Why Making Debt Reduction Should be Your Primary New Years Resolution

General Nathan Lawrence 5 Jan

Now that we are 5 days into 2017, there is no better time than right now to ask yourself how are you doing so far on those New Year Resolutions which you promised yourself you would keep this time.  Be honest with yourself.  Have you taken any steps towards achieving your goals?   If you have not yet taken any steps to kick those bad habits, then there is a very good chance that you are well on your way to completely missing the mark on this year resolutions….AND ITS ONLY DAY 5!!

The challenge with most resolutions and the reason that most of us fail at keeping them, is that the resolutions we set are way too large in scale for us to achieve in a reasonable time frame.  Resulting in quick failures or that we lose interest too quickly in the “work” it takes at achieving them.   There are however, those few select individuals that seem to always manage to keep at it. The trick is to break that big, scary resolution into short term attainable goals…which is what we are going to do right now:

So here is what I would like you to do right now.

Step 1:  Find that list of resolutions that you jotted down on the cocktail napkin at your New Year’s Eve Party, crumple it up, and toss it in the recycling bin (its 2017 after all and if you don’t already recycle, let’s make that resolution #2 on the new list).

Step 2: Next, grab a pad of paper and pen then find a quiet place to think.  In big bold letters, write down “Reduce High Interest Debt”.

Step 3: Now, we take that big lofty goal and break it down in to 3-5 more manageable goals.

 

Goal #1 – Set up an automatic monthly payment for each of your credit cards.  Taking this step will ensure that you will never miss a credit card payment (great credit management that is vital when it comes to managing your credit score).   Try to set automatic payment at an amount higher than the required minimum payment, this way you start making some positive headway right off the start.

Goal #2 – Review/Reduce your spending – This is often much easier than we might think.  Take 30 minutes right now to review your monthly spending habits.  Create a monthly budget of all your spending from last month.  It does not have to be anything special. Simply list the items you spend money on and how much (ie. Cable TV = $150.00, Netflix = $8.99, Cell Phone = $95.00, home phone = $35.00, and so on).

Goal #3 – Next, start thinking about what you are using vs. not using.  For instance, we live in a cell phone world. When is the last time you used your home phone?  Can it be cancelled? Instant savings!!  Or how about the fancy (and expensive) Cable TV package?  Do you actually watch it or do you spend your TV time on Netflix?  Can the Cable TV be cancelled? Instant Savings!!   Have you shopped around for Home/Auto Insurance lately? Possible Savings here as well.  Make a short list of expenses that could be cancelled or adjusted to improve your spending habits, then act on making those changes!

Goal #4:  In the scenario outlined in Goal #3, if you do cancel the home phone and cable TV package, there is a monthly expense savings of $185.00.  Here’s the trick…do not do what the average person does which is to simply find other ways to spend that “new-found” money.  What you, the person trying to keep their resolution does, is set up a second automatic payment towards one of your debts for $185.00 (additional annual debt reduction of $2,200, not including the interest savings).

Goal #5:  Leave the plastic at home!! If you tend to use your credit card and find yourself regretting those purchases down the road, leaving the credit card at home can help address that extra spending.  If your credit card is not readily available, you will not be able to use it for those miscellaneous purchases that you would come to regret later.

Goal #6 – Assess your overall financial situation to see if there are any opportunities to restructure which could help improve your monthly cash flow or save interest.  Your mortgage is the first place to start.   Some simple adjustments could end up saving you a large amount of interest over the life of your mortgage.

 

Breaking that large, overwhelming resolution of “Reduce High Interest Debt” into much more manageable tasks makes it a very attainable resolution.  If you managed to complete even just a few of these 6 goals, you will find yourself in a better position this time next year!!   Not to mention the fact that better control over one’s finances will likely increase quality of life and reduce stress….so in fact, you’ll knock two additional resolutions off your 2017 list in the process!!

