Calculating Your Risk Tolerance When Purchasing a Home

 

When you’re planning to buy a home—whether as a first-time home buyer or as a seasoned pro—deciding how much you can afford is a critical initial step. Once you know that, you’ll be able to find a mortgage tailored to fit your style.
But figuring it out takes more than knowing your debt-to-income ratio. Real estate is an investment, and you need to know your risk tolerance when investing.
Are you conservative, aggressive or somewhere in the middle? Here’s how to tell your real estate risk tolerance.

Income Level

Start by taking a look at your income level.
If you make a higher income, you can afford to be an aggressive borrower, with up to 41% of your monthly take-home pay going toward your debts and 36% going toward housing expenses.
If your income falls in the middle to lower range for your area, an aggressive plan may not work for you.
Let’s use 41% debt ratio as a benchmark.
If you make $60,000 per year, that’s $5,000 per month. A 41% debt ratio means that $2,050 is committed to monthly debts—before groceries, taxes, health insurance, utilities, beer, etc. Most folks will eventually get into trouble if they do this.

Financial Stability

How you make your income also factors into the equation.
If you have a steady base plus windfall income from bonuses, commissions or stock options, then the windfall income could be used as your ‘rainy day’ bucket, and pushing your debt ratio to 41% makes sense.
On the other hand, if your work is steady—but you don’t see a promotion or raise in your future—a moderate financial plan would suit you better.
And if you’re self-employed, a conservative approach is best.
If someone is self-employed or on 100% commission, unless they have a superb, steady track record, they should always be conservative.

Saving Habits

Before you apply for a mortgage, take a hard look at how much you have—or haven’t—socked away.
If someone is a good saver, they may be more comfortable with them pushing the debt-ratio envelope, because I know they can manage tight months.
If you don’t have large cash reserves in your savings account, you’ll save yourself trouble later on by choosing a conservative mortgage.

Age

Your age is also an important deciding factor.
If you’re younger, purchasing your first home, have many years of work ahead of you and feel like you’re in line for pay increases and promotions as you go on, choosing an aggressive plan may make sense. You’ll put more toward your debts and mortgage payments each month—but you’ll be able to build up equity faster.
However, if you’re nearing retirement or already retired, this strategy may not work.
If you’re looking at retirement, you shouldn’t be using your current income to calculate your debt ratios—you should be using your projected retirement income.
This lower, more stagnant income might be better suited to a conservative financial approach.

Bringing It All Together

Once you know what type of borrower you are, realtor.com®’s Home Affordability Calculator can help you see what your mortgage and monthly expenses may look like.
By plugging some basic financial information into the calculator and selecting your borrowing type, you’ll be able to see an estimated monthly payment breakdown—including principle and interest payments, property tax, home insurance and mortgage insurance.
Use this tool to help you manage your real estate risk tolerance.

You should definitely speak to a mortgage professional as this blog just provides guidelines.  Contact me today and I can put you in touch with some great mortgage people!

Carbon Monoxide Detectors Now Mandatory in Homes in Ontario

Did you know carbon monoxide (CO) poisoning kills over 50 people every year in Canada? Carbon monoxide it a colourless, odourless and tasteless gas that results when fuels such as propane, gasoline, natural gas, heating oil or wood have insufficient air to burn completely. CO exposure can cause flu-like symptoms including: headaches, nausea, dizziness, confusion, drowsiness, and loss of consciousness. In higher concentrations and when left undetected, CO can result in death.

To keep consumers safe, the Government of Ontario has introduced new requirements to help protect Ontarians against carbon monoxide poisoning by requiring all homes to have carbon monoxide alarms. The new regulation, which came into effect October 15, updates Ontario’s Fire Code.

“We want Ontarians to be aware of the dangers of carbon monoxide poisoning because these tragedies are preventable. The change to the Fire Code is all about making sure we keep our families and homes safe. I urge all Ontarians to install a carbon monoxide alarm in their homes immediately,” said Yasir Naqvi, Minister of Community Safety and Correctional Services, responsible for the Fire Code.

