Buying a Second Home – Where Do I Start?

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You’ve already been through the process once and bought your first home. But now your mortgage is up for renewal or you’ve outgrown your house or for any other number of reasons, you’ve decided it’s time to move onto your next house. Because you’ve done it before, you know how the process works. But there are some things that you should consider with your second house that you didn’t need to with your first.

Budget vs Pre-Approval – yes there can be a difference

Buying your second house, generally means you will be spending more than you did on your first. So one of the first things you should do, like with any big purchase, is figure out your budget – what you can actually afford to spend. Yes, you will get pre-approved for a mortgage to find out how much money your lender is willing to give you, but there can be a HUGE difference between this amount and what you can afford to spend. Before you even think about contacting a realtor, you should sit down and look at your budget to see how much extra you can afford and what that extra amount going towards your mortgage could mean for the rest of your budget. It may mean that you will have less money to go on vacations or you need to reduce your discretionary spending. Talking to your financial advisor is another great way to figure out how much extra mortgage you can personally afford.

Stick to your budget – don’t even see the carrot

Once you figure out what you can afford, you need to make sure your realtor knows that amount and sticks to it. It’s so easy to fall in love with the 3,000 sq ft open concept house with the huge restaurant style kitchen with granite countertops, stainless steel appliances, dual temperature wine fridge, four bedrooms, finished basement, etc. You may even begin bargaining with yourself to justify the  price tag that is $50,000 above what you can afford. The easy solution? Make sure your realtor knows that you do not want to see anything above your budget. On a side note, if anyone is selling a house like I just described, please let me know…

Figure out what you need  – what does your dream home have?

You’ve learned a lot, and maybe sacrificed a few things, with your first house and those learnings will really help you figure out what you need for this new house. Maybe it’s more space, more bedrooms, a garage (attached or unattached), walk-in closets, a breakfast nook, office, multiple bathrooms, a bonus room, a finished basement, etc. The list of options is endless for things you could want in a new house, but you need to really decide what your non-negotiables are. Maybe you need a separate bedroom for each of your two kids and you also want to have a guest room for family that comes to visit and you need an office space because you work from home, plus your master bedroom. So you need a 5 bedroom house. You don’t want guests having to walk all the way upstairs to use the bathroom, so you need a main floor bathroom. If you live in Saskatchewan, you probably need a garage.

The clearer you can be on what you need in a house, the easier it will be for your realtor to find you the perfect one.

Settling vs Compromising – it’s all a matter of perspective

We all want that diamond in the rough – the perfect house with everything on our wish list that is below budget. But very few of us will actually get it right off the bat. The key is in shifting your perspective. Maybe that means getting an older house for a lower amount that with a bit of work can become your dream home? Perhaps it means getting a bit less square footage so that you can get the big backyard? Maybe it’s considering moving out of your desired neighbourhood? None of these things need to be considered as settling because it’s all about compromising and deciding what’s most important for you.

Ready to start looking?

  1. Make a list of things you find yourself saying “I wish I had…” in your current house.
  2. Check out current listings in your area to see what’s available and what you do and don’t like.
  3. Try out a mortgage calculator, like this one, to see what different mortgage amounts would mean for monthly payments.
  4. Talk to your financial advisor for help figuring out what you can afford

Good luck in your home search!

Eliminating the Stress in Buying a House

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Buying a house is stressful. At least, that’s what I hear. As someone who is planning on buying a house within the next few years, I want to make sure my experience is stress free… or at least as stress free as humanly possible. That’s why I decided to do a little sleuthing to see if I could uncover some tips and tricks to improve the home buying experience so that you can enjoy the process as much as possible. 

Tip #1: Use a Real Estate Agent

Simple, right? Using a real estate agent will definitely cut down on the amount of stress you feel while purchasing a house, especially if you’re working with someone you can trust. Yet as of 2020, 12% of people still don’t use them. Why?

Well, most people who aren’t using a real estate agent are looking to save money. This can work out if you’re already familiar with the property and are buying from someone you trust, like a family member. But if you’re looking at properties that you’re not familiar with, it has the potential to lead to all sorts of issues. Long-term, not using a realtor has the potential to cause far more stress than using one.

But what about the money? Well, using a realtor may not be as expensive as you think. Of course, it’s not free either. You will need to pay realtor fees. But the real estate agent’s commission generally comes from the seller, not the buyer. So, it may not add up to quite as much as you expect.

Using a real estate agent does come with its own stresses (we’ll get to some of those later) but overall, it’s the correct choice for most people.

Tip #2: Get Pre-Approved for a Mortgage

While doing my digging, I decided to reach out to our team of Mobile Mortgage Specialists to see what the number one tip they would give prospective home buyers was. The answer was nearly unanimous: get pre-approved for a mortgage!

What exactly does that mean? Well, it’s just like it sounds. Having a mortgage pre-approval means that a lender has reviewed your financial information and has determined that they would be willing to provide you with a mortgage to buy a house. Having this in-hand while you’re shopping for a home makes it easier for agents and sellers to take you seriously and can possibly save you from future disappointment.

Don’t believe me? Here’s what Lehanne Potts, one of our Mobile Mortgage Specialists, had to say about getting a preapproved mortgage:

“Getting pre-approved for a mortgage is your first step towards homeownership! It’s important whether you’re a first-time home buyer or an experienced purchaser. When you have a pre-approval, you can shop confidently knowing that you are looking in the right price range. And if there are any issues with the application, we’re able to develop a game plan to set you up for success in the future. By taking this very important first step, you can help avoid any disappointment or frustration that may come along if you skip this process.”