House of Horrors – Cautionary Tales of Home Purchases Gone Wrong

General Nathan Lawrence 28 Oct

In honour of Halloween next week we compiled a couple spooky home purchases for you (all based on true stories of course)! Here are 2 short stories of home purchases that went wrong, they should make you squirm a little but keep in mind that not every home purchase ends up in nightmares like these!  These stories, although very rare occurrences as part of the home buying process, highlights the reason why working with a Real Estate Professional and hiring a home inspector is incredibly important.

This Home Renovation Went Nuclear

Wally Davis a resident of Port Hope, ON wanted to build a room in the attic of his home. However, where he lives is the location of a former radium and uranium refinery that left contamination spread around the town. When testing the home for contamination it was discovered that there was contamination in the roof, on the floors, in the walls, and everywhere else in the home. Wally who bought the house in the 90s paid just $130,000 for his home, a decade later it cost the town of Port Hope $464,615 to clean up the house. The Davises were well taken care of while their house underwent renovations but it was a long drawn out process that kept them away from their home for some time.

(Source)

Sometimes you need Spidey Senses when Buying a Home

This house isn’t haunted but it would sure be scary to live in! Brian and Susan Trost purchased their home in the summer of 2007. A 2,400 sq.-ft home over-looking a beautiful country club. Shortly after they moved in Susan started noticing webs and then started to see spiders every day. The Trosts then called pest control who identified the spiders as brown recluses (they have a venomous bite and can sometimes leave a person with what looks like a flesh eating disease). The home had drywall and insulation removed and they both sprayed and put down pesticide powder. When that didn’t solve the problem the Trost took the previous owners and State Farm Insurance to court. During the trial a University professor estimated the spider population to be “immense” with a total of 4,500-6,000 spiders. The house was then put into foreclosure and unfortunately the Trost have not been living in it for over 2 years.

(Source)

Things You Should Never Throw Away …

General Nathan Lawrence 8 Jun

There’s always the saying reduce, reuse, recycle but that’s not really what this post is about. We are more interested in looking at the things you should never throw away in order to get your mortgage approved. Part of the mortgage approval process is providing documents to confirm the details in your mortgage application. It’s nice to say that you make a million dollars a year but the lender is going to require proof that is actually true! Here are some key documents that the majority of lenders require to approve you for a mortgage:

  • Notice of Assessments – The information you receive in the mail from the government regarding your tax returns. You should have at least 2 years of these on file.
  • T1 Generals – Especially if you are self-employed but sometimes lenders will request these for further income details. These documents break down your income and are what you submit to the government for your taxes.
  • Paystubs – Usually you will want to start saving these for a few months when you know you are in the market to buy a home, most lenders will require your most recent one.
  • Property Tax Bill – If you are planning to refinance your home.
  • Separation Agreements – You should always keep a copy of this in your files.
  • Yearly Mortgage Statements – Once again if you are planning to refinance or if you plan to sell and buy a new home.
  • ROE or Last Paystub – If you move jobs it’s always a good idea to keep a copy of your last paystub or your Record of Employment.

 

Now don’t tell your mortgage broker that you’ve thrown these away! And rather than having these documents in a cluttered pile we thought we’d share some really cute filing cabinet ideas with you that we found on Pinterest!

Your Credit Report

General Nathan Lawrence 1 Jun

In the first blog post in this particular series, we went into detail about managing credit payments and how your payment history impacts your credit score.  Managing your monthly debt payments is extremely important and is often times underestimated by consumers.

Almost equally as important as managing your monthly credit payments, is also your ability to manage the outstanding balances that you carry on your credit cards and debt.  This particular aspect of managing your debt really applies to anything that would be considered a revolving debt:

Revolving Debt can include:

  • Credit Cards
  • Line of Credits
  • Home Equity Lines of Credit.
  • Any debt that allows you to use the credit, pay it off and then use it again.

