5 Simple Steps to Owning Your Own Home

Often, the route to owning your own home can seem like a trip to the moon and back.

Really though, it comes down to five key steps:

1 – Manage your credit wisely.
If there is one thing that will gum up the purchase of that perfect home, it’s an unwise purchase or extra credit obtained. Keep your credit spending to a minimum at all times, make every payment on time and most of all pay more than the minimum payment. Remember that if you just make the minimum payment on your credit cards, chances are you will still be making payments 100 years from now.

2- Assemble a down payment.
At first glance, the challenge of finding a down payment can seem insurmountable. In fact, you just need to consider all the sources for down payment funds. yes, you will have saved some but remember you can also, in some situations, use RRSP funds, grants ( BC Home Equity Partnership for example ) and non traditional sources like insurance settlements, severance and of course, gifted funds from a family member. Don’t forget that you’ll need to demonstrate that you’ve had the funds on deposit for up to 90 days and also that you have an additional one and a half percent of the mortgage amount for closing costs.

3- Figure out how much you can afford.
It’s at this point that most people usually stop and scratch their heads. Some even try and tough it out, using the raft of online calculators to figure it out, but new mortgage rules can make even that a challenge.
If you talk to a Dominion Lending Centres mortgage specialist ( like me! ) though, they can help you figure it out and even go as far as getting you a “pre-approval” from a financial institution. This can give you the confidence you need to actually start looking around.

4- Figure out what you want.
You’ll want to make a list of things your new home has to have and what the neighbourhood has to have. Things you want to think about are the things that are important to you now; is there access to a dog park? Is there ensuite laundry? Divide the list into things you can’t live without and things you’d like to have. It’s way easier to look when you know what you want to look at.

5- Look with your head, buy with your heart.
The final step is, with the help of a realtor, look at properties that meet your requirements. Yes, the market is a little frenzied at the moment, but remember, if your perfect property is sold to someone else, the next perfect property will soon appear.

When you do finally buy, chances are, you’ll buy with your heart. My sister Noona moved to London some years back and after settling in, decided to buy. Her list was fairly lengthy, one of the key elements was being able to walk to work. In a market similar to what we face now, she found a property that met most of her requirements. In the end though, she bought with heart, mostly because of the view from the balcony.

The decision which home to buy is a tricky thing, it should be made with your head and heart. Deciding, while balancing what you think and feel, really is rocket science.

I know that this may seem to be an oversimplification but really, the thing that complicates the process is your own emotions – all of the stress that comes along with making a life change can make the process challenging.

 – by Jonathan Barlow

Payment frequency, does it really make a difference?

It has been said that there are two certainties in life; death and taxes. Well, as it relates to your mortgage, the single certainty is that you will pay back what you borrowed, plus interest. However, how you make your mortgage payments, the payment frequency, is somewhat up to you! The following is a look at the different types of payment frequencies and how they will impact you and your bottom line.

Here are the six main payment frequency types:

1. Monthly payments – 12 payments per year
2. Semi-Monthly payments – 24 payments per year
3. Bi-weekly payments – 26 payments per year
4. Weekly payments – 52 payments per year
5. Accelerated bi-weekly payments – 26 payments per year
6. Accelerated weekly payments – 52 payments per year

Options one through four are designed to match your payment frequency with your employer. So if you get paid monthly, it makes sense to arrange your mortgage payments to come out a few days after payday. If you’re paid every second Friday, it might make sense to have your mortgage payments match your payday! These are lifestyle choices, and will of course pay down your mortgage as agreed in your mortgage contract, and will run the full length of your amortization.
However, options five and six have that word accelerated attached… and they do just that, they accelerate how fast you are able to pay down your mortgage. Here’s how that works.
With the accelerated bi-weekly payment frequency, you make 26 payments in the year, but instead of making the total annual payment divided by 26 payments, you divide the total annual payment by 24 payments (as if the payments were being set as semi-monthly) and you make 26 payments at the higher amount.