Carbon monoxide detectors will now be required near all sleeping areas in residential homes and in the service rooms, and adjacent sleeping areas in multi-residential units. Carbon monoxide alarms can be hardwired, battery-operated or plugged into the wall. They range in price from about $25-$100
For more information please visit the Ministry of Community Safety and Correctional Services’ website.

18 Ways to Immediately Reduce Your Home Energy and Maintenance Costs

 

1. Check the insulation in your attic – and install more if needed.

If you have an unfinished attic, pop your head up there and take a look around. You should see some insulation up there, and there should be at least six inches of it everywhere (more if you live in the northern part of the United States). If there’s inadequate insulation up there – or the insulation you have appears damaged – install new insulation.

2. Lower the temperature on your hot water heater down to 120 degrees Fahrenheit (55 degrees Celsius).

This is the optimum temperature for your hot water heater. Most people do not utilize water that’s hotter than that, and thus energy used to keep the water that hot isn’t effective. Lower the temperature, save some on your energy bill, and you’ll never skip a beat.

3. Toss a water heater blanket over that hot water heater as well.

While most modern hot water heaters are well-insulated, some are insulated better than others and many older heaters aren’t insulated well at all. A small investment in a blanket for your water heater will slowly and gradually save you money on your heating bill over time by keeping the heat in the water instead of letting it spread slowly out into your utility closet.

4. Install ceiling fans in most rooms.

Ceiling fans are a low-energy way to keep air moving in your home. Because of the air circulation effect, you can get away with keeping your thermostat a degree or two higher in summer and a degree or two lower in winter, netting a rather large savings. A while back, I wrote a guide to maximizing ceiling fan use – most importantly, the air directly below the fan should be blowing down on you in the summer and should be pulled upwards away from you in the winter – you can use the reversal switch on your fan to switch between the modes.

5. Wrap exposed water pipes with insulation.

Exposed hot water pipes lose heat as they move water from your heater to your faucet. Insulating them makes a two to four degree difference in the temperature of the water and also allows hot water to reach your faucet faster. Check the pipes into and out of your hot water heater first, as the first three feet out of the heater (and the last few feet of inlet water) are key. Use good quality pipe insulation for the job – it’s actually quite simple. Find out more about water pipe insulation at the EERE website.

6. Install a programmable thermostat – and learn how to use it.

A programmable thermostat allows you to schedule automatic increases and decreases in your home’s temperature. This lets your house naturally warm (or cool in the winter) while you’re at work or asleep, saving quite a bit of energy use, and then when it comes time for you to actively use the house, the thermostat automatically adjusts the temperature of your home back to what you prefer. Such devices save money on cooling in the summer and heating in the winter.

7. Hang a clothes rack in your laundry room (or, better yet, an outdoor clothesline).

A clothes dryer can really eat up your energy costs, but it’s convenient for many people. Battle that convenience (and save money) by hanging a clothes rack from the wall in the laundry room and use it for some items – t-shirts and underwear dry great on clothes racks. If you can hang up 20% of the clothes in a load on this rack, you can get away with running the dryer 20% less than before, saving you cash. Even better: if you can, install a clothes line outside where the wind can catch it and hang most of your clothes outside.

8. Check all toilets and under-sink plumbing for leaks or constant running – and check faucets, too.

Do a survey of the plumbing in your home before you settle in. If you find a toilet is running constantly, it’s going to cost you money – here’s how to easily fix that constantly-running toilet. You should also peek under the basin of all sinks in your home, just to make sure there aren’t any leaks. Got a leaky faucet? You should repair or replace any of those, because the drip-drip-drip of water is also a drip-drip-drip of money; not to mention the terrible interplay between mold and home insurance.

9. Replace your air handling filter.

When you first move in, you almost always need to replace the air handling filter (don’t worry, it’s easy to do – it takes about ten seconds). Go down to your air handling unit, find where the filter is (it’s almost always a large rectangle), and mark down the measurements (printed around the edges). Then, go to the hardware store and pick up a few of these, then go home and install one of them, replacing the old one. An outdated filter not only doesn’t filter as well, it also has a negative impact on air flow, meaning your air handling system has to work harder to pump out lower quality air.

