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.

6 Expenses that First-time Homeowners should plan for

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Image Source: Unsplash (https://unsplash.com/photos/cqAX2wlK-Yw)

By Beau Peters

Special to the Financial Independence Hub

Becoming a first-time homeowner is an exciting prospect. It’s a chance to have a place you can call your own, where you can make memories for years to come.

With that said, proper planning is necessary, or your dream can become a financial nightmare. The fact is that there are many unavoidable and potential expenses that could occur over time, and if you don’t understand the realities or you don’t save appropriately, then you could be in for some hard times.

To help you out, we have compiled a list of common expenses that most first-time homeowners will experience and how to prepare accordingly.

1. Closing Costs

As you are looking at potential homes and comparing your financial situation, you will want to keep in mind that there are some upfront expenses that you will want to consider, especially closing costs, which may amount to 3-6% of the total loan value. It is important that you have those funds fluid and ready to go when you sign your new mortgage.

If you are short on funds, then consider creating an agreement with the seller to share these costs or look into government programs if you are short.

2. HVAC Issues

No matter where you live, yyour HVAC (Heating, Ventilation, and Air Conditioning) units will likely need to be repaired either soon or down the road. While most units can last 10 to 15 years, if you run your heat or AC all day, every day, then you could be looking at a repair sooner than later, especially if you bought a home with an existing unit.

When preparing for the expenses associated with a damaged air conditioner, you will need to decide if you can have your unit repaired or if it will need to be completely replaced. The first thing you should do is get a quote from a professional to see if the cost to repair is almost as much as the cost to replace. If it is, consider getting a brand new unit because you know it will last a long time and work at high efficiency. Also, consider the fact that if your AC had to be repaired once, it will probably require maintenance again. Include these considerations in your final decision.

3. Appliance Lifetimes

Whether you are moving into a home with existing appliances or you are buying them brand new, you must realize that all appliances have their expiration date. For instance, refrigerators often last about 10 years, and even if they are still usable after that time, their efficiency will begin to dwindle. As far as other appliances:

  • Washers and dryers typically last about 10-13 years.
  • Dishwashers have about 10 years.
  • Microwaves typically last around seven years.

Knowing these dates is important so you can begin to budget accordingly to pay for a replacement.

As a new homeowner, an expense that you may want to incur is the cost of a home warranty. Many of these programs cover a portion of the price of the service calls necessary to fix your appliances, and your annual fee will also help with the cost of a new unit. As soon as you move into your home, look for home warranty programs and find one that suits your needs and financial situation.

4. Roof Damage

The roof is arguably one of the most important aspects of your home, and if it is damaged by weather or general wear and tear, then you will want to have it inspected and repaired immediately. Typical roofs built with asphalt shingles will last about 20 years, so if you have a new home, you may be good for a while, but if you bought a used home, then you will want to see how much time is left. Continue Reading…

Get started on your investing journey

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RBC/Getty Images

By Michael Walker,

Vice-President & Head, Mutual Funds Distribution & RBC Financial Planning, RBC

 (Sponsor Content)

Whether you’re investing to build up a nest egg for retirement, to buy your first home or for a special vacation, finding the right investing solutions can play a big role in helping you achieve your financial goals.

If you’re just starting on your investing journey, however, I know that taking that first step can feel overwhelming.

To help get you started, I’ve responded below to four of the most common questions I hear about investing:

  • Do I have enough money to get started?

You don’t need to have a lot of money to start investing. It’s important to start early, however, as even small amounts of money can grow into big investments with the power of compounding.

As a simple way to think of this, compounding enables your investment to generate earnings and then those earnings are reinvested. In other words, compounding helps you grow earnings on your earnings.

The basic idea is to start investing with an amount you’re comfortable with and increase that amount over time. Once you’ve decided how much you can invest, consider setting up an auto-deposit that automatically moves that money from your chequing account into your investment account on a regular basis. This could be weekly, bi-weekly, monthly: whatever works for you and your finances. Then, as your available funds increase, you can increase the amount you deposit.

In this way, you’re benefiting from paying yourself first and the money you’re depositing will be in your investment account before you can even miss it.  

