31 May

Can You Afford To Buy A Home?


Posted by: Nick Kaaki

By Genworth Financial Canada


The first thing any prospective homebuyer needs to do is determine whether they can afford to buy the home they want.


Many people believe they have to save a large down payment. Thanks to mortgage insurance, there are various programs that enable homeownership with little or no down payment at all.  A down payment of 20 per cent or more will qualify you for a conventional mortgage. If it is less than 20 per cent, the mortgage must be insured with a mortgage insurance company, such

as Genworth Financial Canada.


Mortgage insurance works by transferring the homeowner’s risk of default from the lender to the mortgage insurer. This benefits homebuyers by allowing them to obtain loans at lower interest rates than would otherwise be charged if the lender retained the risk of default.  Once you’ve determined how much you can put toward a down payment, it’s time to approach

a qualified mortgage planner to discuss mortgage options available to you, and create a mortgage strategy that meets your specific needs and goals.


Most mortgage lenders look at five factors when determining whether you qualify for a mortgage loan: your income, debts, employment and credit history and value of the property you want to buy.


One of the first criteria a lender will consider is how much of your total income you’ll be spending on housing. This helps the lender decide whether you can comfortably afford to buy a home.


A lender will then look at your debts, which generally include house payments as well as other monthly obligations — such as loan payments, charge cards, and child support.  A history of steady employment, usually within the same job for several years, helps you to qualify. But a short history in your current job shouldn’t prevent you from getting a loan, as long as there have been no significant gaps in income over the last two years.


Good credit is very important in qualifying for a loan. It’s important that you have maintained all of your obligations in a timely manner. The lender will also want to know what the house is worth and the price you plan to pay.


The size of your down payment affects the amount of your monthly mortgage payments. A smaller down payment will mean your monthly mortgage payments will be higher, but it may allow you to buy sooner rather than later.


Mortgage payments for principal, interest and taxes should not generally exceed 30 per cent of your gross monthly income. Simply multiply your gross monthly household income by 0.30 to determine your maximum monthly payments. If your gross monthly income is $4,000, the maximum you can quality for is $4,000 x 0.30 = $1,200.00 a month to cover mortgage payments plus property taxes.


You should also remember that there are other expenses over and above your mortgage payments. These include the land transfer tax and legal fees to close the purchase of your home and other monthly-related expenses such as condominium fees, heat, hydro, water, property tax, moving costs, insurance and household maintenance.

25 May

10 Great Reasons to use a Mortgage Broker


Posted by: Nick Kaaki

Document provided by Genworth Financial

1 – Get independent advice on your financial options.
As independent mortgage brokers and mortgage agents, we’re not tied to any one lender or range of products. Our goal is to help you successfully finance your home or property. We’ll start by getting to know you and your homeownership goals. We’ll make a recommendation, drawing from available mortgage products that match your needs, and we will decide together on what’s right for you.

2 – Save time with one-stop shopping.
It could take weeks for you to organize appointments with competing mortgage lenders — and we know you’d probably rather spend your time house-hunting! We work directly with dozens of lenders, and can quickly narrow down a list of those that suit you best. It makes comparison-shopping fast, easy, and convenient.

3 – We negotiate on your behalf.
Many people are uncertain or uncomfortable negotiating mortgages directly with their bank. Brokers negotiate mortgages each and every day on behalf of Canadian homebuyers. You can count on our market knowledge to secure competitive rates and terms that benefit you.

4 – More choice means more competitive rates.
We have access to a network of major lenders in Canada, so your options are extensive. In addition to traditional lenders, we also know what’s being offered by credit unions, trust companies, and other sources. And we can help you take care of other requirements before your closing date, such as sourcing mortgage default insurance if your down payment is less than 20% of the purchase price.

5 – Ensure that you’re getting the best rates and terms.
Even if you’ve already been pre-approved for a mortgage by your bank or another financial institution, you’re not obliged to stop shopping! Let us investigate to see if there is an alternative to better suit your needs.

6 – Get access to special deals and add-ons.
Many financial institutions would love to have you as a client, which is why they often offer incentives to attract creditworthy customers. These can include retail points programs, discounts on appliances, shopping clubs, and more. We do the math on which offers might be worth your attention when it comes to financing or mortgage insurance — so you get the perks you deserve.

7 – Things move quickly!
Our job isn’t done until your closing date goes smoothly. We’ll help ensure your mortgage transaction takes place on time and to your satisfaction.

8 – Get expert advice.
When it comes to mortgages, rates, and the housing market, we’ll speak to you in plain language. We can explain the various mortgage terms and conditions so you can choose confidently.