10. Make sure the vents in all rooms are clear of dust and obstructions.

None of the vents in your home should be covered or blocked by anything – doing that makes your heating and cooling work overtime. You should also peek into all of your vents and make sure they’re as dust-free as possible, and brush them out if you see any dust bunnies. This improves air flow into the room, reducing the amount of blowing that needs to happen.

11. Mark any cracks in the basement with dated masking tape.

Many homes have a few small cracks in their basement walls from the settling of the foundation and the weight of the house. In a stable home, the small cracks aren’t growing at all – they’re safe. If they’re growing, however, you’ll save a ton of money by getting the problem addressed now rather than later. Take some masking tape and cover up the end of any cracks you notice inside or outside, and write today’s date on the tape. Then, in a few months, check the tape – if you see a crack growing out of the end of the tape, you might have a problem and should call a specialist now before the problem gets out of hand.

12. Install CFL and LED light bulbs in some locations.

CFL and LED bulbs can save you a lot of money on energy use over the long haul, plus they have much longer lives than normal incandescent bulbs. Consider installing some in various places – we usually use CFLs for hall lighting and LED bulbs for closet lighting (though LED bulbs are improving all the time…).

13. Choose energy efficient appliances, even if you have to pay more up front.

Unless you were lucky enough to buy a fully-furnished home, you’ll likely have to do some appliance shopping. Focus on reliability and energy efficiency above all, even if that seriously increases the cost you have to pay up front. A refrigerator that uses little energy and lasts twenty years is far, far cheaper over the long run than a fridge that runs for seven years and guzzles electricity. (If you’re worried about the up-front cost, check out tip #17.)

14. Set up your home electronics with a SmartStrip or two.

Looking forward to getting your television, cable box, DVD player, sound system, and video game console set up? When you do it, set things up with proper surge protection (to protect your equipment). You might also want to consider a SmartStrip, which allows the on-off status of one device (say, the television) to control whether or not there’s power flowing to other devices (say, the DVD player or the video game console). Having the power cut automatically from such auxiliary devices can save a lot of money over time, especially since many such devices eat quite a bit of power as they sit there in standby mode, constantly draining your money.

15. Air-seal your home.

Look for any places where air may be leaking directly into or out of your home. These aren’t just air leaks – they’re money leaks. Thankfully, fixing small air leaks is pretty easy .

16. Plant shade trees near your house.

Shade trees naturally cool your home during those warm summer months, reducing the amount of direct rays that hit your house. Lowering the external temperature of your home saves significantly on your cooling bills during the summer, plus it increases your property value. Plant them now, so they’ll grow and shade your house sooner.

17. Take advantage of tax benefits for any improvements you make.

For starters, there’s the first time home buyer tax credit, which is essentially an interest-free loan from the federal government for new homeowners. This is perfect money to help you with fixes you may need to make when you move in, like buying good appliances or putting in shade trees.

18. Develop a home maintenance checklist – and run through it for the first time.

One final tip – create a home maintenance checklist. This list should include regular home maintenance tasks that you’d want to do on a monthly or quarterly or annual basis. Then, make it a habit to run through the items on this list each month. Doing so will extend the life of almost everything in your home, saving you buckets of money over time.

5 Questions to Ask a Realtor Before Hiring Them to Sell Your Home

Selecting a real estate representative to assist in the largest financial transaction a person will likely ever make is a critical part of the home selling process. In a challenging economic environment where competition among real estate companies is on the rise, choosing the agent that’s right for you can be a confusing task.

 

Coldwell Banker® suggests home sellers start by interviewing several real estate agents to find someone with whom they “connect.”  However, chemistry is not the only variable to consider. The length of time an agent has been in the business, his or her home sale success rate and knowledge of the local market can also play a significant role in the decision-making process.

 

To jump-start the conversation, I suggest five essential questions home sellers should ask before selecting a real estate representative.  If they don't know the answer, don't hire them!  Also, check out this short video for more information

https://youtu.be/dFVQC4RCeeU?list=PLcxSYLv7EVEL60-bVY_kSecAx8CrXstrZ

 

1.     How long have you been in the real estate business and what has your success rate been in terms of home sales in ratio to homes listed? The length of time a real estate representative has been in the business and their home sale success rate demonstrates their knowledge and expertise in the industry. Ideally, a home seller will want to work with an agent who has a high percentage of completed transactions within your home’s price range.