Tip #3: Know When to Compromise

Home buying involves compromise. Odds are that you aren’t going to find that perfect home with the attached two car garage, huge walk-in closet in the master bedroom, partially covered back deck with a hot tub. And if you do find a house that has everything you want? Odds are that it’s probably going to cost twice as much as you can afford. What I’m trying to say is, it’s important to know what sorts of things you’re willing to compromise on and which ones you aren’t before you get started.

The budget for your home isn’t something that you should typically be making changes to halfway through the process. A study by homes.com in 2018 showed that 13% of people feel that they overpaid for their home. That’s not a good feeling and it’s not one that’s going to go away anytime soon either. Avoid bidding wars and stay away from spending above your budget on the things you “want” for your house (like that hot tub) and focus on the things you “need” your house to have (like enough bedrooms for your growing family).

Another thing you don’t need to compromise on is your timeline. I know I was just talking about how great realtors are a few paragraphs ago, but sometimes they will try to get you to work on their schedule instead of your own. That’s because they’re likely working with several potential home buyers and the sooner you purchase your future home, the sooner they can switch their attention to helping someone else.

Well, that speed has the potential to add stress. There are a lot of important things to do and decisions to make during the home buying process, even after you’ve put an offer in, and this is not something you want to feel rushed while doing. If you are feeling the pressure to move through the process too quickly, talk to your realtor and let them know you need more time.

Tip #4: Talk to Someone Who’s Done It Before

There are a lot of things to consider when you’re buying a house – more than we could possibly cover in just this one blog. It can be overwhelming, especially if you’re buying a home for the first time (and if you are a first-time home buyer, you might want to check this blog out as well). Like so many things in life, it can start to become clearer and you will start to feel better if you talk to someone about it.

Obviously, you can always go to your realtor to ask them questions. But you can also learn a lot by speaking to other people in your life who have already gone through the process of owning their own home. They might have great tips to share with you about what they thought they did well when buying their house. Or, more likely, they might be able to share things they wish they’d done differently during their own home buying experience.

To test this out, I decided to ask some homeowners from my own life what advice they’d have for me. Here’s what they had to say:

“Buying a new house for the first time can be filled with a lot of emotions – but the first one should always be excitement!

If I could go back to the first time my husband & I bought a house, I would make sure I sat down and prioritized a “wants” and “needs” list. My needs list would be the things that the house would HAVE to have and I would not budge on. The wants list would be filled with things that I really want in my first home, but that when push came to shove, I could sacrifice. For example, something that was on my needs list was three upstairs bedrooms and something that was on my wants list was an attached garage. I ended up sacrificing my attached garage in order to find something with three bedrooms upstairs.

Don’t forget to have fun and enjoy the process – you only get to be a first-time homeowner once!”

– Amanda, Moose Jaw

“As a first-time homebuyer, I found working with an experienced realtor to be extremely beneficial throughout the process. I had lots of questions, and they were able to answer everything I asked in terms I could easily understand. By using a realtor, I found that it took a lot of the stress of the process off my shoulders. I would also recommend doing your research into the home buying process beforehand so that you are able to ask the important questions.”

– Jarvis, Watrous

“I would recommend that people shop around. Don’t let the real estate agent dictate what you do or the speed you do it at – they are there to serve your needs. Also, make sure you get a house inspection. If you can’t afford one, you probably can’t afford a house.”

– Eric, Swift Current

The Answer to The Question…

So, can buying a house be totally stress-free? Honestly, probably not. There’s always going to be a certain level of stress that comes with making such a costly and impactful purchase.

But as I’ve learned while writing this, there are a lot of things that you can do to reduce the amount of stress you feel throughout the process. By using the tips in this blog as a starting point, you’ll be setting yourself up for a successful experience.

Happy house hunting!

Celebrating 100 MONEYTALK Blogs: Top 10 Blogs

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Can you believe it!? We’ve made it to MONEYTALK Blog #100! For our 100th blog, we are going to look back at ten of our most viewed and relevant blogs that provides relatable financial literacy advice for a variety of different topics, events and life stages. 

Money is stressful and everyone is experiencing their own unique life stages and financial situations. There is no one-size-fits-all model when it comes to providing financial advice.

In November 2017, we launched the Conexus #MONEYTALK Blog with a purpose to share expert advice, practical help and real-life experiences for relatable topics and life stages. Time flies when you are exploring financial literacy from a different lens because it’s hard to believe that three and a half years later – we are celebrating our 100th Blog! From blogs on money saving hacks at Rider games to renewing your mortgage during a global pandemic, our authors have explored topical and relevant events and have provided advice to ensure you are best equipped to navigate your financial well-being through whatever life throws at you.

To celebrate this milestone, blog #100 is looking back at ten of our most popular and still relevant blogs that have been published over the past three and a half years. These ten blogs approach financial literacy from a number of different perspectives so it is no surprise that eight of our authors are featured in this list. Enjoy our walk down memory lane and here’s to the next 100 blogs!

What I Learned From My 90 Day Spending Freeze

We’ve all heard of “cleanses” or “detoxes”. Although traditionally meant for weight loss or breaks from social media, spending freezes are gaining popularity as a means to cut spending and flush out bad money habits. Here’s a personal story where one of our writers was forced to check herself before debting herself and what she learned from a 90-day spending freeze. (Author: Melissa Fiacco, November 2020)

LINK: READ THE BLOG HERE

More COVID-19 Scams to Monitor

During this pandemic, it’s not just your physical health at risk, your financial health may be as well. Throughout times of uncertainty we are seeing fraudsters launch sophisticated scams, exploiting public fears for targeted attacks – and we’re definitely in uncertain times.  In addition to the scams we went over earlier, here are five more of the most prevalent COVID-19 scams we’re seeing used to attack people’s financial health and how you can protect yourself from being a victim. (Author: Rachel Langen, April 2020)

