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How to prepare to buy a home in a hot market

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How to prepare to buy a home in a hot market

As lockdown restrictions ease up and provinces enter new phases of reopening, we’re seeing the Canadian housing market experience the momentum of a delayed “hot spring market” into the summer. With more people listing their homes and resuming home searches, we saw one of the hottest June markets nationwide in a really long time.

According to the Canadian Real Estate Association, national home sales shot up a total of 63 per cent month-over-month in June, with an increase of 15.2 per cent in overall activity year-over-year. As restrictions for open houses are being lifted, we can expect this trend to continue into the later summer months.

So, how can buyers best prepare for this hot housing market?

1 – Determine your down payment

A down payment is the amount of money a homebuyer pays up front when purchasing a home. Knowing what your down payment is from the get-go will make for a more productive home search. It will also give you a rough idea of how much you need to borrow for a mortgage, while helping you budget for other expenses such as closing costs and land transfer taxes, if you’re not a first-time homebuyer.

2 – Get Pre-Approved for a mortgage to find out what you can afford

Once you have a clear idea about what your down payment is, getting pre-approved for a mortgage is your next step. Pre-approval will help you establish your home affordability and what you can borrow right from the start. Having this information will allow you to set a realistic budget, which in turn will simplify your home search and make for a much more enjoyable home shopping experience. At Homewise, we’ve seen a strong increase in pre-approvals over the last three months as buyers were getting prepared to enter the market.

3 – Find a good realtor

Once you’re ready to start home shopping, find a knowledgeable realtor that knows how to navigate a hot market. You’ll want to find an unbiased individual that will steer you in the right direction and help you understand if you have access to buying opportunities in a broader market.

4 – Shop only for what you can afford

Whether you’re looking at a new or resale home, a key rule of thumb when shopping in a hot market is to shop only for what you can actually afford. One of the biggest mistakes buyers make is losing sight of their budget and spending beyond their means. When buying resale and you find yourself in bidding situation, make a five-day conditional financing offer. This gives you necessary time to work with a lender that can shop around and get the financing you need to close the deal.

At the end of the day, purchasing a home is a really exciting milestone. Being prepared and knowledgeable will only help you maintain this excitement as you enter a competitive marketplace. Knowing what you can afford will ensure you make a well-informed buying decision that you can feel good about. Happy shopping!

Jesse Abrams is Co-Founder at Homewise, a mortgage advisory and brokerage firm based in Toronto. thinkhomewise.com

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Why the new CMHC rules may not affect you

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Why the new CMHC rules may not affect you

At the beginning of June, Canada Mortgage and Housing Corp. (CMHC) announced its decision to tighten the guidelines for insured mortgages as of this month. This applies to mortgages with down payments of less than 20 per cent that require CMHC default insurance.

Given the recent COVID-19 pandemic, there have been varying outlooks of how the Canadian housing market will be impacted. Evan Siddall, CEO of CMHC – who is also scheduled to depart from the organization later this year – strongly believes that Canadian housing prices will be lowering despite upward trends seen across the country. As a result, he implemented these new policies to stop borrowing from who he deems to be riskier buyers.

When he made this decision, there was a lot of disappointment among first-time homebuyers, as they believed this directly targeted them and negatively affected their ability to buy a home. Now that the dust has settled around this and these changes are in full effect, we’re gaining more insight into who may be affected, and how – some good news for those worried first-time buyers.

So, what exactly are the new CMHC guidelines?

As of July 1, the following rules came into effect for insured mortgages:

  • The minimum credit score increased to 680 from 600, for at least one borrower
  • Buyers can no longer borrow money for a down payment (does not include family gifts)
  • Gross Debt-Service ratio decreased to 35 from 39 per cent (lowers affordability)
  • Total Debt-Service ratio decreased to 42 from 44 per cent (lowers affordability)
  • Multi-unit mortgage insurance refinancing is suspended (unless funds are used for repairs or reinvestment in the property)

Who could be affected?

These new rules have the potential to cut the purchasing power of many Canadian homebuyers as it decreases their overall housing affordability. At face value, we can expect this to impact first-time buyers the most, as they’re more likely to make down payments of less than 20 per cent, as well as buy a home close to their maximum affordability.

