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.

Financial tips and tricks for savvy Home Buyers

Image courtesy of Rawpixel

By Jim McKinley

Special to the Financial Independence Hub

Purchasing a house is a major investment, and finding one you can afford can feel like quite a puzzle. However, there are some smart, money-stretching strategies you might not know, but that can make all the difference in your financial situation. Read on for tips and tricks to help you land the home you’re dreaming about.

Dealing with Down Payments

One of the big hurdles for home buyers is gathering funds for a down payment. Lenders traditionally require 20 per cent down, which calculates to tens of thousands of dollars that many people don’t have sitting in their bank accounts. There are strategies for gathering those funds, like paying off credit cards and saving your cash, taking on a second job, or selling belongings.

Bear in mind that lenders will look at your bank statements to examine where your funds came from, and if anything looks fishy, such as a sudden large deposit, they might hold it against you. Mortgage lenders want to see financial stability, so big fluctuations, bounced checks, and irregular activity could damage your chances for a loan.

For home buyers struggling to come up with a down payment, there is good news. There are FHA loans available that permit as little as 3.5 per cent money down (in the United States). On top of that, you might be able to use gifted funds, which most lenders do not allow.

A couple other opportunities for special mortgages are available. Veterans can aim for a home loan through the VA, and for low-income applicants in rural areas, the USDA offers 100 per cent financing through Rural Housing loans.

Squeaky clean Credit

No matter where you apply for a loan, the lender will examine your credit history. Chances are you know if you’ve made some mistakes, but sometimes credit reports have clerical errors on them. Thankfully, there are ways you can clean up your credit score, but it can take a little time, so if you plan to apply for a loan, get started early.

Start by requesting a free credit report and give it a thorough once-over. If you find errors, you will need to dispute them with the reporting agency, explaining the problem and documenting the error. After that, there will be a time period in which the error can be substantiated by the appropriate credit institution, and if they fail to do so, it is then removed from your credit report.

It can also help to pay down your debts because lenders will examine your debt-to-income ratio. As InCharge points out, you will generally need a result no higher than 43 percent of your income. Keep in mind the lender will include your potential mortgage payment in that calculation.

Rethink your Search

House hunters often search traditional home listings in hopes of finding the home of their dreams. However, thinking outside the box can mean broadening your search. For example, foreclosures can be a bargain under the right circumstances, but you should weigh the pros and cons carefully. Continue Reading…

Accessing new Income Support programs during the Covid-19 crisis

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By Carrie Hunter

Special to the Financial Independence Hub

With the Canadian Centre for Policy Alternatives warning of unemployment rates that could hit 13.5 per cent this year, the highest level we’ve seen in our country since the Second World War, there appears to be few industries and individuals who will escape the economic impact of COVID-19 unscathed.

As of the writing of this blog (April 2, 2020), one million Canadians have already applied for Employment Insurance benefits; with the federal government estimating close to four million joining the queue for the Canadian Emergency Response Benefit.

Meanwhile, the John Hopkins Coronavirus Resource Centre has recorded a staggering one million confirmed global cases of COVID-19, with over 235,000 of those situated in the U.S.

The situation south of the border is dire: especially when you consider that the near quarter million number we’re looking at today is likely to skyrocket over coming days, weeks and months tracing the trajectory of the heart-wrenching Italian and Spanish COVID-19 pandemic curves.

On April 1st, in what one wishes were a cruel April Fool’s Day prank, the U.S. Labor Department reported the loss of 10 million jobs in the last two-week period, with 6.6. million Americans filing for unemployment benefits last week alone.

Why does all this matter to Canucks? As the adage goes, when the U.S. sneezes, Canada catches a cold. Our economies, and those of other global entities, are inextricably intertwined.

Your Emergency Income options

Venturing back north to Canada, what follows are some of the options you have to ease your current financial burden. The tried n’ true path, if you qualify, is to apply for Employment Insurance or Sickness benefits. If, however, you don’t meet the criteria for either of these benefits, all’s not lost. You may still be eligible for the Canadian Emergency Response Benefit (CERB). Eligibility standards for this benefit, lasting 16 weeks and paying out $2000/ month, are arguably much less stringent.

Can I apply for CERB? 

