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.

The Pros and Cons of Mortgage Forbearance during the Pandemic

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By Holly Welles

Special to the Financial Independence Hub

Millions of Americans have lost their jobs, experienced furlough and applied for unemployment during the COVID-19 pandemic. As a result, many are struggling financially, and some must even choose between buying food to feed their families and paying the bills. If you find yourself in the same predicament, you may wonder how you’ll be able to afford your mortgage payments in the coming months.

While rethinking your budget may help you scrounge up a few extra dollars here and there, it likely won’t be enough to pay your mortgage without a steady stream of money coming in. If you’re unable to make payments any longer, mortgage forbearance may be the route you need to take. Here’s what you need to know as you pursue this option.

Pros of Mortgage Forbearance

While mortgage forbearance shouldn’t be your first option when seeking financial assistance, it can be helpful, especially as you cope with short-term financial emergencies. Here are a few advantages of pursuing mortgage forbearance.

1.) Suspends mortgage Payments

If and when you agree to mortgage forbearance with your servicer, they will likely temporarily defer your payments for a specified period or allow you to skip some. This setup will help you avoid foreclosure or damaging your credit score.

Most importantly, a temporary suspension of payments gives you time to find a job, recover from the pandemic and begin saving money and eventually making payments again.

2.) Protection under the CARES Act

Under the CARES Act [in the United States], homeowners can receive certain protection benefits if they have a federally backed mortgage. One such benefit is that your lender or servicer may not foreclose on you until June 30. Another advantage includes having the right to request mortgage forbearance for up to 180 days, plus an additional 180-day extension.

Moreover, lenders don’t require documentation proving you qualify for forbearance. Speak with your servicer and answer a few questions about your financial hardship to qualify.

3.) Better Alternative to Foreclosure

The alternative option to forbearance is foreclosure: which often goes hand in hand with bankruptcy. This combination can easily sink your credit score for years and result in months, and even years, of legalities and paperwork. It’s also incredibly expensive for lenders to foreclose on a home, so allowing borrowers forbearance is a more affordable option.

Cons of Mortgage Forbearance

All of those benefits may make mortgage forbearance sound like a great deal. However, there are consequences to pursuing this option, even if it does solve your financial problems in the short-term.

1.) Possible Credit penalties

Pursuing forbearance during the coronavirus pandemic should not affect your credit score. In fact, the CARES Act states that no negative credit reporting or late charges will occur during your forbearance agreement. However, credit penalties and dips may still happen as your lender reports your account information to credit bureaus. Continue Reading…

How to save on auto insurance during COVID-19

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By Matt Hands, RateHub.ca

Special to the Financial Independence Hub

You might only review your car insurance once a year, but in times of financial hardship, exploring all opportunities to cut back is a smart idea. Whether your car is sitting parked, or you’re only driving for essentials like groceries and medicine, you should know two things.

First, the industry is adapting to the current climate in COVID-19 by offering some payment deferrals and flexible payment options. Second, there are things you can do, be it in a pandemic or not, to save money.

Auto insurance industry response to driving less

The industry’s initial response, almost unanimous in nature, was to offer payment deferral options allowing individuals to delay their monthly premium payments for a defined period of time: ideally once your income returns to expected levels. In addition to this, some providers are waiving non-sufficient funds charges (NSF fees), but be mindful that your bank could still charge you the fee, so it’s best to check with them.

In a more surprising move, many insurers have relaxed their rules about using your vehicle in the shared economy:  e.g. uber, lyft, etc. Depending on your provider, you may also be able to get a coverage extension at no additional charge allowing you to drive your car for commercial reasons to make ends meet. Typically, you’d need a special coverage addition or endorsement on your policy to drive and make money from services like Uber Eats.

More recently, the provincial government announced they will allow the Ontario auto insurance industry to provide premium rebates in the otherwise regulated environment. Now, we’re seeing some more tangible reductions being offered to Ontario drivers. The various relief options can be unique to each provider, so make sure you contact your insurer to find out what potential discounts and flexible payment options are available to you.