 

2.     What was the average amount of time it took to sell those listings? Comparing marketing times between the agents you are interviewing will provide you with an indication of how well that agent markets homes.

3.     What was your list-price to sale-price ratio? Significant differences between original listing prices and ultimate sale prices can be an indication that the list prices quoted at the outset were unrealistic.

 

4.      What is your online marketing plan to sell my property? In Canada, the vast majority of home buyers begin their home search on the Internet. Therefore, the real estate representative you select should have a strong online marketing presence as well as be visible through social media outlets in order to reach the widest possible audience. Websites such as Coldwell Banker On Location, a branded YouTube™ channel, allow real estate agents to showcase their listings and local knowledge by tapping into the power of video and offering consumers a new way to search for homes online.

 

5.     Do you have references you can share from past clients? References allow you to gain additional insight into the day-to-day workings with the real estate agent. Gathering reputable references will help ensure that you select the best real estate representative for your needs.

. 

Contact me for a Free Market Value Report and Staging Advice!

4 Things to Check for When Buying a Home in the Fall

Buying a house in the offseason can be a great idea, as homes are a bit cheaper, sellers may be more inclined to sell and there’s less competition from droves of buyers.
That’s not the only advantage for those looking to buy a house in the fall: if you know what to look for, you can actually use the fall season as a litmus test to help you spot potential problems and pluses on your prospective home.

 

1. Leaves, Leaves Everywhere

Shopping for a home during the autumn is an easy way to see how impressive your home will look for years to come. Those turning leaves can make a day at home that much more relaxing.
Of course, leaves can also bring a number of issues.
If the property is full of trees, expect the yard to need heavy cleanup. Leaf cleanup can be difficult and time-consuming labor, so decide whether or not you want to pay for it or do it yourself.
This should be done more than once a season, as too many leaves will clog gutters and drainage systems.
If the yard has been cleaned, look for piles of leaves by the edge of the property to get an idea of what cleanup is really like when you buy a house.

2. Fireplaces

Nothing’s cozier than a night next to a crackling fire when the cold creeps in.
To ensure the cold isn’t creeping down the chimney, check the fireplace. Open and close the damper, checking for drafts each time. A little draft is fine, but a large draft means you may need a new damper.
Also check for any strange smells, like decaying leaves.
While a home inspector will check the general appearance and functionality of the fireplace—like if the damper opens—he will not check inside the chimney.
Ask the seller for evidence of the last time the chimney has been cleaned: if it has been for more than a year, it will need a professional cleaning job.

3. Insulation and Heating

Fall is windy. That’s good, because it will be easier to check for bad insulation.
When touring the home, pass your hand over windows, electrical outlets, doors and baseboards to check for leaks. Make note of any rattling windows, which can indicate a loose seal.
Notice if any room feels colder than others. If so, this can indicate bad insulation or a problem with the heating system in that section. A freezing room during the cold months will likely mean a sweltering one during the hot months.
Ask if you can turn the heater on and off: when doing so, listen—does it sound like a monster banging around in the basement? That’s something that can wake you (or the kids) up at night.
If there are any weird smells, the duct systems may need cleaning—or the furnace may need a second look.

4. Watching the Rain

Take a walk around the property when it’s raining and check for spouts of water shooting out where they shouldn’t be.
This means a gutter problem, which could lead to flooding if water pools on the ground. Make note of where the water is gushing and check the basement’s interior for signs of leaks.
Check the yard’s drainage system. If the home is on slanted ground or a hill base, water should rush by it—not into it. Take note of any ground gutter system and the potential for them to be clogged by leaves during the autumn season.
The more potential for flooding there is, the cleaner you need to keep your yard during the rainy months.

The Telltale Signs for Next Summer

Don’t forget problems that creep up in winter will likely happen again in the summer.
By checking for leaks, drafts and other issues now, you’ll be saving yourself potential repair costs—and high utility bills—in the hottest months of the year, too.

Contact me today for a complimentary Home Value Report.

A Home Sellers Biggest Mistake

If you’re thinking of selling your home, you'll probably be interested in knowing about one of the most common mistakes homeowners make when they decide to sell their property. When the time comes to sell, everyone wants to get the best possible price for their home, but you need to carefully consider what sale price will ultimately net you the best result. Getting it wrong could result in a loss of what could amount to several thousand dollars in most major Canadian markets.

