefits.

In Canada, you are not taxed on any investment gains made on the sale of your primary residence. So, for example, if you buy your home for $200,000 and sell it 5 years later for $250,000, you do not have to pay income tax on the $50,000 you earned from the sale.

Another advantage is each time you make a mortgage payment, you are putting a portion towards the principal balance of your mortgage, which builds equity in your home. This is a better use of your money than giving rent to a landlord and is a good long-term investment.

Owning a home also means that you can make your own decisions on decorating, home improvements, location, etc. In a recent survey conducted by Genworth Canada, 91 per cent of first-time homebuyers said that homeownership may mean more work but the effort is well worth it.

When it makes financial sense, buying a home is often a wise, secure and emotionally satisfying move to make.

For more information on buying a home visit Genworth.ca

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philromano@vhme.ca

UNDERSTANDING MORTGAGES

One of the first steps in buying a new home is to take a realistic look at what you can afford and how you are going to pay for it. If you are like most people, you will probably have to finance your home purchase with a mortgage loan.

What is a mortgage?
A mortgage is a loan that uses home you buy as security. This loan is registered as a legal document against the title of your property. Here’s a quick overview of some of the most common aspects of a mortgage that you need to understand.

§  The principal is the amount of the loan, or the cash actually borrowed.

§  The interest is the amount the lender charges for the use of funds, or principal. Interest rates vary according to many factors, including terms and conditions of the mortgage. Mortgage payments are applied toward both principal and interest.

§  The amortization period is the actual number of years that it will take to repay the entire mortgage loan in full. This normally ranges from 15 to 25 years.

§  The term is the length of time for which a mortgage agreement exists between you and your lender. Typically, terms range between six months and seven years.

§  The maturity date marks the end of the term, when you can either repay the balance of the principal or renegotiate the mortgage at then current interest rates.

§  Options let you tailor the mortgage to fit your personal needs and circumstances. Open or closed mortgages, pre-payment options, fixed or variable rates or portable mortgages are just a few of the available options.

Types of Mortgages
There are two basic types of mortgages:

§  Conventional Mortgage: The loan amount does not exceed 75% of the property value, defined as the lesser of the purchase price or the appraised value.

§  High-ratio Mortgage, or National Housing Act mortgage: The amount is more than 75% of the property value (up to 95%). By law, a high-ratio mortgage must be insured against borrower default. The borrower pays a mortgage insurance premium (a percentage of the total loan amount) which can be added to the mortgage loan or paid in a lump sum in advance. The borrower must also pay an insurance application fee.

(Source: Canadian Home Builder’s Association)

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