Some may not be affected at all

The mortgage rules technically only apply to lenders who use CMHC as their only insurer. In other words, not every lender (if any) will be following through with these new rules. Genworth MI Canada and Canada Guaranty are two CMHC competitors that have chosen not to adopt these stricter guidelines. So, depending on the lender you’re working with, Canadian buyers may not be impacted at all. In this climate, especially, shopping lenders and finding an unbiased mortgage advisor has never been more important and encouraged.

Changes like this are the exact reason we work with more than 30 banks and lenders at Homewise. Policies and lending guidelines are constantly changing, so having access to multiple lender options ensures that buyers can find the best mortgage for their unique needs.

Recently, we’ve received a lot of questions about how to navigate this situation. Given the many options we have available, we are able to guide our clients to the right lenders so they don’t have to worry about these new CMHC policy changes. Best of all, many top lenders with great features and rates don’t have to abide by this new criteria.

Given that these rules are new, we’re still learning how they can impact Canadian buyers. For the time being, it’s evident there are other avenues for many purchasers to get a great mortgage without being impacted by these new guidelines.

Jesse Abrams is Co-Founder at Homewise, a mortgage advisory and brokerage firm based in Toronto. thinkhomewise.com

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How to navigate the mortgage process during COVID-19

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How to navigate the mortgage process during COVID-19

Jesse Abrams Homewise

Over the last few months, we’ve seen our world transform at the hands of a global pandemic. We’re living in very different times where meeting face-to-face isn’t really an option. Despite the new reality, the priority of taking care of our personal finances is one thing that hasn’t changed.

When it comes to getting a mortgage, there’s no shortage of demand right now. In addition to those looking to refinance or switch to the very low rates available, there are many Canadians who purchased homes before the pandemic who are looking to get approved. Further, the real estate market is beginning to heat up again, therefore mortgage demand is expected to rise even further. The good news is that despite the current situation, there are great options available to apply for a mortgage without having to leave your home.

In the face of COVID-19, operations and procedures across the mortgage industry have been forced to adapt and do business virtually. With many large financial institutions not exactly built for online, this has lowered efficiencies and increased wait times for many customers. Traditional brokers are also facing this dilemma. Many of them don’t have the infrastructure to facilitate the mortgage process outside of their offices, which has prompted a shift toward mortgage technology companies. For example, we have seen a 400-per-cent increase in site visits over the last three months.

Mortgage tech companies are a popular choice and have been resilient because they were already built to streamline the process digitally, while still having advisors to support clients throughout the process. People are looking for contactless options and these companies have been able to deliver an efficient way to get a mortgage without delays, often with better results.

Regardless of the route you choose, here are a few things to keep in mind if you plan to refinance, switch or apply for a new mortgage during this time:

1 Looking to buy a home soon?

Get pre-approved. This is an important step that allows prospective buyers to search for a home with confidence, understand what they can afford and lock in a mortgage. To get preapproved, contact a broker, call your bank or apply online with a digital mortgage company.

2 Prepare your documents in advance

Whether you’re looking to refinance, switch or apply for a mortgage, you’ll need to have the right documents on hand. Get a head start and organize all your paperwork to speed up the process later on.

3 Shop lenders for the best mortgage

Going from one bank to the next to find the best mortgage isn’t something you can easily do right now. So, one of the best ways you can shop around is to either call a broker or use a digital mortgage company. What’s great about these companies is that they’ll do the shopping for you, so you can find the best mortgage option without having to leave your home.

4 Expect lenders to be tighter

The financial downturn caused by COVID-19 alongside the heavy increase of unemployment has led many lenders to be slightly tougher about the application process. Finding an unbiased mortgage advisor will put you on the right path from the start. They’ll give you a full picture of the mortgage options and lenders available.

5 How to close

If you’re going to go digital with your mortgage, why not bring the rest of the process online? Regardless of what you’re applying for, you’ll need property insurance and a real estate lawyer for new purchases. Providers of these services are also expanding their digital options, enabling you to do everything online from your own home.