What’s the most common mistake home sellers usually make? That’s easy -- they ask too much for it. Some homeowners use the approach of going with the highest list price they believe the market can bear. They want to ‘test the market’ believing that they can always come down later if they really have to. It’s a common strategy among sellers who don't know any better. It’s an approach that may sound logical, but as any experienced realtor can tell you, it rarely works!

Why not? Well, the first and most obvious reason is because nothing ever sells when the price is too high. But if it doesn’t sell, you may reason that at least you tried it and there’s been no harm done. Unfortunately, that’s seldom the case. You see, even if they like the first home they see, buyers typically view several homes to see what’s out there and where their preferred choice fits in the market. The bottom line? A potential buyer may like your home, but no one spends more than what they perceive to be a fair market price. Your over-priced listing will just make other listings – your competition – look that much more attractive. Worse still, your price may drive your potential buyers to begin negotiations on another more affordable listing, or one that’s similarly priced, but has more to offer them. Either way, you’ve lost a potential buyer who will probably never come back!

There’s another down side to pricing your listing too high – no action. It’s an accepted fact that the longer a house sits on the market without selling, the more suspicious people become that there may be a reason for it. Prospective buyers become concerned that there may be some hidden problem or defect. They may also become concerned that the home may be equally hard to sell again when resale time comes along. Your property could even start to acquire the stigma of a home that is a poor value. That’s a possibility you want to avoid at all costs! Imagine how difficult it would be to negotiate a favourable selling price in such a situation. And while your house sits on the market, you’ve got the added stress and disruption to your family life of keeping of your house ‘showing ready’.

As your Coldwell Banker real estate professional will tell you, the best way to sell your home quickly and at top dollar, is to create buyer demand. You do that by pricing your home at close to its expected selling price and then just watch buyer interest heat up! You may even find yourself in the enviable position where buyers are competing for your property. As the seller of a property that’s in high demand, you’ll have the luxury of choosing the right offer, no mistake about it!

Contact me today for a Free Home Market Value Report!

Easing the Cost of Home Ownership

 

Even with today’s very affordable mortgage rates, the real estate market can still present a challenge to many people wanting to step onto the property ladder.  First-time buyers in particular are finding they have to make adjustments as they plan for their dream of home ownership.  Some young people are staying at home longer in order to save for a down payment.  Other would-be homebuyers are scaling down their expectations, while still others are choosing a home with a rental unit to help with mortgage payments.

 

There are some other creative alternatives available to help First Time Buyers start to build some equity in the real estate market that entail multiple ownership of the same property.  One option that may be of interest to family groups or close friends is the joint purchase of a multiple-unit dwelling, such as a duplex.  Such a property might be jointly purchased by two groups of buyers, with each family occupying one of the property’s units. 

 

The duplex approach can work well in situations where young people plan to marry, leaving their parents as “empty nesters”.  In this scenario, the family home is sold, with the parents buying one unit of a new duplex outright, and then banking their surplus funds, perhaps for retirement.  The younger generation then assumes the more manageable mortgage payments on the remaining half of the property.  In this way, they can start to build equity immediately, without having to come up with a large down payment, or taking on a big mortgage.

 

In less formal arrangements, two couples may elect to jointly buy one single-family residence and share all the living space. This can sometimes be a stressful situation, and the best chance for success is usually when there is a family relationship between the two couples, such two siblings with their spouses, where there is already some history of living together in a shared space.

 

Whatever method you choose to ease the cost of homeownership, the most important thing to remember is to get the all the details worked out before you buy.  Everyone involved in the purchase should agree on all sub-lease and re-sale provisions “up front”, and in writing.  For example, can one party move out and sublet their living space to someone else? Also, what happens when someone wants to sell? Does one party have the right to buy out the other’s interest?  If so, how will a fair price be determined?  And how long will the other party have to come up with the funds?  Or, is the property simply put on the market with all parties sharing the proceeds? 

