Family Formation & Housing

For young couples starting families, buying their first home and/or other real estate. Covers mortgages, credit cards, interest rates, children’s education savings plans, joint accounts for couples and the like.

What exactly does your Home Insurance cover?

I recently received my home insurance renewal notice. The company I deal with merged (or was bought out?) by another company and the accompanying letter advised reviewing the policy to make sure I was getting the appropriate coverage.

Being obsessive that way, I did go through it with a fine-tooth comb. I don’t want to be disappointed if I ever have to make a claim.

Do you know exactly what your home insurance policy covers?

Are you planning a vacation this summer?

Since an unoccupied home is at greater risk of damage and susceptible to break-ins, you may not be covered while you are away. Coverage may only be provided for a certain number of days. If your house will be empty for longer than that minimum you will probably be required to have someone visit your home on a regular basis – generally every three to seven days, depending on your policy.

Water coverage depends a lot on your policy

I was really glad to find out I had been paying an extra $12 for extended water coverage (I didn’t actually pay attention to it before) when a major sewer backup flooded my basement. My neighbours – who assumed they were automatically covered – were giving me the stink eye when the clean-up and restoration crews pulled into my driveway and totally rebuilt my basement.

Typically, this coverage is for when water backs up into your home from a sanitary or storm sewer that overflows, or any accidental water seepage from burst pipes, for example.

Check to see what your limit is. If you did extensive and costly renovations to your basement, a $10,000 limit is not going to cut it for you.

What we think of as “flood” insurance – when water gushes in to your home due to a river or lake overflowing its banks – was not available in Canada until recently (2015). If you build your dream home five metres away from a babbling brook that triggers only a “hundred-year flood,” be safe and buy the optional coverage.

Home insurance doesn’t cover your home’s market value

Home insurance covers only the actual cost to repair or replace your home as it was before the loss.

Insurance companies will look at the overall maintenance of your home. You need to keep up with repairs. You are not usually covered if you have cracks in your foundation, loose window casements, or a leaky dishwasher that allow water to seep through.

Related: Our house insurance bill is up 30 percent!

They will take into account depreciation of your roof and garden shed, and the condition of that (dead) tree in your yard that crushed the neighbour’s gazebo.

You can’t say, “I hope there’s a big wind storm that knocks down my (broken down) fence so I can replace it with a nice new cedar fence.”

Personal property is almost always covered for replacement cost at today’s prices. Actual cash value will only pay today’s value for the item, prorated for age, use and condition.

However, you must actually replace the items and provide receipts. The insurance company won’t just hand you a cheque.

Condominium corporation insurance doesn’t cover your condo

This insurance covers the building structure, such as roof or windows, and common areas. It does not cover the contents of your own condo, or third-party liability if you cause damage to other condo units. You need your own separate policy. My condo corporation insurance has a $25,000 deductible if I cause any damage – so I made sure that this liability was included in my personal policy.

Likewise, if you are a tenant, your landlord’s insurance is not going to cover you. A lot of renters don’t bother getting tenant’s insurance – as you have probably noticed when you hear of a building fire in the news and the tenants have lost everything.

What’s personal liability protection?

Personal liability protection only covers accidental injury to other people on your property, or damage to another person’s property.

So, if you get sued by your neighbour after punching him in the face during an altercation – you are on your own.

Final thoughts

Home insurance is not regulated like auto insurance. In fact, unless you have a mortgage, you are not obligated to even have it.

Policies can differ widely and may not fully protect you. Sometimes you need to pay a bit more to add a rider to the policy for your valuables, or to protect against different risks.

Know what’s covered. What are the coverage limitations? Don’t assume that insurance will pay for all damages. Update your policy if necessary to best protect your property. It doesn’t make sense to reduce your coverage in order to save a bit of money.

Marie Engen is the “Boomer” half of Boomer & Echo. In addition to being co-author of the website, Marie is a fee-only financial planner based in Kelowna, B.C. This article originally ran at the Boomer & Echo site on June 27th and is republished here with permission.

Is Canada’s Housing market starting to cool?

By Gordon Powers, Zoocasa.com

Special to the Financial Independence Hub

Canadians’ confidence in the housing market hit an all-time high less than a month ago, but the mood across the country seems to have shifted significantly in recent weeks.

Home sales across Canada fell by 6.2 per cent in May 2017, largely due to a sharp drop in Toronto, according to the most recent figures from the Canadian Real Estate Association. The month-over-month percentage decline was the largest since August 2012.

In nearly two-thirds of all local markets across Canada, sales were off. The decline was led by a 6.7 per cent drop in the GTA, where potential home buyers seem to be moving to the sidelines, delaying their purchase decisions in the hope of a drop in runaway home prices.

Prices beginning to shift slightly

The national average price for homes sold in May was $530,304, up 4.3 per cent from where it stood a year ago. While that number has been pulled sharply upward by transactions in the GTA and Vancouver – excluding these two markets trims more than $130,000 from the national average price of $398,546 – there’s no question that prices have dropped off in certain areas of the country

Prices in the GTA declined in May for the first time in years, according to recent figures from the Toronto Real Estate Board.

While home prices in and about Toronto rose 14.9 per cent year over year, they were actually 6.2 per cent cheaper between April and May, the first full month-long period following the implementation of the Ontario Fair Housing Plan rules.