You can apply for CERB if you had an income of $5,000 (this can be self-employment, employment or parental benefit earnings) in 2019 or the 12 months prior to the CERB application; and, you expect to be without employment or self-employment income for at least 14 consecutive days in the initial four-week period identified in your application.You’re also potentially eligible for CERB if you:

  • live in Canada and are at least 15 years of age
  • were laid-off from your job, or your hours have been drastically reduced to zero and you lack any other form of employment income
  • were let go from your job because of COVID-19 and are eligible for regular Employment Insurance or sickness benefits (consult the FAQS at the bottom of the CERB page to get a better handle on when and how to apply for which benefit)
  • still have a job, but have been temporarily laid off
  • are sick, quarantined or are the primary caregiver for someone with COVID-19
  • are a working parent who now must stay home, without pay, to care for your child/children whose school/ daycare is now closed
  • are self-employed or a contractor and wouldn’t otherwise qualify for EI

Tricks, Tips & other considerations

How much will I receive?

Preet Banerjee, keynote speaker and founder of MoneyGaps, has launched the COVID Calculator to help estimate how much income support (via the Canada Child Benefit (CCB), GST and CERB) you can expect during the pandemic.

It’s worth noting CERB will not be taxed at source. That means it’s up to you to squirrel away anticipated tax money that will come due in 2021. To get a sense of how much you might want to sock away, experiment with different income tax scenarios within the Turbo Tax calculator or Simple Tax calculator.

If you’re ambitious, you can model a myriad of tax scenarios in the 2020 and 2019 Canadian Income Tax Calculator. As I mentioned earlier, you can begin applying for CERB on April 6th. However, the government has wisely (although I would still bet heavily on an overburdened IT network suffering instability with unprecedented pent-up Canadian demans) …. staggered the application process. Patience will, undoubtedly, be a virtue.

If you were born in:

  • January, February or March, apply April 6th
  • April, May or June, apply April 7th
  • July, August or September, apply April 8th
  • October, November or December, apply April 9th

And if you fancy a weekend date with the application process, anyone can apply on Friday, Saturday or Sunday.

I know, for many of us myself included, many days this all seems too much to bear, but this morning I was reminded by this Scottish Grandma, this too will pass.

Carrie Hunter is the founder and writer of the personal finance blog, PoundWiseandPennyPrudent.com. A passionate advocate for financial literacy, Carrie writes, speaks and facilitates workshops with a singular goal: to simplify the language of money. A self-taught money expert, Carrie is completing her designation as an Accredited Financial Canada Counsellor®.  This blog originally ran on April 2, 2020 and is republished on the Hub with her permission. 

Americans extremely worried about job security, finances and Retirement due to Coronavirus

By Mike Brown

Special to the Financial Independence Hub

Due to COVID-19, 57% of adult Americans are worried about their job security, while 63% are concerned about both their retirement savings and ability to make monthly student loan payments. Plus, many other insights from LendEDU’s newest survey.

At the time of this writing, Johns Hopkins’ Coronavirus Resource Center has reported 353,692 cases of Coronavirus around the world and 15,430 deaths. In the United States, there have been 35,345, while the total number of deaths is 473 by most estimates.

Then there’s the economic fallout in the U.S. as the stock market has gone into a tailspin, and a recession, or worse, seems likely. With the nation necessarily self-quarantining itself, countless small businesses are shuddering their doors and laying people off.

In the wake of this global pandemic, LendEDU has surveyed 1,000 adult Americans to better gauge the micro-level economic impact that COVID-19 will have on our country.

We found that a substantial proportion of people are worried about their job security, retirement savings, mortgage or student loan payments, and taking on too much credit card debt.

Click here to jump to the full survey results

If you would like to see a specific breakdown of the data other than those provided (ex. state-by-state, gender, age), please email me at brown@lendedu.com.

Observations & Analysis: How is Coronavirus Impacting the Finances & Employment of Americans?

All data is based on a survey of 1,000 adult Americans commissioned by LendEDU and conducted by research firm Pollfish. The survey was conducted on March 18, 2020. For some questions, the answer percentages may not add up to 100% exactly due to rounding.

Job Security

We first asked respondents how Coronavirus has already impacted their job since the virus’ impacts started being felt by the U.S.

35% of adult Americans have been fortunate enough to see no changes to their job due to COVID-19, while a combined 24% have not lost their job, but have seen their hours either reduced or eliminated. Unfortunately, 6% of respondents have lost their job in the Coronavirus fallout.

But, just because the majority of respondents have kept their job in some manner does not mean they aren’t still concerned about losing it. This rings especially true amongst those who have seen hour reductions.