Current conditions have underlined the advantages of tech companies and how they’ve changed the marketplace, especially when it comes to navigating the mortgage process.

In the end, it’s important to know that there are solutions available and that you don’t have to worry about social distancing restrictions keeping you from getting the best mortgage for your needs.

Jesse Abrams is Co-Founder at Homewise, a mortgage advisory and brokerage firm based in Toronto. thinkhomewise.com

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CMHC tightens mortgage regulations slightly

 

 

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Four financial tips to plan for a new decade

Four financial tips to plan for a new decade

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Four financial tips to plan for a new decade

Happy New Year (and new decade), Condo Life readers. This is always an exciting time – to look back and learn from our mistakes, but also to set some real goals for the year ahead.

We often make New Year’s resolutions to lose weight or work out more, but how about a promise to yourself to build your wealth in a meaningful way? Around this time, I usually talk about making year-long financial goals. But with it being a new decade, let’s take this opportunity to set some long-term goals. What are your financial plans over the next decade? Maybe you have plans to retire, downsize, maybe go back to school or buy a condo. All of these events cost money (lots of it) and take some careful planning to make happen. Start setting your 10-year goals now.

Make a list

Every plan starts with a list. List all the goals you hope to accomplish. Break it up into to two parts – five- and 10- year goals. These could be as straight forward as paying off your student debt or saving a certain amount of money into your RRSP each year. Or they could be loftier, such as buying a property in Florida or take a year off to travel. Write them down, then beside each one attach a price tag. For example, how much will it cost you pay down all your high interest debt if you started now? How much would a world tour for two people over six months cost? This will help plan appropriately.

Visualize it

A friend of mine recently invited me over to make a vision board. Initially, I was very sceptical. How could cutting and pasting images out of magazines help me in my life goals? But this one simple exercise has really changed my life. On my vision board, I have a goal to work out more, spend Sundays with my family and read better books. All of those things are starting to happen in my life. Make a vision board, stick it somewhere you can see it daily. Mine is hanging at the back of my closet up high so I can see it every day, as a reminder of what my goals are.

Motivational speaker Jack Canfield is a big supporter of the power of visualization. He says visualization techniques have been used by successful people to visualize their desired outcomes for ages. “We all have this awesome power, but most of us have never been taught to use it effectively,” he says. “The daily practice of visualizing your dreams as already complete can rapidly accelerate your achievement of those dreams, goals and ambitions.”

Break down your goals

Business writer Bill Hogan wrote the now famous book, How Do You Eat an Elephant? One Bite at a Time! The idea that every big task starts with the first step. This same philosophy can be applied to your financial goals. Break them all down year by year, then month by month, or even week by week or day by day. See how by making incremental moves every day you can reach your big goals. Saving $15 a week, for example, can result in an investment of more than $10,000 after 10 years. Go ahead and make big goals, but break them down into smaller moments to make them feel more attainable.

Seek professional advice

You don’t have to pay thousands of dollars to get good financial advice. You can contact a fee-only financial planner who can help you set your financial goals. They will look at your financial situation, talk about your goals and draw out a plan to get you there. They are unlike investment advisors who buy and sell investment products, often for a fee. If you want to become more tax-efficient, consider hiring a tax accountant. They cannot only help you with your taxes now, but also make a plan for you to be more tax-efficient in the future.

Lastly, make a plan to revisit your goals at least once a year. Now that you know where you want to be, make sure you’re staying on track. Hopefully, when you ring in 2030 you will feel like you have accomplished the financial goals you set out today.

Rubina Ahmed-Haq is a journalist and personal finance expert. She is HPG’s Finance Editor. She regularly appears on CBC Radio and TV. She is a contributor on CTV Your Morning and Global Toronto. She has a BA from York University, received her post graduate journalism diploma from Humber College and has completed the CSC.

Follow her on Twitter @alwayssavemoney.


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Dos and Don’ts – financial advice for the holiday season

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Dos and Don’ts – financial advice for the holiday season

The holidays are often a time for over-consuming and over-spending. We second guess ourselves and wonder whether we’ve purchased enough in terms of gifts, food and drink for all the get-togethers. Our wallets are opened more frequently in the six weeks leading up to end of the year, than at any other time of the year.