9 – No cost to you.
There’s absolutely no charge for our services on typical residential mortgage transactions. How can we afford to do that? Like many other professional services, such as insurance, mortgage brokers are generally paid a finder’s fee when we introduce trustworthy, dependable customers to a financial institution. These fees are quite standard and nearly industry-wide so that the focus remains on you, the customer.

10 – Ongoing support and consultation.
Even once your mortgage is signed and paperwork is complete, we are here if you need any advice on closing details or even future referral needs. We are happy to be of assistance when you need it.

10 May

Top eight house-hunting mistakes


Posted by: Nick Kaaki


Buying a home is a very emotional process, and allowing those emotions to get the best of you can cause you to make any number of mistakes.

Since buying a home has many far-reaching implications, from where you will live to how hard it will be to make ends meet, it’s important to keep your emotions in check and make the most rational decision possible.

There are eight common emotional mistakes that people make when buying a home. Avoiding these pitfalls will help you find the best home-sweet-home. (To learn more about how your emotions can cause financial distress, see When Fear And Greed Take Over and Master Your Trading Mindtraps.)

Mistake 1: Falling in love with a house you can’t afford

Once you’ve fallen in love with a particular home, it’s hard to go back. You start dreaming about how great your life would be if you had all the wonderful things it offered – the lovely, tree-lined streets, the jetted bathtub, the spacious kitchen with professional-grade appliances. However, if you can’t or won’t be able to afford that house, you’re just hurting yourself. To avoid the temptation to get in over your head financially, or the disappointment of feeling like you’re settling for less than you deserve, it’s best to only look at homes in your price range.

Further, start your search at the low end of your price range – if what you find there satisfies you, there’s no need to go higher. Remember, when you buy another $10,000 worth of house, you’re not just paying an extra $10,000 – you’re paying an extra $10,000 plus interest, which might come out to double that amount or more over the life of your loan. You may be better off putting that money toward another purpose. (For further reading, check out Buying a House in a Down Market.)

Mistake 2: Thinking that a particular house is the only one that will suit you

Unless you are a high-end buyer looking at custom homes, chances are that for any home you find that you like, there are quite a few others that are nearly identical to it. Most neighborhoods have multiple homes that are the same model. Further, most neighborhoods are full of homes that were all constructed by the same builder, so even if you can’t find an identical model for sale, you can probably find a house with many of the same features. If you’re considering a condo or townhouse, the odds are also in your favour.

Even when you have a long list of must-haves, there are probably several homes out there that can meet your needs. Another house in the same area might be similar enough to meet your needs but be less expensive. Likewise, you could find a similar model with more of the upgrades you’re looking for at a similar price.

Mistake 3: Being so desperate to become a homeowner that you buy a place that doesn’t suit you

When you’ve been looking for a while and you’re not seeing anything you like – or worse, you’re getting outbid on the houses you do want – it’s easy to start thinking that what you really want simply won’t happen. If you move into a house you’ll end up hating, the transaction costs to get rid of it will be costly. You’ll have to pay an agent’s commission (up to 5-6% of the sale price) and you’ll have to pay closing costs for the mortgage on your new house. You’ll also deal with the hassle and expense of moving yet again. If you decide not to move but to try to make the best of what you have, remember that alterations and renovations are expensive, time-consuming and stressful. The best advice is to wait if you have the luxury of time, or to correct your vision for your future to what you actually need, not want. (To learn more, check out McMansion: A Closer Look at the Big House Trend.)

Mistake 4: Overlooking important flaws in the structure, appearance or location of the house

For any of the three reasons we just discussed, you might be tempted to ignore major problems with the house that will be difficult, expensive or impossible to change. Carefully consider your options before you make a commitment, and consider waiting until something better comes along. New houses come on the market every day.

Mistake 5: Thinking you’re a handyman when you’re not

Don’t buy a fixer-upper that’s more than you can handle in terms of time, money or ability. For example, if you think you can do the work yourself then realize you can’t once you get started, any repairs or upgrades you were planning to make will probably cost twice as much once you factor in the labour – and that may not be in your budget. Not to mention the costs involved to fix anything you may have started and the fees to replace the materials you wasted. Honestly evaluate your abilities, your budget and how soon you need to move before purchasing a property that isn’t move-in ready. (For related reading, check out Your Car: Fixer-Upper or Scrap Metal?)

Mistake 6: Putting in an offer before carefully considering all the pros and cons of the property

In a hot market (or even a hot submarket, with dirt-cheap, bank-owned properties during a housing slump) it may be necessary to pull the trigger very quickly if you find a home you like. However, you have to balance the need to make a quick decision with the need to make sure the home will be right for you. Don’t neglect important steps like making sure the neighborhood feels safe at night as well as during the day and investigating possible noise issues like a nearby train. Ideally you’ll be able to take at least a night to sleep on the decision. How well you sleep that night and how you feel about the home in the morning will tell you a lot about whether the decision you’re about to make is the right one. Taking the time to consider the decision also gives you a chance to research how much the property is really worth and offer an appropriate price.