Automatic discounts

A number of insurers are applying automatic discounts, which don’t require the policy holder to do anything. Allstate, Pembridge, Pafco, and Travelers are issuing a one-time payment equal to about 25% of your monthly premium. Gore Mutual decided to give a payment worth 20% of 3 months of premium payments. iA insurance is offering the same 20% premium discount, but over 2 months, and used as a credit on your account. L’unique, SSQ, and LaCapitale are both offering a 20% rebate applied as a credit for one month. Unica is offering a 15% break on premiums for April, May, and June.

Passive discounts

Other insurers are taking a more passive approach, which requires the policy holder to initiate the conversation about discounts. Aviva, Economical, Sonnet, and Family will reduce your car insurance premium by 75% if you aren’t driving anymore, or 15% if you’re driving less. They still don’t want you driving for commercial purposes, though. CAA is offering a 10% base rate reduction, Unica is doing the same by 15%. Desjardins and The Personal are calculating their discounts by looking at 3 months of premiums and reduced driving to figure out your unique discount.

Actions you can take to save on car insurance

Deferral should be a last resort, as you will still have to pay the premiums owing eventually on top of future payments. But don’t fret, there are some other ways to save on car insurance.

Reducing the kilometres on your policy

You may not remember, but when you first get car insurance quotes, you’re asked how many kilometres you drive in a year and your daily commute to work. Continue Reading…

Want to save money on Energy Bills? Go Solar

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By Gary Bordeaux

Special to the Financial Independence Hub

Most people are well aware that solar power is better for the environment, but did you know it can have a positive impact on your wallet, too? Start saving today by converting your home to solar.

Affordability

Year after year the cost of installing a solar panel system has been decreasing dramatically. In the last decade alone costs have dropped nearly 70 per cent, putting solar energy well within the financial reach of most homeowners. More options for ownership have also become available, and you can now finance or lease a system. That means you can see immediate savings on your energy bill with lower upfront costs. Contact the most trusted Colorado solar provider to learn how you can affordably convert to solar today.

Reduced utility bills

It’s almost a given that when you rely on a traditional energy source your bill will increase each year. What if instead of paying more and more you could watch that payment decrease instead? With a well-designed solar installation, your utility bills will shrink: potentially even down to zero if your system generates all of the energy your home requires.

No dynamic pricing

What is dynamic pricing? It’s when a service provider raises rates at peak times, and it’s becoming the norm in the energy industry. Instead of one flat rate for energy usage throughout the day, utility companies increase pricing when the demand is highest. Most home energy consumption occurs from 4 p.m. to 9 p.m. on weekdays, so utility companies raise the cost of electricity during that time period. It’s meant to discourage use during high-demand hours, but what it really does is drive up the total you see on your bill.

When you’re off the grid, you aren’t subject to paying more during peak periods. You’ve generated your own abundant supply of solar energy that is 100 per cent free to use, regardless of when you choose to use it.

Usage rebates

Savings are provided to solar owners through a process called net metering, which makes it possible for you to profit from the energy made by your panels. Continue Reading…

Cross-border death: an administrative nightmare for survivors

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By Elena Hanson

Special to the Financial Independence Hub

How can the estate of your American aunt, who lived in the United States and visited Canada only three times, be considered a resident of Canada? And how can the Canada Revenue Agency tax her estate income while the IRS may or may not be able to collect tax on anything? It gets even more interesting if she held her assets in a living trust or held majority ownership in a private corporation.

I came across this exact scenario and it shows what can happen when moving a trust across the border.

In 2003, Tom and his wife Rose settled their trust. They were both U.S. citizens and residents as well as the beneficiaries and trustees of their trust. Both passed away within months of each other in 2017. Tom died first.