Amongst those that maintained their job in some manner, the majority, 57%, were still concerned about job security moving forward as the impact of Coronavirus widens.

67% of those who have seen reduced hours are worried about keeping their job, while 73% of respondents who had their hours completely cut but kept their job are concerned over job security.

Compare these numbers to the 48% of those who have seen no change in their job, but are still worried about their losing it.

No matter the position employees find themselves in as COVID-19 takes hold, it is clear that stressing over job security will almost be impossible to avoid during this time. Maintaining morale will be a challenge for employees, employers, and the economy as a whole.

General Finances

Before Coronavirus and its impacts hit home here in the U.S., how many Americans were living paycheck to paycheck?

No matter how the data is broken down, the majority of respondents were living paycheck to paycheck before COVID-19 became a large-scale issue in the U.S. This has been reported in other studies as well.

So, while the Coronavirus outbreak in the U.S. may not drastically change the financial lives of those who have seen no changes to their jobs, it could cause severe trouble for those who have seen reduced hours or lost their jobs completely.

For example, 70% of those who have seen their hours partially cut due to COVID-19 were already living paycheck to paycheck, while 82% who have lost their jobs because of the pandemic were doing the same.

Over the next few weeks or even months, these folks will be stretched thin like never before when it comes to their finances. This is why a plan to send Americans checks due to COVID-19 is being discussed in Washington D.C.

With financial woes forthcoming or already here for many Americans, some will be drawing from an emergency fund or savings account to cover expenses.

And when it came to the expenses that Coronavirus has brought on, whether it be toilet paper or T-bone steaks, we found that our respondents have spent an average of $335.65 on COVID-19-related expenses since the pandemic began to seriously impact the U.S.

When expenses run high, many consumers need to access debt, typically via credit card, to finance their purchases. We asked poll participants with at least one credit card if they will be taking on more credit card debt than they would like due to Coronavirus.

Retirement Savings

Coronavirus has already had a crippling impact on the stock market, and it’s likely to get worse. For older Americans especially, there’s a pervasive fear that retirement nest eggs might get completely decimated as a result.

38% of our respondents indicated they are currently saving for retirement through something like a 401(k), Roth IRA, or high-yield savings account. We asked these folks about their concerns over their retirement savings due to COVID-19.

Within each age breakdown, the majority of Americans indicated that they are worried about their retirement savings due to COVID-19 and the ramifications it will have on the market.

Not surprisingly, this is especially true for older Americans ages 55 and up who are in the retirement red zone. 67% of this cohort are concerned about their retirement nest eggs.

Monthly Finance Payments (Mortgages, Student Loans, & Credit Cards)

With financial worries widespread and budgets tightening, we wanted to ask a few questions related to common financial obligations that Americans have, like payments for student loans, credit cards, or a mortgage.

The following graphics are based on questions only asked to those respondents that stated they had a mortgage (35%), outstanding student loan debt (23%), and/or at least one open credit card account (63%).

Many respondents are quite concerned about meeting their monthly financial obligations, whether they be related to a mortgage, student loans, credit cards, or all three.

Most alarming was how those adult Americans that lost their jobs due to Coronavirus answered these few questions. 96% of this group was worried about meeting mortgage payments, 88% about student loan payments, and 93% about credit card payments.

Widespread delinquency or default would have severe implications on the economy at large. In an attempt to combat this, we have seen the Trump Administration waive further accruing interest on student loans and suspend all evictions and foreclosures until April for FHA-insured mortgages.

Investments

While we did touch on investments as they pertained to retirement savings earlier, we wanted to dedicate a section to more active, personal investments that consumers make through personal brokerage accounts.

To describe the stock market in the last couple of weeks as turbulent would be an understatement. There have been sharp rises and drops (mostly the latter), and trading has actually been halted a few times in recent weeks on both the New York Stock Exchange and Nasdaq. The 15-minute halts happen when an initial steep drop in the market triggers “circuit breakers” that shut down trading.

27% of our poll participants indicated that they were actively invested in the market through a personal brokerage account when COVID-19 started impacting the U.S.

We asked this group a couple of questions in regards to playing the market.

As expected, the vast majority of Americans who were making personal investments in the market when Coronavirus escalated got clobbered. 79% of respondents indicated they lost money, while just 8% made a profit.

And, how will these respondents invest moving forward as the pandemic continues to disrupt daily life?