While some people adopt a laissezfaire approach and just go for it, others may be wanting to rein in old habits. As with most things in life, when you know better, you do better.

Do

Create a list of the people who you are buying for, along with what you intend to get them. Set a budget before you venture out to shop. Being tempted by the beautiful window displays, and being drawn into the excitement of the season is lots of fun in the moment, but not so much fun when you receive your credit card statement. By having a monetary plan for how much you want to spend on each person in advance, will help to keep you under control in the stores.

Don’t

People just want to have fun, but don’t try to keep up with the Joneses. Others may be (momentarily) impressed with a fancy charcuterie board, but five minutes into the evening, no one will care, nor will they remember. Spend your money on creating great experiences, not on expensive items that are stored away for 11 months of the year.

Do

Stock up – especially if you’re going to be hosting, or attending other parties where you may need to bring a contribution, or a gift for the host. Look for sales. If you notice a nice bottle of wine that would be suitable for a number of occasions, and it’s on special, pick up the quantity that you’d need for each event. The time and gas, alone, of having to go back multiple times will also save you money.

Don’t

Make sure that you don’t skip an automated contribution to a registered savings vehicle, like an RSP or TFSA, in order to add to your holiday budget. Compounding works in your favour, and can work against you too. Depending upon your age, every dollar could yield as much as $32 in your retirement. If you miss a simple $250 contribution, it could lead to the equivalent of a month of gross income (that you will need in the future) flying out the door.

Do

Use reward cards that offer cash or travel perks. If you’re a bit trigger happy with your credit card, why not reap some benefits from the card provider in the New Year.

Don’t

Do not borrow money to shop. Some people are too quick to treat their lines of credit like a savings accounts. When you do so, you never really know what you paid for an item, or the accumulating interest charges attached to it. Preferably, buy with cash or debit, or use a credit card with reward points, and then immediately pay it off.

If you recognize your weaknesses, get help from a professional. Often their advice will help you to reach your long-term goals, without giving in to short-term spending sprees. And, above all else, enjoy the holidays.

Brandon Parkes is a Senior Consultant with IG Wealth Management. He was also mortgage-free at the age of 32. 416.450.8538 or brandon.parkes@investorsgroup.com

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Canadian household wealth falls for the first time in a decade

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Canadian household wealth falls for the first time in a decade

After nearly a decade of growth, Canadian household net worth is down

New data from Environics Analytics shows the average household in Canada is less rich than they were a year ago. Called WealthScapes, the study looks at how wealthy Canadians are across the country. For a decade, that number had been going up mostly because of higher real estate price.

Now with a slowdown in the housing market when it comes to sales and prices, the net worth of Canadians has fallen as well.

The study says “After almost a decade of wealth accumulation, the average Canadian household net worth declined slightly in 2018. While the latest financial snapshot of Canadian households includes some positive trends, growing debts, shrinking pensions and a sharp drop in liquid assets are putting pressure on families.”

The analysis by Environics Analytics shows Canadian net worth fell by 1.1 per cent in 2018 compared to data gathered in 2017. The average Canadian household has $7,594 less. The average Canadian net worth is $678,792.

This happened despite Canadian households not taking on significantly more debt. Peter Miron, senior vicepresident, research and development and the architect of WealthScapes at Environics Analytics, says, “Despite being relatively prudent in terms of their debt acquisition and repayment in 2018, Canadian households felt the effects of a significant decline in equity market valuations over the fourth quarter of the year.”

But, there are pockets in Canada that did buck the trend and see their net worth increase. The city of Moncton posted the largest gains in household net worth at 2.2 per cent. The study says the New Brunswick city is not just relying on real estate prices rising to see residents’ net worth rise. “Moncton’s households were actively building their savings faster than anyone else in Canada in 2018, on average stashing, away $11,097.”

The richest households continue to be in the big urban centres. The average household net worth in the Toronto grew by 0.1 per cent in 2018 to $977,698. Environics says, this growth was due to an above-average savings rate as well as slightly above-average real estate performance in 2018.