LINK: READ THE BLOG HERE

3 Key Money Tips for High Schoolers

No matter how old you are – you likely aren’t satisfied with the amount of money you have and you want more. When you are in high school, you want to be able to buy the things you want, go out with your friends, and maybe even save for your future education. So, if you are a high schooler – here are a few things you can do with your money to make it work best for you!  (Author: Kailyn Carter, January 2020) 

LINK: READ THE BLOG HERE

How Take Out Almost Took Out My Budget

With so many options for ordering meals via delivery, it’s becoming increasingly hard to resist the convenience of take-out and maintaining the discipline to stick to your meal prepping schedule. Let’s look at a real-life example of how creating and sticking to a budget can save your bank account from landing in the trash with your leftover to-go containers. (Author: Mason Gardiner, November 2019)

LINK: READ THE BLOG HERE

The Cost of Being Single

Single and ready to mingle? Well, if you didn’t need another reason to despise Valentine’s Day,  I’m about to give you one more – independence is expensive. Whether you are choosing to live the single life or you just haven’t met the right catch yet, you’ve probably experienced some of the nuisances that come with taking on the world on your own. (Author: Mason Gardiner, June 2019)

LINK: READ THE BLOG HERE

The Real Cost of Carrying a Balance on a Credit Card

Do you know what it actually costs when you carry a balance on your credit card? We’ve broken it down and even have a tool to figure out how long it might take you to pay off your balance. (Author: Kailyn Carter, May 2019)

LINK: READ THE BLOG HERE

5 Activities for Young Kids: Introduction to Money

Introducing your kids to money early on can create a foundation for financial knowledge and positively impact how they manage money later. (Author: Laura McKnight; June 2018)

LINK: READ THE BLOG HERE

Tips for First-Time Home Buyers

Purchasing your first home is a big life decision. Our Mobile Mortgage Specialists share advice for first-time homebuyers on what to know and consider when purchasing your first home. (Author: Nicole Haynes-Siminoff, March 2018)

LINK: READ THE BLOG HERE 

The Importance of Having an Emergency Fund

Life happens and sometimes an unexpected curveball is thrown our way, threatening our financial well-being and causing stress. Having an emergency savings fund helps us be prepared for these unexpected life events. (Author: Courtney Rink, March 2018)

LINK: READ THE BLOG HERE

Credit Unions vs Banks: What’s the Difference?

When it comes to managing your finances and choosing where to bank, there are many things to consider including whether you should choose a credit union or a bank. (Author: Francis Dixon, December 2017)

LINK: READ THE BLOG HERE

What I Learned From Buying a House During COVID-19

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Sorry, Dorothy – repeating “there’s no place like home” will not wake you up from the nightmare that 2020 has trapped us in BUT there may be no time like the present to look into buying a new home during a global pandemic. After years of saving (and with a lot of help from our 2020 trip budget), my husband and I were able to buy our first house together. If you are wondering what it is like to house hunt during a worldwide virus outbreak – it was a different experience but one that I am happy I did and learned a lot from. This is what I learned from buying a house during COVID-19.

The Search

When you start getting serious about looking for a house, you start thinking about your criteria. How many bedrooms do you want? What end of the city do you want to live? To reno or not to reno? For us, our dream home originally came complete with an open concept, finished basement and a garage, but quarantine caused us to move some other things up in priority. For example, a home office became suddenly mandatory after I spent months hunched over on a wooden seat at the island in my kitchen. My point is, a few things changed, but it is important to assess what are your must-haves and what has some wiggle room to change.

We had to be very selective when physically viewing houses for a couple reasons. For starters, open house viewings were now a thing of the past so we had to book an appointment to be able to visit. Second, there were procedures put in place to make the experience of buying a home during COVID-19 safe for both us house hunters and the home owners. For example:

  • Prior to entering, we had to participate in a questionnaire to consent that we did not have any symptoms and have not traveled within the past 14 days
  • Out of respect and safety for the home owners, we were told to touch minimal things and whatever we did touch was disinfected afterwards
  • We made sure to keep our 6 feet distance from our realtor, which is hard to do when viewing a house

If anything, these procedures made us feel that both sides were being respected, provided a safe environment and really didn’t add that much more time. It did however, encourage us to really make the most of our time at each location and be very intentional and thorough to decide if this home was an option for us. Overall, it was different – but we found our home!

The Payment

COVID-19 or no COVID-19, figuring out your financing is a big component when you’re making one of the most expensive purchases of your life. You need to know how much you can comfortably afford with your mortgage and bills all factored in, furnishing your new home, plus, you’ve got to eat! For us, as big travelers in a travel ban world, we were able to reallocate our savings for trips for this year into furnishing our home. My advice would be to review what has changed in your finances or savings during COVID-19 and how that will adjust going forward – there is no shame in changing up your plans!

One very important bonus right now for those looking to buy a new home is that the interest rates are low. That’s great news for buyers as the cost of borrowing is much lower so you’ll pay a lot less in the long run. Now more than ever, it is incredibly important to shop around before locking in your lender and the terms of your mortgage. This rate finder tool from Rate Hub gives you a one-stop shop to compare mortgage rates from the Big Banks. But don’t just choose one from there, make sure to shop around via other options like your local credit union or the financial institution you work with for your day-to-day banking. Your financial advisor will be able to work with you to find a mortgage that fits your overall financial well-being and some may even offer lower rates altogether.

Here’s a hot tip for buying a house during COVID-19 that I learned from my realtor: when chatting with your financial institution, be sure to ask what they offer for an interest rate guarantee. An interest rate guarantee or mortgage rate hold, is locking in a specific rate for a certain number of days, so you will be guaranteed that rate even if they go up during your house hunting journey. This is important right now because as the market recovers from COVID-19, the interest rate will continue to rise back up so placing a hold on these low rates will buy you some time to make sure you are being thorough in your house search.