The trick when it comes to managing the balances on revolving debt is knowing that you need to keep the outstanding balance below 65% of the limit.  The credit system is designed to look for red flags that indicate consumers might be at risk of defaulting on their debt.  One of those red flags is how much of your available credit limit you have used up.   If you have a few credit cards and all of those credit cards are maxed out, then it indicates to the credit agencies that you might be relying on your credit to manage your daily expenses and obligations.

The Dreaded Household Budget

General Nathan Lawrence 17 Feb

We’ve all thought it…URGG!…that darn B-Word!!  BUDGETS!!!   The very next thought is always…”it’s ok, I don’t need to do a budget, I’ve got a good handle on our monthly finances.”

But do you really?

The reality is that you won’t truly know until you’ve assessed your spending habits.

Budgets are hard; however, they are not hard because they are a lot of work or because they are too complicated.  Doing a monthly budget is actually a very simple process, we are just afraid of what the outcome might be.

A budget is about taking control of your finances and understanding where your money is going.  Have more money leaving your bank account than is actually going in?  Then this simply highlights a need to tighten the belt a bit.  A budget is really about two things:

  1. Developing an action plan, and
  2. Taking Action.

When it comes to your personal finances,

Your Budget = Your Action Plan

Sticking to your budget = Taking Action 

So grab your pen!  Take 15 minutes right now to go through this simple budgeting exercise to get the ball rolling:

 

Item Totals Notes

INCOME

 {Enter Monthly Net Income Here} *Remember this should be your after tax income.*If you are paid bi-weekly, you need to properly convert to monthly. The Calculation is (Bi-weekly pay X 26)/12
Total Monthly Income {Add up all Net Monthly Income}  

 

 

 

EXPENSES

*Here is all of your monthly expenses. The trick here is to make sure you think of everything and to be honest with yourself
Mortgage/Rent {Enter Monthly Bill Amount Here}
Property Taxes {Enter Monthly Bill Amount Here}
Home/Auto Insurance {Enter Monthly Bill Amount Here}
Utilities (Gas, Hydro, Water) {Enter Monthly Bill Amount Here}
Groceries {Enter Monthly Bill Amount Here}
Vehicle Fuel {Enter Monthly Bill Amount Here}
Home Phone/ Cell Phones {Enter Monthly Bill Amount Here}
TV / Internet / Netflix {Enter Monthly Bill Amount Here}
Home Security {Enter Monthly Bill Amount Here}
Vehicle Payments {Enter Monthly Bill Amount Here}
Gym Memberships/Sports {Enter Monthly Bill Amount Here}
Monthly Kids Activities {Enter Monthly Bill Amount Here}
Monthly Subscriptions (Magazines, Apple Music, etc.) {Enter Monthly Bill Amount Here}
Any other monthly expense {Enter Monthly Bill Amount Here}
Total Monthly Expenses {Add up all Monthly Bills Here}
 

SAVINGS

*Most of the time we forget to budget our savings (RESP, RRSP, TFSA)
Tax Free Savings Account {Enter Monthly Contribution Here}
RRSP {Enter Monthly Contribution Here}
RESP {Enter Monthly Contribution Here}
Savings Account {Enter Monthly Contribution Here}
Total Savings Contributions {Add up all monthly Contributions}
 
Monthly Net (Loss) {Take your total net income – Total Monthly Expenses – Savings Contributions} *This final number is important and will provide some good insight into your financial strength.

 

Here is the Key…

  • Is the final number a positive number? If so, you’re doing well. However, even with a positive number there is always room for improvement.  Take a look at your expenses and really assess what you’re paying for and what you’re actually using.  Is there potential for additional savings?
  • Is the final number close to 0.00? If so, you’re doing ok, but your spending needs to be watched closely. Take a hard look at your expenses and see if there is any room for you to make some cuts.  Maybe you’re not using that monthly TV Package?  Maybe you have some monthly subscriptions you can cut?  Turning that 0.00 into a strong positive number can make a huge difference in the long run.
  • Is the final number a negative number? If so, you need to take action right now!! Cut some costs.  Basically you have more money going out each month than you have coming in.  If something isn’t done soon, you’re going to find that your credit cards or lines of credit will start to grow. Sit down as a family and work out where you can adjust your spending…always start with the non-essential costs (TV, monthly service subscriptions, etc)