  • How do I decide which investing options are right for me?

Finding the right investing solutions starts with understanding your investing style. Here are some questions you can ask yourself, to help determine that style:

  • Why do I want to invest? How does this fit into my overall financial goals?
  • Do I want to make my own investing decisions and do I have the time to manage my own investments?
  • Am I comfortable with virtual investing, knowing there are professionals managing my investments in the background?
  • Do I want advice and support from an advisor, and if so, how much?
  • Do I want to combine doing some investing on my own with working with an advisor?  

Once you understand your investing style it will be much easier to determine the investing options that suit you best. Continue Reading…

Canadians more optimistic about money than their love lives this Valentines

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Despite Valentines Day being right around the corner, Canadians appear to be more optimistic about their financial futures than their love lives, according to a survey released Wednesday. Here is the press release.

TD’s second annual Love and Money survey gauged the financial behaviours of more than 1,700 Canadians who were married, in a relationship, or divorced in 2021.

It found that 60% of respondents claimed it’s harder to find true love than financial success, up from 51% in 2020’s report.

  • For those in committed relationships, 51% said they’re experiencing barriers to meeting their financial goals and are delaying milestones like planning a wedding.
  • 74%  of divorced Canadians feel their financial status is the same or better than when married: 54% said it is easier to manage their finances post-divorce.

The survey also explored millennials’ unique approach to love and money, including their intolerance for financial ‘red flags’ that would cause them to leave their partner:

  • They never offered to pay for anything (86%)
  • They were secretive about their finances (81%)
  • They didn’t seek professional financial advice (77%)

 As for life post-divorce, 52% said they learned a new financial skill like tracking their spending (28%), making bill payments (24%) and saving for retirement (23%). 57% said they are spending less after divorce while 45% consider themselves financially better off. 54% said it’s easier to manage their finances post-divorce.

TD says the survey also reveals the downside of not talking about finances in relationships. Divorced couples were less likely to have regularly discussed money during their marriage, with only 29% of divorced respondents saying they talked about money weekly with their former partner, compared to 50% of married couples who say they have the talk weekly.

Millennials, Love and Money

Millennials are more likely than other demographic cohorts to keep their money separate from their partners, with 49% of respondents saying they have no common accounts or shared credit cards. Millennials are also less tolerant of ‘red flag’ financial behaviours: they say they would leave their partner if they never offered to pay for anything (86%); if they were secretive about their finances (81%); or if they didn’t seek professional financial advice (77%).

Financial challenges of committed couples

The survey also shines a light on the financial challenges of committed couples. It found 28%  are keeping a financial secret from their partner, up from 8% from the 2020 report. Of those keeping a secret, 64% don’t plan to ever tell their partner. The survey also shows that a secret purchase is the most kept (42%), followed by a secret bank account (29%). Continue Reading…

Crowdfunded Commercial Real Estate Investing: A primer on commercial real estate investing

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Image by Shutterstock

By Veronica Davis

Special to the Financial Independence Hub

A Brief Disclaimer on Becoming an Investor:

The “investing world” can seem like a challenging mountain to climb if you are just getting started. The “investing world” itself isn’t a practical term for what should instead be thought of as an interdependent system of markets tied to the valuation of assets.

The tremendous scope of this investing world can push people away from sinking their teeth in and learning about how this exciting and lucrative system works. I could never hope to explain something as complicated and broad as the “investment world” in a single post, so instead, I will focus on a very specific investment market – that of commercial real estate investing – and how you can start your journey as an investor.

Most people cannot afford to be Full-Time Investors

Unless, of course, that is their full-time job. Without the help of crowdfunding real estate investment platforms, real estate private equity firms, or real estate investment trusts (REITs), most retail investors would lack the capital, resources, and time to manage real estate properties effectively.

However, retail investors can pool their capital in a number of ways to add commercial real estate into their portfolios and benefit from the growth of the commercial real estate market.

So, let’s have a look at some of the options:

Crowdfunding Commercial Real Estate Platforms

In the early 2010s, the rise of investing platforms such as Robinhood and Fundrise opened investment markets to millions of new and eager retail investors. With these new investment apps, the average person could now invest in markets previously only available to people who had private brokerage accounts or professional investors who could meet the often high investment minimums.