As it turns out, the majority of investors plan on riding out the storm and holding steady on their stock plays. Meanwhile, 21% plan on buying more during this crisis, while 13% will be looking to dump shares.

Full Survey Results

Continue Reading…

How much would the Home Buyers’ Plan help in your market?

 

By Penelope Graham, Zoocasa

Special to the Financial Independence Hub

For those trying to scrape together a down payment in Canada’s hottest housing markets, the Home Buyer’s Plan is known as an effective tool. Offered by the federal government, it allows first-time buyers to pull funds from the RRSPs completely tax-free to put toward their home down payment. If you’re lucky enough to have RRSP matching via your employer, or have been saving for retirement for some time, it can seem an especially attractive method to amass down payment funds.

However, there are a few restrictions buyers should be aware of:

  • Buyers must have a signed Agreement of Purchase and Sale to buy or build a property before applying to access the funds.
  • They can pull up to a limit of $35,000 from an individual’s RRSP, and up to a combined $70,000 from RRSPs held by two individuals buying together (assuming the funds are saved in the first place).
  • The funds must have been sheltered within the RRSP for a minimum of 90 days before they can be accessed.
  • Buyers are required to “pay themselves back”, contributing one fifteenth of the withdrawn amount on an annual basis over a 15-year timeline, or be taxed on that portion at their full rate.
  • Buyers must qualify as “first timers,” which the Government of Canada defines as not having owned a home, or occupied one that your spouse has owned, in the four consecutive years before this home purchase is made. (However, there are exceptions in the case of a marriage or common-law relationship breakdown where former partners can restore their first-time buyer status.)
  • Buyers must intend to dwell in the home as their permanent residence within one year of its purchase or completion.

How long would it take to actually save for the HBP?

Assuming a buyer satisfies all the criteria above, they also need to actually save the funds in the RRSP in order to use them for their home purchase: and that’s easier said than done in some urban centres than others.

To see how long it would take to actually set aside the maximum $35,000 in an RRSP, Zoocasa sourced individual income thresholds in 14 cities across the nation. The data was based on 2017 tax filings as reported by Statistics Canada, and assumed the income was earned income, eligible to create RRSP contribution room, and that individuals contributed the maximum to their RRSP annually (18% of earned income, to a maximum of $26,500). The study also compared how long it would take for those in the top 50%, 25%, and 10% income groups to save $35,000.
According to the findings, for a median-income household contributing the max amount to an RRSP, it would take between 4.3 – six years to pull together $35,000.

(See Infographic at the top of this blog).

How far would $35,000 go in your Housing market?

As well, the extent that the maximum HBP funds would actually aid in a home purchase varies across Canada; it’s no surprise that in the priciest markets, such as homes for sale in Toronto or Vancouver, that it’s hardly a drop in the bucket – just 4.3% and 3.5% of a benchmark home price, respectively. Continue Reading…

7 promising Property trends to watch In 2020

By Vicky Scott

Special to the Financial Independence Hub

The real estate industry has always been promising. Though the year 2019 saw a downfall in real estate, the industry still seems to prosper and shine in 2020. Some of the prominent property trends to look forward to this year are discussed below:

Technological transformation

Technology has always played a major role in bringing transformational change in any industry. Real estate is no different. Technology has brought a change in almost all parts of the real estate sector.

Starting from construction to the purchase process and continue until after-sale service, technology has helped in improving the construction quality and fastening the construction process. Similarly, technology has changed the entire buying process. The concept of augmented and virtual reality has enabled customers to view the property without even visiting the site physically. Numerous forex software tools are another gift of technology to the real estate industry.

Conventional loan requirements less stringent

Getting a home loan has become much easier compared to what it was a few decades ago. Less strict rules and easy loan approval process has made property buying easier. Financial institutions are boosting property purchases by lowering credit scores, as well as the down payment. Potential buyers who were not eligible for taking a loan in the past can now get the loan without facing many difficulties.

Mortgage rates expected to remain lower

Mortgage rates play a critical role in the growth of the real estate industry. Lower the mortgage rates and more people would think about buying a property. Stability in the mortgage rate is another factor that stimulates the future of the real estate industry. The rates were quite lower in the year 2019, and many economists believe that this trend will continue in 2020 also. This is good news for interested buyers.

An increase in mortgage rates acts as a demotivating factor for potential buyers. Lower the mortgage rate and enthusiasm rises among property buyers. People prefer buying property when mortgage rates are lower,  as instalment payments are that much lower. Continue Reading…