Some quick spending tips that can help save you more:

  1. Grocery Shopping – Plan your meals for the week based on what is on sale in the grocery store. Do the weekly check of the flyers and start trying to buy the items that are on sale.
  2. Fuel – Nowadays, many households have 2 vehicles. And it’s very common for people to default to the nicer or bigger vehicle when leaving the house.  Try to use the more fuel efficient vehicle as much as possible.
  3. TV subscriptions can be a killer – Sit down as a family and really think about how much you use it. Maybe a simple Netflix or CraveTV service will work just fine (and cost a fraction of the cost).
  4. Cell phone bills always running over each month? Make sure that you have wireless setup rather than data when at home or at work. You would be surprised how much of a difference this can make.

If you would like to sit down with our team to see how we might be able to help with restructuring your budget with a refinance, simply give us a call.

Feeling the Winter Blues

General Nathan Lawrence 13 Jan

We sometimes overlook the simple things that can positively change the way we think during the cold winter months.  Your home is the best place to start. During the winter months we tend to hibernate at home, so why not look at ways to do things in your home to make you feel better about yourself and your home? This will help you stay motivated and inspired during the cold winter months.

Plan that much needed home renovation!

Look at areas of your home that you have been thinking to change or upgrade. Spend some time and start to visualize the home that you want.  Then take the time and start planning for that dream home renovation. Get everything organized now, and you just might have hammers swinging by spring time.  Your next step, find out if it is financially feasible. Consult with a mortgage professional about a renovation mortgage and an interior designer to review your home projects with you. Knowing that you are financially prepared and working with professionals towards a home project will keep you excited and something to look forward to.

Keep your home and yourself, healthy and fit!

Start by giving your home a good cleanse.  LET GO of what is not needed or you have no use of. If you haven’t used it in a long time then you don’t need it. Having a clean and organized home will in turn make yourself feel better about spending time indoors.  Fill your fridge and freezer with healthy foods.  Winter months are good to pre-make meals in advance and freeze. Soups, stews, sauces, and healthy loaves and muffins are easy and fun to make.

Dress up your house…in a budget friendly way!

Do little things in your home to keep yourself motivated, energized and inspired.  Add budget friendly décor pieces such as candles, warm throws and pillows, fresh flowers, fill glass vases with outdoor pieces like pinecones or grass stocks.  Update cabinet hardware or light fixtures. Replace old towels with new soft towels, or even simply change your bathroom curtain and hooks to make it feel like a new space. These are all ways to stay connected to your home to help with the winter blues.

Create a Magical Home for the Holidays

General Nathan Lawrence 10 Dec

Christmas time is my favourite time of the year. I love everything about it! Christmas lights, Christmas songs, Christmas baking, and spending time with family and friends. I always look forward to decorating my home at Christmas and look for ways to make my home feel magical and cheery during the holiday season.

I love to decorate but don’t necessarily love covering the entire house with Christmas decorations. I try to stay away from clutter and not too many “Knick knacks”.  I like to keep it simple, “less is more”. Here are a few decorating ideas for the season to help set the tone for the Christmas spirit. Start with the core of your home which usually is your living room and pick a few decorative pieces that make a statement.

Your Christmas tree is a good start and the easiest to make your center piece. Consider choosing a color scheme other than your traditional red and green for your tree, this will have an impact on making a statement.   Select a theme to fit your design style, for example a glitzy glam scheme with shimmering colors like golds and silvers or for rustic charm color scheme choose browns, creams, or blues. Finally, get fun and creative with your ornaments, add texture, sparkle, natural and oversized ornaments, ribbons, and the perfect tree topper to help achieve your desired look.

