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.

Rethinking Retirement and Home Ownership

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gbgorr
Gary Gorr, CHFC

By Gary Gorr, Chartered Financial Consultant

Special to the Financial Independence Hub

Recently I have been doing retirement assessments for several new customers. What amazed me as I spoke with them was how resigned to defeat the clients were. It was like they knew in their guts that they had started saving too little and too late to attain the retirement they wanted.

One answered my question on when do you want to retire by saying “around 120 is the only way I could.”

After the initial meetings I reflected on other circumstances from planning for customers in 2014 and noticed some commonalties.

  • Age range: 45-55
  • They own homes with attractive Fair Market Values
  • Had fairly decent equity positions in homes
  • Most would carry a mortgage into retirement
  • All had projected incomes at retirement far less than their desired outcome

Many Canadians, including these clients, have grown up with the belief that home ownership is an important goal. The home represents a significant part of their net worth.

Not easy to unlock home equity

Continue Reading…

Why you need to share financial responsibilities with your spouse

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Wealth PlanningHub Staff

From the American Family Insurance website, this article focuses on the importance of sharing budgeting and financial responsibilities with your spouse. In many relationships, it seems one party usually takes over much of the financial decision making– knowing important contacts, where money is kept and how it is spent etc. This article stresses the importance of making sure BOTH parties are on the same page with the family finances and, just as importantly, the family’s financial goals.

AmFam provides a few important steps to accomplishing this, beginning with talking to each other about things like saving, bills, retirement planning and debts.
Setting short- and long- term financial goals TOGETHER, knowing where to find your safe deposit box and combinations to the home safe, and finally making sure your loved ones know how to contact important financial contacts are the final steps to being on the same page as your spouse.

The article also discusses the importance of protecting your important papers by using preventative measures such as a safe deposit box, a fire-resistant home safe, a home filing system, and your attorney’s office to keep all your various documents safe.

5 things mortgage shoppers can expect in 2015

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Smiling beautiful couple sitting on a bench at summer park and pFrom the Globe & Mail’s mortgage columnist Robert McLister comes this list of five predictions for mortgage shoppers in 2015:

1.) More mortgage restrictions:

McLister says new limits on government-backed mortgage funding will make it costlier for lenders to fund mortgages, or new underwriting rules will make it harder to qualify for mortgages.

2.) Record discounts for variable mortgage rates:

By the end of 2015, some lenders or brokers will be advertising discounts better than prime minus 1%.

3.) Brokers will break into there camps:

These will be full-service, online mortgage brokers and everyday brokers. The latter will be uncompetitive versus other brokers, banks and credit unions, McLister says.

4.) A glut of private money:

Alternative lenders like Mortgage Investment Corporations (MICs) will thrive as investors chase higher yields and the abundance of capital will tempt sub-prime lenders to take more risk. McLister expects that as a result some will offer mortgages with only 10% or 15% down instead of the traditional 20% or 25%. As a result, consumers will have more lending options at lower interest rates.

5.) Brokers will pitch you other stuff:

Expect cross selling of everything from GIS to insurance, credit cards and RRSPs.

The 10-year rule: what home buyers can learn from the stock market

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House With Life Preserver CrashingInteresting piece by the Globe & Mail’s Rob Carrick today about the 10-year rule. The columnist says prospective home buyers should follow the same 10-year rule that investors do with stocks:

“If you can’t wait at least a decade for a transaction to make financial sense, don’t do it.”

Carrick worries about the recent estimate by the Bank of Canada that housing here may be overvalued by 10 to 30%. With all the chaos going on in the world lately, “Houses don’t have immunity. They are financial assets, just like stocks, gold bars and gallons of oil.”

And in an example that hits home, he reminds us that after reaching $254,197 in 1989, the average house price in Toronto fell so long and hard it took until 2002 to set new highs. I recall personally buying a starter home in Toronto in 1988 for $230,000 and ultimately selling in 1996 for $182,000.

It worked out though, since we bought a better home closer to the lake: a strategy known as “moving up in a down market.” That initial $50,000 paper loss has been recouped ten or twenty times over.

On stocks, I’ve often heard experts cite a five-year rule but Carrick says a 10-year rule is more prudent and “a 10-year hold should work for housing, unless we get a crash like the one in the United States or in Toronto in the late 1980s.”

Ouch, he reminded me again!

 

Mortgage financing costs rising for some first-time home buyers

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expensive houses from euro banknotesMortgage costs may rise  up to $600 for typical first-time home buyers, the Financial Post reported Friday. Garry Marr says Canada Mortgage and Housing is tripling the fee it charges to guarantee loans in the mortgage-backed securities market.

Marr suggests the move is consistent with Ottawa’s goal of cutting back its role in mortgage insurance but may also help to put the brakes on an overheated housing market. As Terence Corcoran reports in another column, the Bank of Canada has suggested the Canadian housing market may be overvalued by up to 30%.

For a typical mortgage of $250,000 for a first-time home buyer, Marr quoted a source who estimated the extra cost will be as much as $600.  It could mean a jump of up to 10 basis points on a five-year closed mortgage. The changes are effective April 1, 2015.

Those with less than a 20% downpayment are required to get mortgage default insurance if borrowing from a federally regulated financial institution.

Marr says that among the moves Ottawa has taken to cool the red-hot housing market has been to lower mortgage amortization rates from 40 years to 25 years.