So let’s say your monthly payment is $2,000.
Bi-weekly payment : $2,000 x 12 / 26 = $923.07
Accelerated bi-weekly payment $2,000 x 12 / 24 = $1,000

You see, by making the accelerated bi-weekly payments, it’s like you’re actually making two extra payments each year. It’s these extra payments that add up and reduce your mortgage principal, which then saves you interest on the total life of your mortgage.
The payments for accelerated weekly work the same way, it’s just that you’d be making 52 payments a year instead of 26.
Essentially by choosing an accelerated option for your payment frequency, you are lowering the overall cost of borrowing, and making small extra payments as part of your regular cash flow.
Now, It’s hard to nail down exactly how much interest you would save over the course of a 25 year amortization, because your total mortgage is broken up into terms with different interest rates along the way. However, given todays rates, an accelerated bi-weekly payment schedule could reduce your amortization by up to three and a half years.
If you’d like to have a look at some of the mortgage numbers as they relate to you, please don’t hesitate to contact a Dominion Lending Centres mortgage specialist who would love to work with you and help you find the mortgage (and the mortgage payment frequency) that best suits your needs.

– by Michael Hallett

Helping Children with A Down Payment

Although home prices in Toronto and Vancouver seem to have stabilized recently, they are still at historical levels.

The average home price in these two major Canadian cities are still well over $1 Million. Unsurprisingly, first-time homebuyers are finding it increasingly difficult to get onto the “property ladder”. It is now harder than ever for first-time homebuyers to own a home; so what are they to do? Studies have shown that more and more millennials are turning to the bank of mom and dad for help with their down payments.

According to the latest statistics from Mortgage Professionals Canada, down payment gifts from parents have increased significantly in the last 16 years, going from 7% in 2000 to 15% for homes purchased between 2014-2016. The average gift amount has skyrocketed as well. Industry experts have seen many down payments in the six-figure range – $100,000 to $200,000. The trend is expected to continue, as 2017 is predicted to be “the most difficult year for a first-time homebuyer in the last [decade]”, according to James Laird, co-founder of RateHub, a mortgage rate comparison website.

How can you help your children climb the property ladder?
With soaring property prices, you may be asking about your options to help your children break into the housing market. One way is by getting a reverse mortgage on your home. The CHIP Reverse Mortgage from HomEquity Bank has seen a growing number of senior Canadians over the years access their home equity in order to give a financial gift to their family members to help them with big purchases such as a down payment for a house. “We definitely see a growing trend of this at HomEquity Bank. We get a large number of clients who would take out $100,000-$200,000 in a reverse mortgage, they have the benefit of not having to make payments, and they give that lump sum of money to their kids to help them get started in the real estate market.” says Steve Ranson, President and CEO, HomEquity Bank.

How does it work?
A reverse mortgage is a loan secured against the value of your home. It allows you to unlock up to 55% of the value of your home without having to sell or move. The money you receive is tax-free and you are not required to make any regular mortgage payments until you move, sell or pass away.

Why should you give an early inheritance as a down payment now?
Life Expectancy – According to Statistics Canada, for a 65-year old couple there is a one-in-two chance that one of them will reach the age of 92. Do your children really need an inheritance when they are in their mid-to-late 60’s?
Create memories now – After you are gone, you will have missed out on seeing your children build a family in their new home. Giving a down payment now will enable you to create lasting memories while your health allows you to.

Find out more about this incredible opportunity to use a reverse mortgage to give the gift of a down payment to your loved ones today. If you’re 55 years or older and want to learn more about your financial options, including a reverse mortgage, talk to your Dominion Lending Centre mortgage specialist today.

New mortgage changes decoded

This week, OSFI (Office of the Superintendent of Financial Institutions) announced that effective January 1, 2018 the new Residential Mortgage Underwriting Practices and Procedures (Guidelines B-20) will be applied to all Federally Regulated Lenders. Note that this currently does not apply to Provincially Regulated Lenders (Credit Unions) but it is possible they will abide by and follow these guidelines when they are placed in to effect on January 1, 2018.

The changes to the guidelines are focused on
• the minimum qualifying rate for uninsured mortgages
• expectations around loan-to-value (LTV) frameworks and limits
• restrictions to transactions designed to work around those LTV limits.