Christmas is a happy time of the year shared with family and friends. It all about adding magic! And what better way to welcome the Christmas spirit by turning your home into a magical place to enjoy during the holidays!

Thoughts on the Buying Process, from a First Time Home Buyer

General Nathan Lawrence 24 Sep

By: Brianna Shortreed

We just recently went through our first home purchase and having a knowledgeable Mortgage Broker and Real Estate agent on our side was incredibly helpful! We definitely had some sticker shock here and there throughout the process but because we were prepared we were able to easily overcome each hurdle without any difficulty. This post will be about each step of the home buying process, it is a fun and incredible experience but we want to make sure you are not caught off guard by unexpected expenses and closing costs. The last thing you want is to feel like a deer caught in headlights and have your home purchase come to a crashing halt.

WORKING WITH PROFESSIONALS

One of the most important things you can do as a first time buyer is surround yourself with professionals that you can trust. They’ve gone through the steps many times and will know what to do in any situation that arises. They can also provide you with excellent advice; however, they won`t simply make the decisions for you (that’s still your job!). Start the process by visiting your local mortgage brokerage to get pre-approved for a mortgage. When visiting your lending institution you will learn about one lender’s mortgage products, this is why I highly advise visiting a mortgage broker as you will receive your best option from 100s of lending institutions that include banks, credit unions, and trust companies. Once you are pre-approved you will want to find a realtor that you enjoy working with, start by looking online or getting recommendations from friends and family. Working with a realtor to purchase a home also will have no cost to you, as the realtor’s commission is covered by the person that is selling their home.

BUDGET TOWARDS WHAT YOU CAN AFFORD

The amount you are pre-approved for is not necessarily the amount you will want to spend on a home, it is very important that you create a budget and stick to it. Start by completing our Home Budgeting Spreadsheet, this will look at your real-life situation including debt payments, insurance, saving goals and spending money. As homeowners, it is important to know what money is coming in and going out monthly. Next step is to save up for a down payment. You will require a minimum down payment of 5% of the purchase price. Also consider all of the other costs related to purchasing a home, which can include a home inspection, legal fees, title insurance, utility and property tax adjustments (if the seller had pre-paid any of these), and other administrative fees. If you take the guess work out of understanding your income and expenses, you will be much better prepared to purchase a home and manage your budget. Use the link at the end of this article to download the Home Budgeting Spreadsheet.

START LOOKING AT HOUSES

Once you have figured out what you can afford you can begin the fun process of looking for houses. It’s not always easy to find the perfect home but with the guidance of your realtor you will find something that suits your needs and wants. It was actually our realtor that suggested the house we ended up buying, she knew us so well! Once you find a home you will sit down with a realtor to fill out the offer paper work. This is one of the most beneficial reason of working with a realtor, when writing an Agreement of Purchase and Sale you have to have an understanding of the documentation. It is really important that you include a few conditions in the Agreement as well, these include a condition subject to financing, home inspection, and house insurance. Look at these conditions as a way to protect yourself if something unexpected comes up during the home inspection or the bank declines your mortgage request. The realtor will deliver the offer and make sure the proper signatures are obtained.

DON’T LET EMOTIONS DETERMINE YOUR DECISIONS

Sometimes your offer to purchase a home does not always work out, this is why it is so important not to get overly attached to a home before everything is said and done. Sometimes there may be a bidding war or the sellers will want to negotiate your offer price. You want to make sure you know the price you are willing to go to otherwise you may find yourself getting caught up in paying over your budget. The other thing that might make your home purchase fall apart is the home inspection, this happened to our first accepted offer. We put in an offer in our dream location and it was accepted, we knew the house needed a little bit of TLC but we weren’t prepared for what the home inspector told us. There was a rotting section of the roof that had to be redone, the electrical was not done properly and there were live wires, and the plumbing was done incorrectly. Most of the DIYs that had happened could be covering up other problems that we couldn’t or wouldn’t be able to see. Finally the water issues were enough to make you cringe. Needless to say we learnt a lot about what to look out for in a home and we weren’t quite willing to spend an additional $50,000 to bring the home up to code so we walked away, thank goodness our conditions allowed us to do that! It was disappointing but we were able to move on and we are happy that we did.