When Rose died, their trust was the beneficiary of annuities and an Individual Retirement Account (IRA), and also consisted of

  • investments in marketable securities,
  • a corporation owning 50% of a condo,
  • the other 50% of the same condo,
  • and some personal property.

Prior to their deaths, Tom and Rose resigned as Trustee, and their niece Anne became the sole Trustee of the U.S. Trust. She also became one of four beneficiaries of the estate upon their passing. Nothing too complex, so far. Right? Except that Anne and the three other beneficiaries happen to be Canadian citizens and residents who never lived in the U.S. or filed U.S. taxes.

What exactly does this mean? Are there tax implications of the trust moving to Canada? The short answer is, yes. Let’s have a quick look at what those implications might be.

First, from the perspective of the Internal Revenue Code (IRC), when Anne became Trustee of the trust in February 2017, the trust moved to Canada but retained something known as “grantor trust status in the U.S.” When Rose died in May 2017, the trust then became a non-resident and no longer held grantor trust status for U.S. tax purposes.

What’s so great about grantor trust status? Typically, moving a trust from the U.S. to Canada would result in U.S. tax on the appreciation of trust assets. Because the trust maintained its grantor status after it was moved to Canada, the trust assets were not treated as sold.

That’s the good news, but here’s the straight goods on how the U.S. tax regime treats the disposed assets held within the trust:
Continue Reading…

5 tips for finding a Real Estate Agent online

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By Curtis Brown

Special to the Financial Independence Hub

For many of us, the decision to buy or sell property has far reaching financial implications, which is why among other things, we need advice from an experienced real estate agent to help make the process smoother. But how does one go about finding a good agent?

Once you get your mortgage pre-approved, you can start getting serious about hiring a real estate agent. You will find them on the internet, on local papers, yard signs, maybe even through email marketing. Real estate agents are sales professionals whose job is to connect you to a buyer or seller – and they can access a Multiple Listing Service (MLS), which tells them which properties are on the market, and which ones have already sold.

How Do I Find the Best Agent?

Most people hire them online, but to make sure that you find the most qualified person for the job, follow these five expert tips:

1.) Contract somebody you can trust

You’re probably not looking at personality differences when hiring a real estate agent, but keeping in mind that home selling takes weeks, you’re going to spend a lot of time with your new agent. Make sure that you are comfortable with each other, and that you get along. Having knowledge of the market is one thing, but it won’t help things if you end up fighting with your real estate agent.

To help with this, you should conduct interviews with your top candidates to ensure you get the best person to work with.

2.) Get referrals from your own networks

Speak to family and friends about finding a good agent, and maybe get this information from someone who has recently bought or sold a property. Find out what experiences they had and if they liked their real estate agent.

Remember, you want to work with an agent who has experience with clients that are similar to you. So if this is a first time purchase, then your agent must have a lot of experience with first time buyers.

Ideally, your real estate agent should tick the following relevant boxes:

  • Be a Realtor with a capital: This makes them a member of the National Association of Realtors and bides them to their ethics and code of conduct.
  • Certified Residential Specialist (CRS): It shows the agent has undergone additional training in residential real estate.
  • Accredited Buyer’s Representative (ABR): Indicates that the agent has had additional training to help represent buyers in transactions.
  • Seniors Real Estate Specialist (SRES): Has had training for handling transactions for clients aged over 50.

If you decide to contact the agent, ask them as many questions as you need to, about your own transaction.

3.) Search your preferred candidates online

You can learn a lot about them by checking their online presence. Examine their social media accounts and websites as well. If they don’t have a strong digital presence, that might not be a good indication of their skills.  Reviews are another source of information, and this you can get from third party websites. One or two bad reviews is fine in most cases; but if they constantly get bad reviews from every independent reviewer online, move on to another agent.

Also check with your state licensing board to see if an agent you want to hire is licensed or has had disciplinary action taken against them in the past. You can get this information from your local Better Business Bureau.

4.) Meet at least three real estate agents

This is your chance to get a sense of the person you’re trying to hire. Continue Reading…