What the above means in layman’s terms is the following:

OSFI STRESS TESTING WILL APPLY TO ALL CONVENTIONAL MORTGAGES

The new guidelines will require that all conventional mortgages (those with a down payment higher than 20%) will have to undergo stress testing. Stress testing means that the borrower would have to qualify at the greater of the five-year benchmark rate published by the Bank of Canada (currently at 4.89%) or the contractual mortgage rate +2% (5 year fixed at 3.19% +2%=5.19% qualifying rate).

These changes effectively mean that an uninsured mortgage is now qualified with stricter guidelines than an insured mortgage with less than 20% down payment. The implications of this can be felt by both those purchasing a home and by those who are refinancing their mortgage. Let’s look at what the effect will be for both scenarios:

PURCHASING A NEW HOME
When purchasing a new home with these new guidelines, borrowing power is also restricted. Using the scenario of a dual income family making a combined annual income of $85,000 the borrowing amount would be:

Current Lending Guidelines

Qualifying at a rate of 3.34% with a 25-year amortization and the combined income of $85,000 annually, the couple would be able to purchase a home at $560,000

New lending Guidelines

Qualifying at a rate of 5.34% (contract mortgage rate +2%) with a 25-year amortization and the combined annual income of $85,000 you would be able to purchase a home of $455,000.

OUTCOME: This gives a reduced borrowing amount of $105,000…Again a much lower amount and lessens the borrowing power significantly.

REFINANCING A MORTGAGE

A dual-income family with a combined annual income of $85,000.00. The current value of their home is $700,000. They have a remaining mortgage balance of $415,000 and lenders will refinance to a maximum of 80% LTV.
The maximum amount available is: $560,000 minus the existing mortgage gives you $145, 0000 available in the equity of the home, provided you qualify to borrow it.

Current Lending Requirements
Qualifying at a rate of 3.34 with a 25-year amortization, and a combined annual income of $85,000 you are able to borrow $560,000. If you reduce your existing mortgage of $415,000 this means you could qualify to access the full $145,000 available in the equity of your home.

New Lending Requirements
Qualifying at a rate of 5.34% (contract mortgage rate +2%) with a 25-year amortization, combined with the annual income of $85,000 and you would be able to borrow $455,000. If you reduce your existing mortgage of $415,000 this means that of the $145,000 available in the equity of your home you would only qualify to access $40,000 of it.

OUTCOME: That gives us a reduced borrowing power of $105,000. A significant decrease and one that greatly effects the refinancing of a mortgage.

CHANGES AND RESTRICTIONS TO LOAN TO VALUE FRAMEWORKS (NO MORTGAGE BUNDLING)

Mortgage Bundling is when primary mortgage providers team up with an alternative lender to provide a second loan. Doing this allowed for borrowers to circumvent LTV (loan to value) limits.
Under the new guidelines bundled mortgages will no longer be allowed with federally regulated financial institutions. Bundled mortgages will still be an option, but they will be restricted to brokers finding private lenders to bundle behind the first mortgage with the alternate lender. With the broker now finding the private lender will come increased rates and lender fees.
As an example, we will compare the following:
A dual income family that makes a combined annual income of $85,000 wants to purchase a new home for $560,000. The lender is requiring a LTV of 80% (20% down payment of $112,000.00). The borrowers (our dual income family) only have 10% down payment of $56,000.. This means they will require alternate lending of 10% ($56,000) to meet the LTV of 20%.

Current Lending Guidelines
The alternate lender provides a second mortgage of $56,000 at approximately 4-6% and a lender fee of up to 1.25%.

New Lending Guidelines
A private lender must be used for the second mortgage of $56,000. This lender is going to charge fees up to 12% plus a lenders fee of up to 6%

OUTCOME: The interest rates and lender fees are significantly higher under the new guidelines, making it more expensive for this dual income family.

These changes are significant and they will have different implications for different people. Whether you are refinancing, purchasing or currently have a bundled mortgage, these changes could potentially impact you. We advise that if you do have any questions, concerns or want to know more that you contact a Dominion Lending Centres mortgage specialist. They can advise on the best course of action for your unique situation and can help guide you through this next round of mortgage changes.