The TREB May resale numbers reveal GTA sales dropped 20.3 per cent year over year with detached home sales leading the slide at 26.3 per cent, Toronto condo sales backing off 6.4 per cent, and Toronto townhouse sales declining at 18.1 per cent. Continue Reading…

Is a fixed-rate or variable-rate mortgage right for you?

 

By Alyssa Furtado, RateHub.ca

Special to the Financial Independence Hub

Interest rates in Canada have rarely seen such lows, which makes borrowing money to buy a home pretty attractive. But when you start looking around for the best mortgage rates, homebuyers face a choice of going with a variable-rate or a fixed-rate mortgage.

So what’s the difference? A variable-rate mortgage follows interest rates as they move up and down. And a fixed-rate mortgage is locked in for a certain term. Sounds simple, but deciding which option works for you can depend on a number of factors. Here are some essential pros and cons:

Fixed-rate mortgages

Pro: Added security

You don’t have to worry about whether your payments will change because of economic factors you can’t control during the mortgage term. This makes long-term financial planning much easier.

Say you get a five-year fixed-rate mortgage, with a 2.5% interest rate. Regardless of whether interest rates go up or down elsewhere, the rate will stay at 2.5% for the entire five-year period. This allows you to set it and forget it until it comes time to renew your mortgage, at which point you’ll need to renegotiate your rate. At this point your rate could be higher or lower.

Con: Added expense

The luxury of knowing your rate will remain the same will likely cost you, as fixed rates tend to be higher overall.

Variable-rate mortgages

Pro: You can save a bundle

Although by no means guaranteed, historically borrowers save more money over time with this method. Your rate is correlated to the prime lending rate, which can fluctuate. Your rate is quoted as the prime rate plus or minus a certain percentage, such as prime minus 0.4%. In this instance, if the prime rate is 2.7%, your mortgage rate will be 2.3%. Such a small percentage might not look like it will affect your payments, but the savings will add up significantly over time.

Con: Rates can always go up

The variable-rate option comes with a certain risk. If your bank’s prime lending rate changes, the interest moves up or down in conjunction with it. The amount you actually pay your lender on a regular basis (biweekly, monthly, etc.) won’t necessarily change. If the interest rate goes down, more money from your payment will go toward paying down the principal. If the rate goes up, more of the payment will be eaten up by interest, and sometimes your regular payment can also rise. Continue Reading…

The rising cost of buying homes near Schools

By Penelope Graham, Zoocasa

Special to the Financial Independence Hub

Buying real estate is a stressful enough endeavour,  but throwing kids into the mix adds a whole new layer of complexity to the house hunt.

While most buyers have a lengthy wish list of must-haves, usually centred around size, access to amenities and location, living close to a highly-rated school is a top consideration for 39 per cent of Canadians contemplating their next real estate purchase.

And you can certainly expect to pay more to live within a coveted catchment area, even in regions with softer conditions than the red-hot Vancouver and Toronto real estate markets.

“School districts have become a large factor that buyers consider when searching for a home. As a result, homes in better school districts tend to have greater demand and a larger buying pool,” says Chantel Crisp, broker of record at Zoocasa Realty. “Parents are motivated to get their children into great school districts even during economic downturns, so neighbourhoods with better school ratings are sought after in both times of economic growth and decline.”

Higher prices for higher learning

Just how much more do homes fetch in top school neighbourhoods? Buyers can expect to pay a whopping premium of over $800,000 in some cases, according to data collected via Zoocasa’s school search function. The fact that it’s not always clear whether a home lies within a school’s boundary can be a point of frustration for buyers trying to harmonize their home buying ambitions with their academic needs says Zoocasa CEO Lauren Haw.

“Homes across the street from one another may be in different catchment areas. Understanding where your home is within a certain boundary can help with long-term transition planning and reduce unnecessary moves,” she says. “Not to mention wealthy accumulation – school rankings are highly correlated to real estate prices.”

To get a better idea of how much living near a top-rated school will impact buyer budgets, check out the infographic below, based on the sale prices of homes with more than three bedrooms, and top EQAO-rated elementary schools in each of Toronto’s six boroughs. Continue Reading…

Mortgage Brokers vs. Banks: Which is better?

By Alyssa Furtado, RateHub.ca

Special to the Financial Independence Hub

Shopping for a mortgage can be a challenging task. Much like when you buy a car, it can be hard to get clear information. Mortgage rate comparison websites like RateHub.ca can help you learn about your options in general terms. But when it actually comes time to apply, a mortgage agent can give you objective advice and get you the best mortgage rate.

Canadians have two main options when looking for a mortgage: banks and mortgage brokers. When you talk to a mortgage advisor at a bank, you have the ability to negotiate directly with someone at that financial institution. When you work with a mortgage broker, he or she will work with a number of different lenders and negotiate on your behalf.

These are two different approaches to the same thing. But which option is better?

Each has benefits and drawbacks

To answer this question, we need to dive in to the benefits and drawbacks of each. Let’s start at the bank.

When looking for a mortgage, you can expect the mortgage advisor to be quick and responsive. You’ll have the option of convenient face-to-face meetings, and many banks even have mobile salespeople who will come to your home to discuss your mortgage needs. Continue Reading…