Even if the mortgage rate goes down, some financial institutions will honor the decreased rate. I will admit, I had a mini celebration each time I saw the rate drop before we officially signed our documents. For more helpful tidbits on mortgages during COVID-19, visit this blog we published earlier this month on how COVID-19 affects the renewal of your mortgage.

The Closure

Closing costs and the process it takes can be the most frustrating part of purchasing a home. Although, I wish it was under different circumstances, some of these processes have become quite efficient during COVID-19. Typically, once you are ready to sign on the dotted line – you end up having to do that many times and over many appointments across the city. Because of COVID-19, we were able to sign almost everything digitally including realtor agreements, mortgage documents, insurance and even signing the offer. There were some signatures needed in person with our lawyer but with the new procedures in place – it was quick, easy and safe!

Buying a house during COVID-19 maybe wasn’t the norm, but I was happy with the process and found it much more streamlined. It has been super exciting and has been a source of light in an otherwise dark time. Now we can reminisce on the Facetime bloopers with our realtor and cheers to building back up that trip fund over a distanced drink on our patio!

How does COVID-19 affect how you renew your mortgage?

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COVID-19 has changed the way we do many things and renewing your mortgage during this time is no different. Thankfully, if you have a good relationship with your lender, the process is relatively seamless and easy to do while practicing social distancing.

Renewing your Mortgage during COVID-19

By law, lenders must give you 21 days’ notice of renewal before the term of your mortgage is up, but if you would like to plan ahead like I do, you should start thinking about the renewal process 120 days before that renewal date. Most lenders will send you their best offer 30 days before the renewal date but starting early gives you some time to really determine what might work best for you and your family. Whether you are looking for a quick renewal of your current mortgage or you are interested in shopping around for the best rate – there are a few things you should keep in mind to set you up for the next 1-5-10 years of home ownership.

How does money affect the mortgage?

If COVID-19 has had an impact on you financially, it might be time to re-visit your household budget. If you took your mortgage over a 5-year term, a lot can change in that time so you should know what kind of flexibility you have in your monthly finances. Some things to consider:

  • What are your financial goals? For a lot of families, COVID-19 has increased the importance of setting up emergency savings. Keeping your mortgage payments small might help you set up that emergency savings in case of another pandemic or job disruption. If retirement is on the horizon and your investments fell during this time, it might be possible to increase your payments while you’re still working. This will allow you to pay the mortgage off faster so that you are mortgage free once you are on a fixed income.
  • Have you received a sum of money such as bonus or inheritance? Consider applying that to your mortgage principle at the same time. Not only could this reduce your payment, but this pays your mortgage off faster and saves you interest. The tricky part is not convincing yourself that this new windfall gain should be spent on a new vacation!
  • Are there some renovations or home improvements that you’ve got the time to accomplish? You could consider increasing the amount you renew your mortgage for to cover the costs of the shingles or finally heating your garage.

Choose the correct term length for you

One of the biggest considerations is the term of your mortgage. Mortgage terms can vary from 1-10 years with the average being 5 years. If you think that you might want to sell your house in the next 5 years, taking your mortgage over a shorter term will help you avoid any costly early-payout penalties from your lender.

Adjusting your payment frequency to match your financial situation is also a change you may want to consider. Bi-weekly payments that match your pay schedule can pay off your mortgage sooner and decreases the amount of interest that you pay in the long run. A monthly payment may make it easier for you to budget during the month. Each option is unique to you and what makes the most sense for your budget.

How COVID-19 has affected interest rates

If there is a bright side of COVID-19, interest rates have fallen significantly since March, making it a great time to renew your mortgage with a low interest rate. The Bank of Canada’s overnight rate is 1.75%*, allowing lenders to offer mortgages just above Prime at 2.89%* for a 5-year fixed rate mortgage.(as of June 9, 2020. Interest rates are based off of your credit score and may vary).

There are traditionally two types of interest rates, fixed and variable and what works best for you is largely based on your own situation:

Fixed: Most borrowers like the idea of having a fixed mortgage rate to limit any surprises in their budget. Especially if you are recovering from job disruption due to COVID-19, a fixed rate is probably your best option.

Variable: Variable rates are attractive because they are often lower than fixed rate mortgages. A variable rate is usually stable, but it is based off the Prime Rate. If the Bank of Canada increases the overnight rate, it pushes the prime rate up, thus increasing variable rates. If your budget can accommodate some flexibility, choosing a variable rate can save you some money over time.

Try shopping around

If you aren’t happy with your current lender, or see a low rate at another bank, renewing your mortgage is an opportunity to shop around. However, COVID-19 has impacted lives in many ways, so be sure to consider your personal situation before making the switch.

If you haven’t applied for a mortgage since October 2018, you are now required to pass the mortgage stress test when applying for a new mortgage or switching lenders. The stress test ensures that borrowers can afford the mortgage that they are applying for by qualifying them at a higher interest rate. The good news is, the Bank of Canada reduced the greater qualifying rate from 5.04% to 4.94% making it easier to qualify for financing. The greater qualifying rate is only to ensure that you can afford your mortgage, the interest rate you will pay are usually lower than this.

If you are considering switching lenders, there may also be some penalties that you have to pay to move your mortgage. Switching within the 120-day window should avoid early payout penalties. Some other fees to consider are appraisal fees, set-up fees for transferring your mortgage and other administration fees. Part of the power of shopping around is that you can ask for these fees to be covered from your new lender which will save you some cash.

How COVID-19 has affected mortgage applications

The pandemic has changed the way that lenders review applications and could make it harder to access funding when renewing your mortgage. Lenders are reviewing any applications under a microscope so it is important to have your documents in order prior to applying for financing. Income statements, business plans for self-employed applicants and personal net worth statements are some of the documentation that may be required.