Credit rating and debt servicing a mortgage

It is great feeling buying your first home, but for most of us the first step is preparing to get a mortgage.
Your credit rating and cash flow are based on a minimum of a two-year history.
As mortgage rules continue to change, the credit rating is becoming even more important as a higher credit rating could mean a lower interest rate and save you thousands of dollars over the life of your mortgage.
Your credit is made up of many things that the lenders will look at.

Character, it is determined by:
• Paying your bills on time.
• No Delinquent accounts
• Available credit – Are you using all or most of your available credit? That is not a good thing. You are better off to increase your credit limit than to use more than 70% of your limit each month. If you need to increase your score faster use less than 30% of your credit limit, and if you need to use more, pay your credit cards off early so you do not go above 30% of your credit limit.
• Your total out standing debt is considered.

Capacity: this is your ability to pay back the loan. Capacity also covers cash flow vs debt. Your employment history. How long have you been with your current employer, are you self employed, for how long? Capacity is not what you think you can afford, it is what the lender thinks you can afford based of the debt service ratio.

Capital: how much have you saved? How much do you have for a down payment and where does it come from?

Collateral: Lenders consider the value of the property and other assets as they want to see a positive net worth. If you have a negative net worth you may not be able to get a mortgage.

Not having one of these areas in order could prevent you from getting a mortgage.
Contact you Dominion Lending Centres mortgage specialist for a free review of where you stand.

Time to lock in your rate? Make sure you have an exit strategy

Like many of you, I received a call last week, from my mortgage provider, asking whether I wanted to “lock in” a new five-year fixed rate. The rate was a special offer and would only last for the week, so I would need to make a decision quickly, with little time to think about the consequences to my own mortgage strategy.

While it may appear that your financial institution is acting entirely in your best interests, this is only partially the case. While it is true that locking in or switching to a new fixed rate can help you control your costs, they are doing it to manage their own costs, not yours. It’s important to remember that each time a financial institution lends you money, it’s not their own money. Their strategy is to borrow the money from investors, depositors and other corporations in order to lend you the money. The five year fixed rate renewal they sign with you is backed up with a five year investment contract with someone else. Always.

When I started as a broker, the best piece of advice I got was from a former boss who said; “Before you sign up with someone, its always important to have an exit strategy, because things will change, often for the better, and you may need to get out of the agreement. Make sure you make it easy to do so. “

Having an exit strategy is just as important when signing a renewal or early renewal contract. The strategy is not so much about exiting the mortgage entirely, but ensuring you know and can use the existing features to your advantage. There are three specific features (termed ‘privileges’ and ‘penalties’ in the offer) that you should know and understand before signing that new contract;

A) Pre-Payment Privilege
For most of us, there is some time in our lives where a sum of money lands in our laps, perhaps a large bonus, severance, cash settlement or even a small inheritance. Knowing how much you can pay down, should you choose to, is vital. Depending on the lender, you may be limited to a 10 percent prepayment or as much as 20 percent. Some lenders specify the exact day you can make the prepayment, some merely say ‘anytime’.

B) Increased Payment Privilege
Again, at some time in our lives, most of us will leave one job for another that pays significantly more. In those situations we can certainly afford to increase our mortgage payments and should do. Do you know how much you can increase your payment and when? Again, it varies widely from lender to lender, for 10% on a specific day, yearly, to 20% anytime.

C) Early Payout Penalty
This is perhaps the most ignored potential cost in mortgage financing. As with the privileges, no two lenders calculate the penalty the same way. Its important to understand the differences. It can save you thousands.

Most people’s reaction, when we talk about penalties is ‘well I’m never going to pay out early, so it doesn’t matter. ‘ I don’t blame you for thinking that way, because that’s always my reaction too! But let’s walk through a “what if” and I’ll show you why its important to consider.