The richest Canadians are still in Vancouver, despite their household wealth falling more than the average, by 1.3 per cent. The average Vancouver household net worth was $1.14 million.

For all of Canada, though, there are other bright spots in this report.

Miron says, “On a more positive note, Canadians are actively taking steps to reign in their debts and build up their savings. In fact, four provinces saw the average debt per household decline in 2018.” Those provinces are Alberta, Saskatchewan, Newfoundland and Nova Scotia.

Household salaries are higher as well. The average household income in Canada was up by 3.4 per cent to $99,654. Canadian household net worth falling for the first time in 10 years is not a positive story. But, depending on where you look, there are places in Canada that are doing better financially. And it’s not all because of higher real estate values, rather more because of higher salaries and better savings rates. From a personal finance perspective that is a very good news.

Rubina Ahmed-Haq is a journalist and personal finance expert. She is HPG’s Finance Editor. She regularly appears on CBC Radio and TV. She is a contributor on CTV Your Morning and Global Toronto. She has a BA from York University, received her post graduate journalism diploma from Humber College and has completed the CSC. Follow her on Twitter @alwayssavemoney.

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Why condo co-ownership is gaining popularity

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Why condo co-ownership is gaining popularity

More Canadians are partnering up with friends and family to buy a condo. New data from Teranet, the provider of Ontario’s online property search and registration, shows co-ownership in condominiums specifically was more than 37 per cent in 2018. With condo prices continuing to rise year over year, for many, pooling their money is the only option to get into the condo market. For others it’s a more creative way to manage a huge responsibility, like owning real estate. Here is what the latest data shows.

The trend is growing

Compared to data from 2012 more condo purchases are being made with more than one person on title. Condos with only one person on title in 2018 was 48 per cent. That is down from 57 per cent in 2012. Parents are pitching in more too. For example, units owned with parental assistance is at more than 14 per cent. Compare that to 2012 when only nine per cent of condos were purchased with help from mom and dad.

Owners close in age

The data from Teranet show co-owners are relatively close in age. That number has also risen slightly. In 2012, 50.1 per cent of the province’s homes had several owners on title, with the age gaps being 20 years or less. This proportion went up to 51.6 per cent by 2018. The rise is small, but shows more people, young or old, are choosing to buy together, whether it be young people buying their first home, or retirees deciding to downside together.

Financing options

Owning a house with a friend of family member means you will need to apply for a co-mortgage. Some financial institutions are now launching products that are specifically aimed at this group of people eager to find a way to buy their first home. There are many factors to consider in a co-ownership situation. This will include how the regular monthly bills will be handled, who will get what room and how emergency costs can be covered. As well, have an exit plan if you co-own a property.

Consider the future

Unlike when you buy with your spouse or long term partner, life can change at different times. One co-owner may meet someone and want them to move in. Another may get a new job and want to sell the home and take the equity to buy a house elsewhere. Draw up a plan now of how you will handle the sale of the home and what each co-owner’s expectations are.

With co-ownership of condos on the rise, more needs to be done to protect all those involved in the transaction to make sure the real estate purchase is worth it for everyone.

Rubina Ahmed-Haq is a journalist and personal finance expert. She is HPG’s Finance Editor. She regularly appears on CBC Radio and TV. She is a contributor on CTV Your Morning and Global Toronto. She has a BA from York University, received her post graduate journalism diploma from Humber College and has completed the CSC. Follow her on Twitter @alwayssavemoney.

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Are American style mortgages coming to Canada?

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Are American style mortgages coming to Canada?

Are American style mortgages coming to Canada? Bank of Canada Governor Stephen Poloz has encouraged financial institutions to start looking at new ways to offer mortgage products – including establishing longer term mortgages, much like those in the U.S.

Poloz recently spoke to a group of finance and mortgage professionals, impressing upon them that mortgage products need to innovate. Among other suggestions, he proposed the idea of longer mortgages. “One basic idea would be to encourage more diversity in mortgage durations. It is true that most financial institutions offer fixed-rate mortgages longer than five years.”

Few Canadians, he says, take advantage of longer mortgages, but that could change. “Forty-five per cent of all mortgage loans have a fixed interest rate and a five-year term. In comparison, just two per cent of all mortgages issued last year were fixed-rate loans with a term longer than five years.”