If you’ve had to defer payments due to COVID-19, you may have to catch up on those payments before being able to switch lenders. This could come at a major one-time cost so be sure to talk to your current lender about what that cost may be.

Finally, the #1 thing that you can do to set yourself up for success while renewing your mortgage during COVID-19 is to reach out to your Financial Advisor. They can complete a review of your finances and your unique situation in order to give you advice on what the best route is for you.

Help! I Need a Mortgage!

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Purchasing a home, especially your first, will be one of the most expensive and important purchases of your life. It’s important to understand how the process works and the impact that buying a home can make on your short and long term finances. Follow these three handy tips to see how much house you can afford! 

Did you ever drive around with your parents during the holidays looking for the best lights in town and thought “I wonder how much this actually costs?” Or maybe you’ve started looking at listings in neighborhoods you’d like to live in, only to realize you have no idea how much you can afford? Whatever the case may be, securing a mortgage is an intimidating process. We’re here to help with a three step process that gives you a great starting point for where to go and how to makes sure it fits your budget.

Step 1: Check, Check, Check It Out

Are you ready for this next chapter to begin? It starts with a word that still sends shivers down everyone’s spine after high school… “homework”.

First you’ll need to determine your credit score. I recommend sitting down with your financial advisor who will be able to best accurately determine how much debt you’ll be able to undertake.

Financial advisors use your credit score to determine whether you qualify for a mortgage and how much you will qualify for (alongside the Mortgage Stress Test). An easy way to take a realistic look at your spending patterns is by going through your banking and credit card history. Staying in touch with your current spending habits will prevent any unpleasant surprises when going in to discuss your options with your advisor.  

Step 2: Evaluation Time: What Can You Spend?

Figuring out “how much you can afford to spend” versus “what you should spend” can be hard. Imagine spending your entire budget on your lavish dream home, but you can’t invite anyone over because you don’t have furniture for them to sit on. Compare that with a home within your means that you can afford with furnishings that you, your friends and family will enjoy. Just because you qualify to buy a large house, doesn’t mean you should make yourself “house broke”. If you purchase a home and leave yourself some wiggle room, it’ll give you more flexibility to spend your disposable income on other things such as trips, family, and decor for your new digs! Ask your financial advisor about the lifestyle trade-offs that occur when you take that step to become a homeowner.

I also recommend talking to your financial advisor about creating a budget that provides a holistic picture of your current expenses, long-term expenses, future expenses, and miscellaneous expenses that will come with being a new homeowner. Compare this budget with your current spending habits you identified in step one and you should be able to identify if you can realistically afford the purchase of a home. Need some help? We have some tools to help you create a budget. 

Tip: Practice living on this self-made budget for a while before making the steps to purchase. This way, you know that you can actively save and handle the budget change while making sure it is accurate.

Step 3: What You Should Spend & Knowing the Fees

Time to look at all the fees that come with buying a home! *Gulp* Many of these fees exist on top of the cost of your home so make sure you leave room in your budget.

  • Down payment (at least 5%),
  • Mortgage Default Insurance Premiums
    • Your down payment amount affects the costs associated with your mortgage. The higher your down payment, the less Mortgage Default Insurance Premiums (more commonly known as CMHC). Mortgage Default Insurance Premiums are mandatory in Canada, and are calculated based on your down payment amount. These fees are an insurance on your mortgage. If you can realistically afford putting down a 20% down payment, you can avoid paying CMHC. If you have the means to save for a 20% down payment, it will save you a ton of money.
  • Appraisal fees,
  • Home inspection fees,
  • Land transfer fees, and
  • Lawyer fees (approximately 1.5% of the total cost of your home)

As well, remember that once you buy a place to call home, your total monthly house costs are much more than just your mortgage payment and things like property taxes, home insurance and condo fees should be added to your budget. One of our previous blogs explores the expenses of homeownership.

In Canada, there are guidelines on how much an individual can spend on a house, based on your monthly income. In most cases, it is recommended that your monthly housing costs do not exceed 30-40% of your total gross monthly income. There are many good reasons to stay well under that number, remember, all those pesky fees and your monthly house costs we discussed above? They stack up fast and can leave you “house broke” if you are not careful.

Only you can decide your lifestyle and how much you’re comfortable spending each month, and if having a mortgage payment is right for you. Your finances are one of the most crucial and personal pieces of your life so it is important that you feel confident making the decisions that are right for you!

Are you thinking of purchasing a home? What advice do you have for people looking to buy a home? Share your thoughts in the comments below, it’s on the house!

girl and boy with arms around each other staring at front door of their home

Expenses of homeownership

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The cost to own a home is more than just your mortgage payments. It also includes insurance, utilities, maintenance and more. Here are a few examples of, and advice on how to manage, costs related to owning a home.

You’ve made your down payment, you know what your mortgage payment is and when it’s coming out of your bank account – that should be it for costs for the year, right?

When my boyfriend and I bought our house, it felt like all we were doing was spending money related to our house and paying bills.  We were fortunate to have negotiated some furniture in the sale and were each bringing some pieces with us, which helped us financially, but what we didn’t realize were a lot of extra expenses, we hadn’t anticipated for.  Having lived at home with my parents for my whole life, except for when I lived in Australia, I didn’t really understand all the additional annual costs that exist when you own a house.

When it comes to homeownership, there are many expenses that may come your way, without you realizing. Here are a few examples, and advice on managing these expenses, from my personal experience.