CLOSING COSTS

After you have found your perfect home and have fulfilled all of your conditions, the reality of “this is really happening” will begin to sink in. Up to this point you’ve only spent $300-$500 on the home inspection and given the realtor a small deposit on your down payment to hold in trust. You will first sit down with your mortgage broker and sign all of the mortgage documents, you will also get a break down of all your mortgage payments and see what will be going towards principle and what will be going towards interest. The nice thing about your mortgage is that the first payment won’t come out on closing, depending on your payment schedule it will either come out 2 weeks or 1 month later! When it comes to closing costs you can never really predict exactly what the total is going to be, so you might be in for some sticker shock but you should have a general idea of the approximate costs of everything. The lawyer will let you know the amount of money you must bring to the signing meeting (usually a couple of days before your closing date). The total will include the following:

  • Lawyer Fees ($1,000 to $2,500)
  • Title Search & Title Insurance ($250-400)
  • Administrative Fees & Certificates ($300)
  • Land Transfer Tax (Varies, Ontario has a $2000 Rebate for first time home buyers)
  • Anything Outstanding (if the seller had prepaid property taxes, gas, and other utilities)

The majority of these fees are also subject to HST, so make sure that you have factored that in as well. For Land Transfer Tax you might not owe anything but if your Land Transfer Tax is more than $2000 you will owe the difference.

I hope that after reading through this information you will feel more prepared and will not be caught off guard with your first home purchase. It should be an enjoyable and exciting experience and you’ve worked very hard in order to be able to afford it! The reason that you work with professionals is that you can ask them any questions that you might have. We wish you the best of luck with your first home purchase!

HOME BUDGET SPREADSHEET 

“B” Positive About Alternative Lending

Alternative Lending Nathan Lawrence 24 Sep

Mortgage markets are historically geared towards the prime borrower, these are people with a squeaky clean credit score, solid income, and are considered to be able to easily repay their mortgage. However, not everyone is going to fit into that category but that doesn’t mean you won’t be able to get approved for a mortgage. There are a growing number of Canadians who are turning to alternative lenders. As lending guidelines tighten they are being turned away from larger lending institutions. These lenders are often referred to as B-Lenders, high risk lenders, or alternative lenders, and these types of lenders can be helpful to those that have been hit by bad credit, have recently divorced, fallen on difficult circumstances, or are self-employed individuals. Just because the bank declines an application for a mortgage does not mean that you as a home owner are out of options. Remain positive and visit your local mortgage broker, they will be able to connect you with lenders that consider and approve all types of mortgage clients, including those who may have recently gone through a bankruptcy or consumer proposal.

When applying for a mortgage with an alternative lender, the mortgagor is not going to receive the lowest rates; however, they will be provided with solutions to help a home owner get back on their feet until they can qualify to re-apply for a mortgage with a prime lender. It is not what you would consider a be all, end all, solution but rather a stepping stone to working on building up credit and personal equity. Usually a mortgage term with an alternative lender is shorter, this way the borrower is not stuck with high interest rates for a long period of time. After all, an alternative lender should be a short-term solution.

Alternative lenders will look at applications on a case-by-case basis and they will want to hear the whole story. For example, if you had to apply for a bankruptcy in the past they will want to know why. If you are self-employed alternative lenders will want to better understand the nature of your business and income.

Work with a mortgage broker that has experience helping people with tough mortgages. They should also provide advice and connections that will help you build towards being able to apply for a prime lender at renewal. A good mortgage broker and alternative lender don’t want to see their clients end up in a downward spiral of higher and higher interest rates as they fail to manage their credit. The main goal of any alternative lender is to get the borrower on their feet and happy about being a homeowner.