Mistake 7: Being too slow to pull the trigger

It’s a tough balancing act to make sure you make a careful decision yet don’t take too long to make it. Losing out on a property that you were almost ready to make an offer on because someone beat you to it can be heartbreaking. It can also have economic consequences. Let’s say you are self-employed. Perhaps for you more than anyone else, time is money. The more time and energy you have to take out of your normal activities to search for a house, the less time and energy you have available to work. Not dragging out the homebuying process unnecessarily may be the best thing for your business, and the continued success of your business will be essential to paying the mortgage. If you don’t pull the trigger quickly, someone else might, and you’ll have to keep looking. Don’t underestimate how time-consuming and routine-disrupting house shopping can be. (A small business can increase your disposable income. To learn how to set one up, see How To Make A Million In Your Small Business and Starting A Small Business In Tough Economic Times.)

Mistake 8: Offering more than a house is worth

If there’s a lot of competition in your market and you find a place you really like, it’s all too easy to get sucked into a bidding war – or to try to preempt a bidding war by offering a high price in the first place. There are a couple of potential problems with this. First, if the house doesn’t appraise at or above the amount of your offer, the bank won’t give you the loan unless the seller reduces the price or you pay cash for the difference. If this happens, the shortfall on your bid as opposed to your mortgage will have to be paid out of pocket. Second, when you go to sell the house, if market conditions are similar to or worse than they were when you purchased, you may find yourself upside down on the mortgage and unable to sell. Make sure the purchase price for the home you buy is reasonable for both the house and the location by examining comparable sales and getting your agent’s opinion before making an offer. (For further reading, check out Do You Need a Real Estate Agent?)


Even knowing all of these things, it’s still hard to act on them. You may still find yourself making decisions based on emotion during the home-buying process. Slow down, overcome your emotions and, ultimately, make a home-purchase decision that’s good for both your feelings and your finances.

3 May

Sins of the father


Posted by: Nick Kaaki

By Gail Vaz-Oxlade | Online only, MoneySense Magazine, 4/04/11


The Baby Boomers have finally gotten old enough to officially retire. Well some of them anyway. The peak of Boomer retirement won’t happen for another 14 years or so.


I was born in the year that the most Boomers were born, and when it comes time for my twins and I to hang up our spurs, there’s no telling what the world will look like. Casting back to 14 years ago, the Canadian dollar was at 71.55 cents U.S. That’s different! Bank Prime was between 5 and 6%. That’s different! And the level of debt Canadians were carrying… oh, so very different!

Some of us still have time to get out of debt and make savings a priority before time runs out. Or we’ll have to reconcile ourselves that we will not stop working just because we’ve turned 65.
But there are also a few very important lessons in here for the generations who are following the Baby Boomers:

1. Having robust savings doesn’t count for much if you’re also walking around with a ton of debt. A Royal Bank survey found that 4 in 10 Canadians will retire with debt. I’m willing to bet, based on how delusional I’ve found people to be, that the number is higher. A subsequent survey reported in the Globe and Mail found that 62% of people plan to retire with a debt load. That’s a little more to my thinking.

The lesson: your balance sheet must balance. It’s not how much you have saved; it’s your overall net worth that really paints an accurate picture.

2. We used to aim to have our mortgages paid off by the time we swapped paycheques for retirement income. An Investors Group poll found that 56% of Canadians with a mortgage do not consider paying it off as an important factor in deciding when to retire. So more than half of us think retiring with a mortgage is now okay. Is that because we don’t have a hope of getting it paid off and we’re reconciled? If you’re living on less income, doesn’t having fewer fixed expenses just make sense?

The lesson: if you’re buying so much house that you can’t afford to pay it off during your working years, you’re setting yourself up to have a very stingy retirement.

3. If you can’t live within your means while you’re working, how the dickens are you going to do it when you’re living on a fixed income that is substantially less? Borrowing has made living beyond our means easy. Since most retirement income is predicated on receiving 30-50% less income, shouldn’t a body practice living on less so they can learn to be happy with what they have?

The lesson: You’re going to have a lot of demands on your money over your lifetime: retirement savings, educational savings for your kids, mortgage repayment. Learning to be happy with what 50-70% of your net income can buy means when you transition into retirement you won’t be assaulted by the concepts of frugality. And in the meantime, saving aggressively and paying off your mortgage means you’ll have more financial security.

The Big Lesson: Don’t make the same mistakes your parents did. Surely you’re smarter than that!