 

In addition to the terms of ownership, the ongoing care of the property should also be considered.  Who will be responsible for the ongoing maintenance of the property?  What services such as landscaping or snow removal will be contracted out to service providers, and how will this cost be shared? How will the cost of major repairs be handled? 

 

As you can see there are a lot of variables to consider.  Such important issues should not be left to chance.  Don’t expect that they’ll be sorted out easily when the time comes. The best course of action is to get a lawyer involved and draw up an agreement that clearly sets out the rights and obligations of all co-owners.

 

Remember, when you’re thinking of creative ways to ease the cost of owning a home, talk it over first with the expert.  Tell your real estate salesperson all about your plans, so they can ensure that you are shown homes that conform to the appropriate zoning and municipal by-laws.  Best of all, your Coldwell Banker real estate salesperson may be able to suggest options that you’d never considered, and help you make your home ownership dream a reality.

 

Contact me today for a Free Homebuyer's Toolkit!

Home Sale Values in K-W up an Average of More than 4% in September

 553 residential properties were sold through the Multiple Listing System (MLS®) of the Kitchener-Waterloo Association of REALTORS® (KWAR) in September, marking a new record high for the month.  Septembe, 2014, home sales were up 14.3 percent over last year.

On a year-to-date basis 5,210 residential units have sold compared to 5,138 during the same period in 2013.

“September’s strong showing of home sales follows a slower than usual spring market and picks up on what was a very active August” says Lynn Bebenek, President of KWAR.  “We continue to see evidence that the traditional spring market was pushed into the summer months because of the brutal winter weather we experienced earlier in the year”

More sales in the higher price ranges in September contributed to an 8.8 percent increase in the average price of a detached home to $385,780 compared to last year.  The average price for a condominium was $233,321, an increase of 4.8 percent over September 2013. The average sale price of all residential sales increased 7.7 percent to $338,350 over September 2013.

Residential sales in September included 359 single detached homes (up 15.1% from last September), 48 semi-detached (up 6.7%), 35 townhomes (on par with last year) and 108 condominium units (up 27.1%).

The average price of all residential properties sold year-to-date was $337,661, a 4 percent increase over 2013. The average price of a detached home to the end of the third quarter was $383,885, a 4.3 increase over 2013.

“As the Waterloo region area continues to grow, the real estate market continues to be strong and healthy,” says Bebenek.

Contact me today to find out what your home is worth!

A DON'T List for Prospective Home Buyers

 

There’s a lot to consider when buying a home, and especially in today’s changing market conditions.  I can tell you that many markets across Canada are beginning to moderate and become more favourable to buyers.  So while you’re considering a possible home purchase, here’s a Homebuyer “Don’t” list that may help you avoid some common mistakes:

The “DON’T” List for Prospective Homebuyers:

• DON’T fall in love with the first house or neighbourhood you see. That grand colonial with the picturesque view may win your heart at first glance, but you need to keep an open mind to make sure you find the right fit for all your needs. At the end of your search, it may turn out that the riverfront ranch that’s closer for your commute is a better bet all-around.
• DON’T buy beyond what you can afford. It’s easy to fall into that all-you-can-eat attitude, especially when it comes to your first home purchase. You "want it all" when it comes to size, amenities, location, etc. But remember that your eyes may have a larger appetite than your wallet. Make sure the down payment, closing costs, monthly expenses and taxes are truly within your income and savings range before you sign an offer.
• DON’T treat your home the way you treat your stock portfolio. It’s unrealistic and unwise to expect your housing investment to appreciate as quickly as you’d hope for your high-risk bonds. Buying for lifestyle, and remembering that real estate is a great long-term investment, will help you look at home purchasing and ownership in the right context.
• DON’T jump into a confusing mortgage.  Be sure to read carefully through every aspect of the proposed agreements to fully understand your end of the bargain. For instance, an attractive rate now may be difficult to carry if rates change during the term of your mortgage. Arm yourself with information and don’t be afraid to ask questions.
• DON’T underestimate the value of your local Coldwell Banker real estate professional. While being a savvy buyer and doing your homework will help on the road to homeownership, a local expert with years of negotiating experience is invaluable when it comes to scouting out the perfect home – and closing the deal.

Contact me today for a Free Home Buyer's Toolkit - don't make a mistake when buying a home!