Expenses you don’t have a choice about

  • House insurance – protected for the unexpected: If you own a house, you need house insurance which will protect you if something bad were to happen such as a fire or flood. Even if it wasn’t a requirement of a mortgage, which it is, you definitely want to have house insurance in place and ensure you’re continually renewing your insurance so that you’re covered if the unexpected were to happen. Tip: You can set up a separate bank account to transfer money into every month so when your insurance comes due, you have the money ready to pay it.
  • Property taxes – we have to pay to play: Every year, you’re required to pay an assessed amount to the city or town you live in. This money goes to help pay for education, libraries, road repairs, and other city/town projects. For more information check out https://www.saskatchewan.ca/government/municipal-administration/taxation-and-service-fees/municipal-property-tax-tools. Tip: Paying a lump sum can be tough, but in Regina and Saskatoon, you have the option to pay monthly instalments through the TIIPS program which can make it a bit easier. If monthly payments aren’t an option for you, set money aside each month into a separate account, helping you to save and prepare for the large annual expense.
  • Utilities – keeping the lights on and water running: Water and heat are essential and typically when you move into your new home you’ll have to pay a fee to install these services. Additionally, as a first-time homeowner, you may be required to pay a deposit for your utilities. Tip: Prior to moving into your home, contact your local utility companies to schedule these services and ask what fees they charge for installation. Be sure to add these expenses into your budget for the month you move in.

Expenses you may not expect

  • Water softener – I prefer soft hair: Depending where you live in Saskatchewan and whether it’s a new build or not, your new house may not come with a water softener. A water softner is optional, and if you prefer to have one there are several options available to you: rent, finance or buy. All three have benefits and it’s comes down to what will best fit your needs.
  • Water heater – what’s an anode rod?: You have hot water every time you turn on the tap. That should be all you have to worry about, yes? What some don’t realize is there’s annual maintenance that needs to be done to keep you enjoying those hot bubble baths. Although some things you can do yourself, sometimes its best to leave it to the pros if you’re not too handy, and call in a professional to do the maintenance work, which will be an additional annual expense for you.

Expenses you can choose

  • Cable and internet – Grey’s Anatomy still on and gets me every time: When we first moved in, I didn’t think we really needed anything more than a basic tv package and basic internet. While that’s true, we ended up wanting more after realizing how many great tv shows are on – thank goodness for PVR. Tip: When choosing a cable package, pick one that’s best for you and works within your budget. If needing to reduce expenses within your budget, consider re-looking at your cable package and downsizing to free up some extra money.
  • Landscaping – flowers are so pretty: Our house was a new build, so our backyard was bare at move in. After pulling all the weeds that were the size of shrubs, the first thing we did was bring in soil to raise and even out the yard, so we could lay sod, and then gravel to build a parking pad. We hired someone to build a fence – as stated earlier, some things are better left to professionals – and planted some trees in the front. We were fortunate to have friends and family help us with this, but it was an expense we hadn’t thought about. Tip: Yard maintenance will be an annual expense. Save money throughout the year to help cover yard maintenance costs including unexpected costs like having to replant trees in the front because the rabbits got to them.

These are just a few examples of homeownership expenses I’ve come across in the last year. There are many other expenses, such as home maintenance, and it’s crucial to budget for these costs – especially the ones you don’t have a choice about first -so that you have a realistic idea of what you can afford and are prepared when these expenses are incurred. This is especially true for those months that you will have a bigger payment like your insurance or property taxes, etc.

Are you a homeowner? What are some expenses you’ve come across that you may not have anticipated? What advice do you have for first-time homebuyers? Share with me in the comments below so I can learn more and proactively prepare.

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10 ways to take control of your finances

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A New Year means resolutions and often times have a financial component to them. Here are 10 ways you can take control of your finances this coming year.

New Year. New financial you.

It’s hard to believe the New Year has already begun. With a New Year often comes resolutions – creating a plan for the future using lessons from the past – and many times have a financial component to them.

Here are 10 ways you can take control of your finances this coming year.

1. Set goals

We all have dreams of what we want to do and what we want to achieve. Make these dreams a reality by setting goals to achieve them. Organize your goals by priority and be sure they’re realistic and achievable. Tip: Start small. Small goals are easier to reach and help train your brain into believing you can achieve it, increasing your chance for success of future goals. Get started by checking out our Goal Setting Blog.

2. Take action

It’s one thing to say you’re going to do something and actually doing it. Put action to your words by creating an action plan setting dates you want to achieve parts/milestones of your goal by. Hold yourself accountable and reward yourself when achieving each milestone helping you to keep motivated.

3. Create a budget

A budget helps you manage your money, showing you how much you’re bringing in each month and where you plan on spending your money. It can help you not spend above your means and focus on what’s important to you. To make budgeting easier for you, we recommend using our online Budget Calculator.

4. Track your spending

By tracking every nickel you spend, you’re able to get an accurate picture of your spending habits – sometimes it can be very shocking how quickly or how much your purchases add up. Tracking your spending will also help you create a more precise budget based on your spending habits and allow you to identify areas where you may need to change your spending behaviours.

5. No-spend challenges

Each month challenge yourself to a spending freeze for a day, weekend or even the full month for all non-essential items. Or pick a different non-essential category to not spend on such as ‘No Eating Out March’.

We recommend challenging yourself for a day or weekend if doing for the first time. Check out our No-Spend Weekend Challenge Blog helping you succeed in taking an entire weekend off from spending.

6. Save for an emergency

Life can sometimes throw us a curveball, threatening our financial well-being and causing us stress. Set money aside each month into an emergency savings fund for those unexpected life events. Having a fund ensures if your car breaks down or your furnace goes in the middle of winter that you’re prepared and gives you peace-of-mind knowing you won’t need to stress trying to find money to cover these unexpected expenses.