So… You have an existing mortgage in the amount of $480,000. Your lender’s representative calls you to say that because rates are going up, he’s calling all his clients to let them know that if you wish to early renew, they’re offering a fixed rate that’s actually a minuscule amount lower than you are paying now. Rates are going up and the offer is only guaranteed until the end of the week!

Because it’s actually well before the renewal date, there is a penalty, but they’ll add that on to the mortgage balance, no need to worry. After a couple of moments hesitation, you agree and you go in to sign at the branch. Overall, your experience with the lender has been very good.

Spool forward three years and your life is changing. You’ve become an expert in your field, people are noticing and suddenly, you are offered a dream job in another part of the country.

It’s sad and exciting to have to sell up and move but you’re startled when you realize the payout penalty is $21,000. That’s a LOT of your hard earned equity to lose but you realize that you’ve already actually paid another $37,00 in penalties when you renewed early. Now its $25,000! GULP!

I know you realize that this is a worst case scenario but it can potentially happen to any one of us. The key is not avoiding these costs, but by making informed choices, avoid paying any more than you have to. By being aware and making one simple change, your penalties in our previous scenario could be about $7,500 – a savings of $17,500.

You can read more about how some lenders (not all ) calculate their penalties here.
As always, contact a Dominion Lending Centres mortgage specialist if you have any questions.

– by Jonathan Barlow

Yes, You Can

This story is from the Fall edition of Our House Magazine

Moving on up from condo to house, these young homeowners prove age is just a number

For Jordan Rothwell and Karissa Roed, the timing to find their forever home couldn’t be more perfect. The couple, who recently moved to Mission, B.C., are expecting their second child and are ready for the family to grow.

It’s quite the responsibility for Jordan and Karissa, aged 23 and 24, respectively. But it’s a challenge the young couple has been preparing for since they first resolved to get into the housing market a couple of years back. And the pair see their story as motivation for what other young people can achieve if they set their minds to it.

“If younger people would just set goals for themselves, especially when it comes to buying property, it’s such a blessing when you do it. You’re instantly further ahead as an adult when you do it,” Jordan says.

Their property story began when Jordan’s grandfather offered to match the couple’s savings for a down payment on a condominium. So Jordan and Karissa went about saving money wherever they could. That meant a lot of sacrifice—especially missing out on trips and events they might have attended.

“It basically became an addiction for a while, just saving up every penny to try and get to the point where we could go in and buy a condo,” Jordan notes.

It paid off. By 2014, they saved up $5,000 and, with matching funds, moved into a two-bedroom condo in Port Coquitlam, B.C.

Fast forward a couple of years, and Jordan and Karissa were looking to upsize. By then, they had some equity, in part because they bought their condo at the right time, taking advantage of the hot Metro Vancouver real estate market, and were ready to move into their forever home.

Once again they looked to family, partnering with Karissa’s mother and stepfather to purchase a 3,000-square-foot, six-bedroom house in Mission for $605,000. Jordan, Karissa and their young family will live upstairs, while her parents will take the ground floor.

The couple couldn’t be happier in their new home. “It’s definitely nice moving from a condo to a house,” Karissa says, adding they have nearly double the square footage as their old condo, along with a backyard for her children to play.

Dominion Lending Centres mortgage specialist Pauline Tonkin says she couldn’t be more impressed by the couple’s smart financial habits. Tonkin helped them secure a mortgage for their first condo and wasn’t surprised to see them make a jump to a house.

“I wasn’t concerned for them because they really do the right things. They really get it,” Tonkin says. “Age is not indicative of how people handle finances.”

She describes the couple, especially Karissa, as very diligent at considering all the costs involved in the purchase. The pair wanted all the details, something Tonkin says isn’t often the case with young buyers.

Besides securing the proper financing, Tonkin helped Jordan and Karissa through the process, giving them a “road map” to where they wanted to be. It was help the couple appreciated. “When you’re buying a condo or a house, it’s such a blur,” Karissa says, adding that their mortgage broker was someone they could trust and call at all hours if they needed to.

Jaclyn LaRose has enjoyed similar success as a homeowner. This spring, she sold her first condo to upsize to a bigger one in Surrey, B.C., close to her work as a schoolteacher.