The U.S. has had 30-year mortgages for decades, but in Canada, most mortgages are still five-year terms that are renewed as we amortize our loan.

So, are these long-term products a good idea for Canadian consumers? There are pros and cons.

Pros

Longer mortgages are a great option for anyone who doesn’t like to spend time renegotiating the terms of their mortgage agreement every five years. Most of us take on a 25-year amortization, but are forced to talk to the bank every five years when the term is up.

Longer mortgages would be especially good for those who don’t shop their mortgage around and stay with the same financial institution until the end of the amortization.

Cons

But for anyone who likes to save money, it’s not a good deal. If you compare the data, in Canada we make smaller interest payments on our loan compared to homeowners in the U.S. The five-year fixed mortgage was created in Canada, albeit in the 1800s, so homeowners had the opportunity to pay more down at the end of the term, without penalty. As anyone who has a mortgage knows, there is a limited sum you can pay above and beyond your regular payment. Also, every five years you can renegotiate the rate – which during an environment of falling rates, is very advantageous.

Poloz also seems to like the idea that was announced in the spring federal budget – that the Canada Mortgage and Housing Corp., beginning this fall, will help first-time homebuyers by taking an equity share in their home, up to 10 per cent to help lower their payments. He calls this an example of how the mortgage industry is innovating.

Still, when it comes to longer term mortgages, don’t expect this change to happen anytime soon. It’s all just talk right now. But coming from the Bank of Canada governor, that is significant. He emphasizes that the system is not broken – it has served Canadians and financial institutions well. But he also says the mortgage industry is pretty much the same now as when he got his first mortgage in the 1980s. And that, he says, feels a little stagnant.

The mortgage experience across Canada is very different, he says. This means there has to be several products available that give homebuyers options, because no one homebuyer is like another.

Rubina Ahmed-Haq is a journalist and personal finance expert. She is HPG’s Finance Editor. She regularly appears on CBC Radio and TV. She is a contributor on CTV Your Morning and Global Toronto. She has a BA from York University, received her post graduate journalism diploma from Humber College and has completed the CSC. Follow her on Twitter @alwayssavemoney.

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Cost of living and retirement savings are barriers to homeownership

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Cost of living and retirement savings are barriers to homeownership

Anyone living in a big Canadian city such as Toronto knows the cost of living is high. Everything from basic needs, such as food, clothing and shelter to non-essentials are expensive, and according to a new survey they are also barriers to homeownership for young families.

Basic living costs biggest barrier

Conducted by Sotheby’s International Realty Canada and the Mustel Group, the survey found that “across Canada’s key metropolitan areas, young, urban families identified the cost of covering basic living expenses, such as rent, groceries and utilities, as their leading financial barrier to saving for homeownership.” One third of Canadians surveyed said this was their primary obstacle. In Toronto, the number was slightly higher with 35 per cent saying basic cost of living was keeping them from saving for and owning a home.

But the barriers don’t stop there. Would-be homeowners say even non-essential lifestyle expenses such as dining out, travel, entertainment and fitness memberships were also preventing them from breaking into the real estate market.

Giving up a lot to get there

The report surveyed more than 1,700 families living in Canada’s largest cities, including Toronto, Vancouver, Calgary and Montreal. It focused on families where the heads of the family are between the ages of 20 and 45. The majority, 51 per cent, said they were willing to minimize or reduce non-essential lifestyle spending to reach their real estate ownership goals. This includes cutting out dining out and travel. Many were also willing to give up clothing or technology purchases. To save, more than 37 per cent of families said they have reduced or eliminated health and fitness expenditures. A further 15 per cent say they are reducing if not eliminating car ownership.

Retirement on the back burner

The most concerning finding is one in five homeowners worried that prices will continue to rise are delaying saving for retirement. The implications of this can be significant. The shorter time you save for retirement the shorter time that money has to grow. A 2018 CBIC poll called “Am I saving enough to retire?” found the magic number Canadians needed to retire is $756,000 but they found as many as 90 per cent don’t have a retirement plan. The poll findings also show that almost a third of those nearing, or on the cusp of retirement aged 45 to 64, have nothing saved for their retirement. For those who have saved, the average value of their nest egg is $345,000 – only half as much CIBC says you need to retire.

