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.

Is it worth it to skip a Mortgage payment?

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By Alyssa Furtado, RateHub.ca

Special to the Financial Independence Hub

Skipping a mortgage payment can seem like a good option, especially in an emergency if you don’t have a rainy day fund or savings to dip into. If you lose your job, your car breaks down, or you have any other type of unexpected expense, the option to skip a mortgage payment may look enticing. But is it worth it?

Some mortgage lenders allow you to skip a payment. Here’s what you need to know before deciding whether or not you should choose that option.

What does skipping really mean?

Sounds like a simple fix on a month when everything’s gone south, right? Not so fast. When you skip a payment, you’re not just pushing the expense back a month, you’re still racking up interest.

On a day-to-day basis, it looks like a simple monthly payment. But your mortgage payment actually has two component parts: The principal (the actual payment of the debt itself) and the interest. You don’t pay the principal, but your mortgage lender still charges you interest.

By skipping a month, you lose the chance to pay down the principal and you add on that month’s interest, which gets added to the total amount left on your mortgage.

You wind up with a higher mortgage rather than the number staying the same. The skip doesn’t freeze time. Any scenario where you add more interest should be looked at as borrowing more money.

Looking years down the line, the interest you pay after skipping will be even higher since your loan itself becomes larger. The increase won’t be huge, but if you just took on a mortgage with a 25-year amortization period, the additional interest will add up over time. If you’re close to paying off your mortgage, the interest costs won’t be as high.

Am I allowed to skip?

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The Missing Middle: are Townhouses the answer?

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By Penelope Graham, Zoocasa

Special to the Financial Independence Hub

Shelling out a million for a home is no longer just an issue for downtown dwellers: it now costs that much on average to purchase a detached house in the ‘burbs, according to several new reports.

The February numbers from the Toronto Real Estate Board reveal regional home prices have surpassed two pricey milestones; average detached home prices in the city proper have hit the $1,500,000 mark, and $1,106,201 in the surrounding GTA. That’s tough news for those planning to trade a lengthy commute for affordable housing, as the competitive factors from the hot Toronto real estate market now stretch as far as the Niagara Region.

Too few houses to go around

The latest narrative around GTA housing is the scant supply of listings, with just 793 detached houses changing hands last month. “The listing supply crunch we are experiencing in the GTA has undoubtedly led to the double-digit home price increases we are now experiencing on a sustained basis, both in the low-rise and high-rise market segments,” said Jason Mercer, TREB’s director of market analysis. “Until we see a marked increase in the number of homes available for sale, expect very strong annual rates of price growth to continue.”

And it’s not just the resale market that’s too hot to handle. January numbers from the Building Industry and Land Development Association (BILD) report newly-built low-rise housing –- whether it be detached, semi-detached, or freehold row houses –- also exceed the average million mark, as fresh stock is immediately snatched up. Continue Reading…

5 mistakes to avoid when buying your first Home

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By Alyssa Furtado, RateHub.ca

Special to the Financial Independence Hub

You’re about to make one of the biggest decisions of your life by purchasing a home. And it will likely be your biggest and most complicated financial commitment. So you should make a plan that captures everything you need to do to avoid costly mistakes.

Here’s a list of five mistakes you shouldn’t make when purchasing your first home.

1.) Failing to get pre-approved for a mortgage

It’s vital you know how much you can spend before you start looking for your first home. To figure out how large of a mortgage you can afford, use a mortgage affordability calculator. This will help estimate how much you will be pre-qualified for by a lender, who will conduct a credit check and review your finances. You can arrange for your pre-approved mortgage rate to be held for a period of about 90 to 120 days while you search for the right property.

2.) Not researching mortgage rates

Your first instinct will be to approach your current bank to obtain a mortgage, but you should do some research first to find the best mortgage rates. Continue Reading…

Burn Your Mortgage: The simple, powerful path to Financial Freedom

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By Sean Cooper

Special to the Financial Independence Hub

Five years ago I read Jonathan Chevreau’s financial novel, Findependence Day, and it changed my life forever.

One of the central themes of the book is that the foundation of Financial Independence is a paid-for home. I wasn’t a fan of six figures of mortgage debt hanging over my head for the next 30 years, so I aimed to pay off my mortgage as quickly as possible.

A little over a year ago I reached my goal of “Findependence” when I burned my mortgage – literally. I paid off my home in Toronto in just three years by age 30. Thanks to a stroke of luck and good timing, the story went viral, making headlines around the world from the U.K. to Australia. I received hundreds of email from people congratulating me and wanting to follow in my footsteps.

This inspired to me write my new book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. With home prices skyrocketing in cities like Toronto and Vancouver, many feel like  the dream of homeownership is out of reach. I’m here to tell you that it’s not. I may have paid off my mortgage in three years, but that doesn’t mean you have to. There are simple yet effective lifestyle changes that anyone — from new buyers to experienced homeowners — can make to pay down their mortgage sooner.

Some people argue it doesn’t make sense to pay down your mortgage early with interest rates near record lows. I see it differently. Instead of using low interest rates as an excuse to pile on more debt, use them as an opportunity to pay down the single biggest debt of your lifetime: your mortgage.

Here’s an excerpt from my book that looks at why you’re most likely better off paying down your mortgage instead of investing. [Editor’s Note: the official launch of the book is today.]

Why pay down your Mortgage when you can come out ahead Investing?

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How to Supersize your RESP – Use it as a TFSA and other tips

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By Aaron Hector, Doherty & Bryant Financial Strategists Inc.

Special to the Financial Independence Hub

The purpose of this article is to show you how to think outside the box and use an RESP [Registered Education Savings Plan) in ways that you may not have previously considered. But before we get to that, let’s look at the basics.

How does an RESP work?

To help you save for your child’s post secondary education, the government provides a 20% match by way of the Canada Education Savings Grant (CESG). The CESG matching is subject to both annual and lifetime maximums.  Specifically, on your first $2,500 of contributions each year, you’ll receive $500 in grant money, to a maximum of $7,200 in lifetime grants per child. To illustrate over time, if you contribute $2,500 per year, you will max out the grants available to you in 15 years (14 years at $2,500 + 1 year at $1,000, with a 20% match = $7,200).

If you don’t start making contributions when your child is born, or if there’s a lapse in contribution installments, you are able to ‘reach back’ and receive grants for previous years. You can reach back one year at a time. Therefore, you could consider a contribution of up to $5,000 this year if you missed making a contribution last year, or any year prior, and that would net you a CESG of $1,000 in total- $500 for the current year grant, and $500 for a prior year grant. The carryforward of unused CESG accumulates for every year including the year of birth, regardless of whether you have actually opened an RESP account.
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