7. Prepare for retirement

We all dream of the day we’ll retire – no more alarm clock, being able to take a nap whenever we’d like and playing that golf game on a Wednesday afternoon. Being able to retire the way we want though requires some planning in advance. Start preparing now by checking out our blog, Retirement: will you have enough?

8. Save your extra money

Throughout the year we come across extra money such as an income tax return or a cheque from our Grandma for our birthday. Though we may be tempted to treat ourselves, consider putting any extra, unexpected money you come across into savings – you’ll thank yourself at the end of the year when you have extra savings in the bank!

9. Invest in a TFSA

A tax-free savings account (TFSA) is a great way to save for just about anything, whether it be a short-term or long-term goal. What you save is not tax deductible nor are you taxed when you withdraw your earnings. As well, in 2019 contribution maximums have increased to $6,000. Learn more here.

10. Plan/review your estate

We often think that planning our estates is something we do when we’re older but in fact, everyone young or old should have an estate plan in place in case something unexpected were to happen to us. Having an estate plan helps our loved ones understand our wishes and how to carry them out if we were to pass. This can include naming guardians for children, instructions for your burial/cremation and how you’d like your property divided up and should be updated at each life event such as marriage, children, divorce, retirement, etc. Start your plan by speaking with a local estate planner or lawyer today.

A New Year symbolizes a fresh start and new beginnings. Hopefully, these quick tips help you feel more prepared to take on the new year and take control of your finances. For more financial advice, we encourage you to check out some of our other blogs or contact us today to set up an appointment with a financial advisor.

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Fixed vs. variable: picking a mortgage that’s right for you

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Fixed or variable? When it comes to picking the type of mortgage rate you want, there are many things to consider. 

There are many questions and decisions to make when buying a house. How much can I afford? Where do I want to be located? How much can I put down? Something you may not be considering though is the type of mortgage rate you want – a fixed rate mortgage or a variable rate mortgage.  Understanding and picking the type of mortgage rate you want is a big decision, and without the proper knowledge and resources, can be quite difficult to make. When choosing the mortgage rate for you, it’s important to look at your situation and ask yourself what you are comfortable with.  Like any big decision someone makes in their life, it often starts with a good old-fashioned pro’s and con’s list.

Fixed

A fixed mortgage rate is one that remains the same throughout the entire term of your mortgage, no matter how much the market fluctuates. With a fixed rate, you’ll know exactly what you’re paying towards the principal and the interest on your mortgage.

  • Pro: Known as the ‘set it and forget it choice’, a fixed rate mortgage provides no risk if interest rates change and can provide a sense of security for people, especially if raising interest rates cause you stress.   
  • Con: Fixed mortgage rates often are higher than variable mortgage rates and are locked-in, meaning if interest rates were to decrease, you wouldn’t be able to take advantage of the lower rates. They typically have higher payout penalties than variable mortgage rates if having to break a mortgage prior to the term being up.

Variable

A variable mortgage rate is one that fluctuates with the market interest rate, known as the ‘prime rate’. What this means is the amount of your mortgage payment that goes to the principal and towards interest can change month-to-month.

  • Pro: Generally, variable mortgage rates are lower and can result in interest savings and provide you with the option to pay your mortgage off faster. Variable mortgage rates also have a lower payout penalty (3 months interest) if the mortgage is broken prior to the term being up.
  • Con: Variable rates have a bit of risk associated with them, as they’re unpredictable due to fluctuating markets. If interest rates increase, the amount you pay towards interest will also increase.

When people hear the term variable, many believe this means that your payment fluctuates. What many don’t know is that when choosing a variable rate you have the option to set your payment amount so it’s the same each time. What this means is that each payment date your payment amount stays the same, but depending on an increase or decrease in interest rates the portion of your payment that goes towards interest and to the principal may change. To learn more, talk to a mortgage specialist.

To help explain the difference between fixed and variable rates further, we recommend checking out this great Know How video by Ontario’s Northern Credit Union.

Your buying situation

There are many factors to consider when choosing between a fixed and variable rate. To help break it down, here are the three questions to ask yourself:

  1. What is your risk tolerance?
  2. What is your financial circumstance?
  3. What are the chances of you breaking your mortgage before maturity?

Risk Tolerance

Everyone’s risk tolerance is different and depends on your personal and financial situation. For some, a bit of risk may be scary, while for others they may be comfortable taking one. If you’re someone who lays awake at night worrying about increasing or changes to payments, choosing a variable rate may not be for you.

Financial Circumstance

Your financial circumstance can have a large impact on determining if a fixed or variable rate is right for you. Do you live pay cheque to pay cheque or frequently spending above your means? If so, a fixed rate may be the better option for you. If interest rates increase causing your mortgage payment to increase does this cause you to worry? If you can handle an increase, a variable rate might be better suited for you.

Breaking your mortgage before maturity

Life happens and things change that may cause you to break your mortgage before your term is up. It’s important to understand when choosing a mortgage the rules around payout penalties – the fee you would pay if you were to break your mortgage before the term ends. Variable and fixed rates have different payout penalty rules and a mortgage specialist can help you to understand the penalty payout rules, but also calculate the payment.

Consider factoring in your personal situation and future goals to help pick a mortgage term length (one-year, three-years or five-years) based on your situation. Ask yourself:

  • What stage of life are you in?
  • Are you purchasing the house with anyone? (e.g. friend, sibling, etc.)
  • Is this home big enough to grow into?
  • Do I plan on relocating for work anytime soon?

With any decision, it is always important to do your research and speak with a mortgage specialist. They can provide you with guidance and advice based on your personal situation, help you to understand market trends and forecasts and assist you in making one of the most important decisions of your life.

To learn more, contact one of Conexus’ Mobile Mortgage Specialists today.

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Tips for first-time homebuyers

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Purchasing your first home is a big life decision. Our Mobile Mortgage Specialists share advice for first-time homebuyers on what to know and consider when purchasing your first home.