What is the best decision?

Buying real estate should not come at the cost of ignoring other financial obligations. One easy solution is the look for properties that are less expensive. Condos are often the best choice for first-time homebuyers. If a more expensive property is what you desire, spending more time saving for your down payment will lower your payments when you finally purchase. The reason many young families are willing to sacrifice, is 78 per cent of those surveyed by Sotheby’s and the Mustel Group believe their home will either outperform or match the performance of their financial investments in the next five years. If the last 10 years is an example, that would be true, but it’s important to understand that as interest rates rise, so will the cost of borrowing and that will put downward pressure on home prices, too.

The bottom line? Financial sacrifice is necessary when buying a home in most Canadian urban centres, so plan and prepare.

Rubina ahmed-haq is a journalist and personal finance expert. She is HPG’s Finance Editor. She regularly appears on CBC Radio and TV. She is a contributor on CTV Your Morning and Global Toronto. She has a BA from York University, received her post graduate journalism diploma from Humber College and has completed the CSC. Follow her on Twitter @alwayssavemoney.

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Till debt do you part, looking for love in all the wrong places?

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Till debt do you part, looking for love in all the wrong places?

Dating can be complicated, especially later in life. You’re probably carrying some extra baggage, which can come in many forms. And, there still might be an ex in the faded picture, as well as children and grandchildren. It can be a difficult world to navigate.

When you’re younger there are any number of reasons of why you might fall for someone. But, when you’re older, you’re hopefully a lot wiser too. In addition to emotional baggage, financial baggage could be holding you back from finding the perfect partner. A personal finance website called Finder, found that 68.5 per cent of Canadian adults say that they would reconsider a relationship based on a person’s financial debt. Baby boomers might be a tad more savvy, as 70 per cent of those surveyed would consider their partner’s debt unacceptable and a roadblock for the relationship to continue.

Deal breaker

Some debt is considered worse than others. The Finder survey found that payday loans were viewed as the least acceptable form of debt. More than 58 per cent of Canadians said that if they found out that their partner was carrying this type of liability, then it would be a deal breaker for them. Pay day loans have notoriously high interest rates, and are often used as a last option to get funds.

Other types of debt that may have your love interest rethinking, also include credit card debt, and money owed to family and friends.

Acceptable debt

Angus Kidman is the editor-in-chief at Finder and he says, “The uncomfortable truth is that the majority of Canadians are turned off by personal debt. Given so many people in relationships aspire to share finances, it’s not surprising that individuals view partner debt unfavourably. In saying that, not all types of debt are equal. Prospective partners are more likely to accept mortgages or business loans.”

These types of loans don’t evoke the same feeling as high-interest debts do. Mortgages or business loans are viewed as ‘good’ debt, as they relate to assets and the potential of increasing your earning capacity.

Indebted romantics

If you’re searching for love, and think that your debt might be holding you back, then your first step is to figure out how you are going to pay it down. Make a plan to cut out the variable spending, and commit to the plan.

Also, sit down and have a serious talk about money with your love interest. If your debt is hindering your relationship, it’s better to find out now, rather than later. You may learn that they, too, have some debt issues that they haven’t been able to discuss, or that they’re very supportive. While honesty is always the best policy, it’s never more important than when dealing with personal finances.

“While it can be difficult to talk about debt, it’s important to have open and honest conversations about the state of your finances to minimize relationship friction,” says Kidman. “You should also have frank discussions about the level of debt you’re willing take on in the future, and the circumstances under which it’s acceptable.”

One of the most common reasons that couples split up has to do with their relationship with money. To get your new relationship off to a good start, it’s best to be open and direct, and make a plan to become debt-free.

Rubina Ahmed-Haq is a journalist, personal finance expert and HPG’s finance editor. She appears on CBC TV and radio, CTV Your Morning, Global Toronto, and writes for ratesupermarket.ca. Follow her @alwayssavemoney. AlwaysSaveMoney.ca

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