LaRose was 26 when she and her sister decided to buy their first place with a little help from their parents. Her parents didn’t like seeing them throw away money on rent, she explains, so they helped out with a five per cent down payment for an apartment in nearby Coquitlam, B.C.

“I definitely considered at the time that I was young because I hadn’t been thinking about it for a few more years at least,” she says.

Not having even hit the age of 30, Larose is now on her second home. She said she has friends who believe it’s impossible to get into the market, especially in B.C.’s Lower Mainland. But she also points out those friends are looking in prime spots where the prices are highest. LaRose chose to look a little further afield to get into the market. She’s gone from a 500-square-foot, one-bedroom apartment to a two-bedroom with more than 800 square feet.

While Larose points out there is a sacrifice related to home ownership, she now feels lucky to be in her position. “It’s just about getting in when you can,” she said. There are places out there where you can get in.” And now that she has home ownership all sewed up, she’s able to focus on her career and personal goals.

“For the short term I feel settled,” LaRose says.

Back in Mission, Karissa and Jordan have settled into their new home. They are also way ahead of their peers and looking forward to the future. A lot of people his age look at owning a home as something they’re not supposed to do, or able to do at their age, Jordan says. But he doesn’t see it that way at all: “If you just stick to your guns and build a goal of what you want to accomplish… you’ll get there.”

You’ve been squirreling away your bonus cheques, savings and reducing the amount of times you visit Starbucks so you can finally get into your own home to build solid equity for your future. Now that you know what you want and what you can afford, it’s time to visit your local Dominion Lending Centres mortgage specialist to get yourself pre-approved for a mortgage.

Note, we did not say go to your bank to get pre-approved!

A mortgage broker works with banks (including yours), credit unions and other lending institutions to help find you the best rate on your mortgage. Since they work with so many different lending institutions across the country, they are in the best position to approach banks and ask for the best rates – sometimes better than what the same bank would have been able to offer you had you gone in on your own. Best of all, you do not pay a dime for their services – the lending institution does!

To work with a broker for your pre-approved mortgage, you will need the same documentation you would have to provide your bank so be sure to have your documents in order. You will need the following documents:

For a Salaried Employee

• an employment letter/verification of employment
• current/most recent pay stub

For an Hourly Employee

• current/most recent pay stub
• an employment letter/verification of employment
• Two (2) years of your T4 tax slips

For Someone Who is Self Employed

• last two (2) income tax returns
• proof of self-employment

Once you have submitted these details, you are on your way to getting pre-approved for your mortgage and providing yourself with a clear budget on the home you would like to buy!

– by Max Omar

Mortgage changes are coming—are you prepared?

We know – more changes?! How can that be! With this ever-changing landscape, mortgages continue to get more complicated. This next round of changes is predicted to take affect this coming October 2017 (date not yet available). These new rules contain three possible changes, the most prominent being the implementation of a stress test for all uninsured mortgages (those with a down payment of more than 20%). Under current banking rules, only insured mortgages, variable rates and fixed mortgages less than five years must be qualified at a higher rate. That rate, of course, is the Bank of Canada’s posted rate (currently 4.84%, higher than typical contract rates). Going forward, it will be replaced by a 200-basis-point buffer above the borrower’s contract rate. (source)

The other proposed changes include:
• Requiring that loan-to-value measurements remain dynamic and adjust for local conditions when used to qualify borrowers; and
• Prohibiting bundled mortgages that are meant to circumvent regulatory requirements. The practice of bundling a second mortgage with a regulated lender’s first mortgage is often used to get around the 80%+ loan-to-value limit on uninsured mortgages.
These two proposed changes are minor, and would only affect less than 1% of all mortgages in Canada. The main one, the stress testing, will have a far greater impact.

Why is this happening?

You may recall that the stress test requirements were announced by OSFI in October of 2016. This rule followed a long string of new rules that occurred in 2016. At the time, they primarily affected First Time Home Buyers and those who had less than 20% down to put towards a home. Now, those who are coming up to their renewal date or wishing to refinance may find that this will have an impact on them. They may not qualify to borrow as much as they once would have due to the stress testing implication. For example:

A dual-income family with a combined annual income of $85,000.00. The current value of their home is $610,000.00.