Buying your first home is a huge life event and can sometimes cause a bit of stress. Figuring out where to start can also become a bit overwhelming. All the questions you begin to ask yourself – how much can I afford? Who should I talk to? How much money do I need to put down? To help get you started, and reduce some of that unnecessary stress, we sat down with our Mobile Mortgage Specialist Team to give us their advice on what to know and consider when purchasing your first home.

Planning

As it’s one of the biggest decisions of your life, planning is essential to ensure you don’t get in over your head. Planning early is key and includes asking yourself some important questions including:

  • What type of home do you want to buy? A condo, residential home or perhaps one that has a legal suite in the basement allowing for potential income – or what some like to call a mortgage helper?
  • How long do you plan to live in this home? Is it your starter home? Forever home? What does your life look like in the next 5-10 years? Family, pets, etc. – will this home need to be able to grow with you?
  • What can you afford? What payment would you be comfortable paying that allows you to still live comfortably? Does this amount include all home-associated costs such as utilities, maintenance, etc.? What other expenses impact your affordability such as debt repayment, etc.?
  • How much money do you have saved for a down payment and what will you need?

When starting to think about purchasing a home, these are just a few of the questions you need to be asking. We recommend speaking with an expert, such as a Mobile Mortgage Specialist, to walk you through these questions and to help you come up with a plan. Doing so will allow you to become focused and help you understand exactly what you need to do to get you where you want to be.

Pre-approvals & affordability

Once you have an understanding of what you’re looking for, it’s important to determine how much money you can borrow. Getting pre-approved sets parameters for the amount of loan you’d be approved for and helps ensure you’re not looking at homes outside of your price range.

When getting approved for a mortgage a number of factors are considered including your income, length of employment, credit history, monthly obligations, assets, liabilities, etc. Debt is also a big factor when it comes to being approved. Credit cards, lines of credit, and loans can have a huge impact on how much you’re approved for.

Also, it’s important to understand how your pre-approved amount equates to your payment cycle. Is this amount something you can afford each month, bi-weekly or weekly? And how long do you want to be paying this mortgage off? Twenty years? Twenty-Five? A longer length of time may make your payments lower but can cost you more interest in the long run.

Remember, whatever you are pre-approved for doesn’t mean you need to spend the full amount on a home. Purchasing a lower-priced home means you’ll need to borrow less money, potentially smaller payments, and the ability, if it works within your budget, to potentially pay off your home more quickly.

Down payments

First-time homebuyers are required to put down a minimum of 5% of the purchase price – for example, if you’re looking to purchase a $300,000 home, you’ll need to put down $15,000. Seems like a lot, right? And another reason why planning is essential.

Start saving for a down payment as early as you can. Consider putting into a savings account, Tax-Free Savings Account or RRSP. Take the ‘pay yourself first’ approach and put a certain amount of money into a separate account each payday. Label the account something that means something to you such as ‘down payment’ or ‘house account’ as you’ll have a better chance leaving the money alone. Also consider putting any extra money you receive such as a work bonus, gift money, money you make selling some of your own personal items, income tax refunds, etc. into this account to help grow your savings faster.

Programs and incentives for first-time homebuyers

There are several programs and incentives for first-time homebuyers that you should be aware of.

  • The Home Buyers’ Plan allows first-time homebuyers to withdraw money from your RRSP to buy or build a qualifying home. You will need to repay these funds back into your RRSP within 15 years.
  • Saskatchewan’s first-time home buyer’s tax credit provides first time homebuyers with a provincial non-refundable income tax credit of up to $1,075 to eligible taxpayers on qualified homes.
  • The Head Start Equity Builder Program allows first-time homebuyers to take a personal loan as a down payment to purchase a new home constructed by the HeadStart on a Home Program.

Also, consider looking at what local builders have to offer homebuyers. During certain times of the year, or in certain community developments, builders offer incentives such as no down payments or down payment grants to encourage homebuyers to purchase through them.

Other considerations/things to know

There is a lot to know when it comes to purchasing and owning a home, and it can be hard to think of it all by yourself. Along with the advice above, here are a few additional things to know and consider.

  • Lean on your experts. Don’t try to do this alone and work with people who are experienced and have your best interests in mind. Your realtor and mortgage specialist are there to offer you a wealth of information to help guide you step by step and ensure as little stress as possible during this exciting time.
  • Set money aside for all the additional fees associated with purchasing a home such moving expenses, inspection fees, home and life insurance, utility hookups, taxes, lawyer’s fees, etc. We recommend setting aside 1.5-2% of the purchase price to help cover these different costs.
  • Filling your new space can come with a cost. The great part about planning in advance means you can also start setting money aside for furniture, household items and your first grocery trip to fill your cupboards with all of the staple items. Another great tip is to create a list of items you’ll need, watch for sales and purchase throughout your planning timelines, putting anything into storage until you move. Be sure to share this list with family and friends for ideas on what to get you for birthdays and Christmases.
  • Use www.expressaddress.com to have your mail forwarded to your new address, update your address within existing companies and even set up your utilities for your new home. It’s free and will help you save time.
  • Budget. Budget. Budget. With new home ownership comes new expenses, and it’s important to have an understanding of your money and budgeting for your newest life chapter. When setting a budget, be sure to put money aside for some of those unexpected expenses such as maintenance or breakdowns. Check out our Setting a Budget blog to get you started.

Buying a home for the first time can be stressful but with a bit of planning, and working with a team of experts, your transition into home ownership can run smoothly. Remember, you’re not in it alone. We’re here to help.

Ready to start your first-home plan today or have additional questions? We’d love to talk to you – contact one of our mortgage specialists today and let’s start planning your future today!