So, what are some of the investment platforms available to retail investors?

Fundrise

Founded in 2012, Fundrise was one of the first crowdfunded investment platforms. It is currently unavailable in Canada but is open to US residents (don’t worry, there are plenty of options for Canadians, too – see below). Users of Fundrise do not need to be accredited investors to open up an account, but Fundrise does offer accounts exclusive to accredited investors.

Fundrise has several investment tiers, and the least expensive tier starts at 10 dollars, meaning practically anyone can start investing. Investor capital is spread out among many REITs or real estate investment trusts. REITs are a type of mutual fund that takes the investment capital they receive and manages various high-value real estate properties.

Fundrise investors receive a percentage of the profits made by the REITs. Depending on the type of investment account, users saw an average ROI of between 7.31% and 16.11% over five years.

What are some comparable crowdfunding real estate platforms available in Canada?

NexusCrowd

NexusCrowd was founded in 2015 and was Canada’s first online investment platform that allowed accredited investors to team up with institutional investors to invest in real estate.

A benefit of NexusCrowd is that it heavily vets its investment opportunities. It only invests in projects that are at least 50% funded by other investors. If the investment project fails to meet its fundraising goal, NexusCrowd reimburses investors. Continue Reading…

Thinking of buying a home in the U.S.? Here are 5 tips to help you on your journey

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Image RBC/www.pexels.com

By Alain Forget, Head of Sales and Business Development, RBC Bank

(Sponsor content)

When it comes to the ins and outs of purchasing a property in the U.S., the process may seem complex at first. While there are some differences from how you buy a home in Canada, such as the mortgage process, taxes and insurance requirements, with the right partner and preparation, purchasing your dream home south of the border may be easier than you think.

Whether you are just starting to dream about owning a home in the U.S. or you are ready to make a purchase, here are five things to consider to help you on your journey.

1) Choose where to buy

If you’ve been heading south for years to vacation in the U.S. you may already know where you want to buy. If not, it’s important to consider why you are purchasing a property and what’s important to you in terms of location. While warm weather may be at the top of your list, you’ll also want to think about what type of activities you want to be close to. For example, do you want to be within walking distance of restaurants, shopping and entertainment or do you envision yourself outdoors, either on a golf course or walking down a beach? If you need more time to think about where you want to buy, it might be helpful to rent first. By renting, you’ll be able to test out different areas and figure out where you’d like to call home.

2) Understand the dollars and cents of buying in the U.S.

While there are a lot of similarities when buying a home in the U.S., there are some key differences that could impact your budget and what you can afford. For example:

    • Exchange Rate – While you need to account for some level of currency exchange when buying a property in the U.S., it might not have as much of an impact as you might think. Homes in many markets in the U.S. tend to be more affordable than in Canada which means your budget can go farther even after the exchange.
    • Taxes and Insurance – It’s important to factor in the ongoing costs of owning a U.S. property into your purchase decision. For example, while you will usually pay lower taxes in the U.S. than in Canada, you may need different – and potentially more expensive – insurance to protect your investment.
    • Down Payment – In the U.S. a down payment is typically 20% if you plan to spend time in the home and 25% if it is an investment property you don’t plan to live in.
    • Closing Costs and Timelines – While closing costs in Canada are typically about 2.5% of the purchasing price, in the U.S. it can range from 1% to 5%. It’s also worth noting the extra time it takes to process a U.S. mortgage. In Canada, while mortgages can process in 5-10 days; in the U.S., it can take 30-45 days.

3) Consider the benefits of financing your purchase

Paying cash isn’t the only option when buying a U.S. property and financing your purchase may be the way to go. Whether you’re buying a home to enjoy or making an investment, you can save thousands in upfront costs just by financing with a U.S. mortgage. When you finance versus paying all cash, your initial costs are limited to a down payment and closing costs. This preserves your Canadian equity and assets and saves you thousands of dollars in one-time, upfront foreign exchange costs. In addition, U.S. mortgages are always open so you have the flexibility to repay your mortgage at any time without penalty, like when the Canadian dollar is stronger. Continue Reading…