Take off the existing mortgage amount owing and you are left with $145,000.00 that is available in the equity of the home provided you qualify to borrow it.

Current Lending Requirements

Qualifying at a rate of 2.94% with a 25-year amortization and with a combined annual income of 85K you would be able to borrow $490,000.00. Reduce your existing mortgage amount of 343K and this means that you could qualify to access the full 145K available in the equity in your home.

Proposed Lending Requirements

Qualify at a rate of 4.94% with a 25-year amortization and with a combined annual income of 85K you would be able to borrow $400,000.00. Reduce your existing mortgage amount of 343K and this means that of the 145K available in the equity in your home you would only qualify to access 57K of it. This is a reduced borrowing amount of 88K.

They have a mortgage balance of $343,000.00. Lenders will refinance to a maximum of 80% LTV (loan to value). The maximum amount available here is $488,000.00

As you can see, the amount this couple would qualify for is significantly impacted by these new changes. Their borrowing power was reduced by $88,000-a large sum of money!

With the dates of these changes coming into effect not yet known, we are advising that clients who are considering a renewal this fall do so sooner rather than later. Qualifying under the current requirements can potentially increase the amount you qualify for—and who wouldn’t want that?

For more information on how these changes affect you specifically, or to refinance your mortgage, get in touch with your local Dominion Lending Centres Mortgage Professional-they are well-versed in these changes and are ready to help you navigate through the complexities!

– by Geoff Lee

Avocado Toast & Budgeting

There was an article reprinted in the National Post recently about an Australian millionaire’s opinion on millennials not being able to afford a home because they’re wasting money on avocado toast, at $22 per plate. The article was quickly mocked but it was an interesting article on two fronts: 1) the irresistible urge for avocado toast and 2) the importance of budgeting.

In no way is this a critique on millennials themselves, but a reminder for all to understand how spending money today, may prevent us from saving for tomorrow.

The comments arose from a TIME interview with the millionaire about how he did not spend his money on avocado toast and $4 coffee, multiple times a day, when he was young. Surely times have changed since said Australian millionaire was young and he had other priorities at the time – which may not have included avocado toast. However, what he is trying to drive home, is the importance of budgeting.

For those that are trying to save money for a down payment on their first home, it is important to think about living within your means. Perhaps those trips to the coffee shop and Sunday brunches could be fewer per month to help save a few hundred dollars a month.

If you are spending an average of $4 per coffee at your local café on your lunch hour or coffee break at work, that could add up to approximately $80 per month. For many, those coffees are added to their credit cards where only the minimum payment is made at the end of the month. As such, those $80 per month have increased to more than 99$ at a 24% interest rate (and continues to compound over the months you carry your balance). For those few who pay off their credit card before the end of the month, even saving an extra $80 per month can add up to a pretty solid down payment on a home over months and years.

Today, we are more prone to instant gratification and those coffees and avocado toasts may seem like harmless frivolities that don’t amount to much. However, every little bit counts when planning for your future. I often tell people that today’s non-essential purchase is a hindrance to their future home which helps puts things into perspective for them – and serves as a catalyst to saving.

Budgeting is essential when looking to buy your first home. This includes looking for a home and mortgage solution that work best within your monthly budget. For example, if you are earning $4,000 per month, it would be ill-advised to have mortgage payments that nears $2,000. Perhaps a starter home is all you need which will allow you to invest in your home, grow your equity and then use that for your next home in a few more years. Do you need that 2,500sq foot home right away, or can you live in a 800sq foot home for a few years before moving into a bigger place?

Making the right financial decisions can be difficult for many families. As a mortgage broker I have seen many people struggle trying to buy their first home and invest for their future. Luckily, though, I have also been able to work with them to find mortgage solutions that make sense for their very personal financial situations.

Should you need help securing a mortgage for your first home, please contact your local Dominion Lending Centres mortgage specialist.. In the meantime, ease up on the avocado toasts and $4 coffees.

– by Jeremy Deutsch