Don't Forget Your Home-Office Tax Deductions

One of the great virtues of starting a home business is the tax breaks you can claim. However, claiming aggressive write-offs is a sure way to attract CRA auditors. In this article, we'll look at some of the more popular home business write-offs as well as some tips on how you can legitimately claim them.

1. Keep business records
If your wish to claim tax deductibles on your home office expenses, you must get into the record-keeping mindset. You need to establish a means of keeping track of the money that is coming in and the money that is going out. Being audited is not the end of the world. However, being audited and not having the records to back up your deductions can be a nightmare.

The more detailed your accounts are, the easier it will be to face an audit. Compiling your daily reports into a monthly tracking sheet will drastically shorten the time it takes you to get your taxes together, and it will have the added benefit of providing a snapshot of your business month-to-month.

2. Write off your workspace
Writing off a home office can be particularly attractive if you have a line of work that can be neatly confined to a dedicated room. You can still write off part of a shared room, but in either case, the space is calculated as a percentage of the total house or apartment area. That percentage is applied to all the related costs, including utilities, insurance, rent or mortgage payments, and so on.

3. Update your business equipment
Office furniture, software, computers, and other equipment are all 100% deductible within the year that the cost is incurred - you don't need to depreciate. There is an upper limit and the purchases must be majority-usage (primarily used) and necessary or helpful for business.

4. Business phone and internet
If chatting with clients is a necessary part of your business, it may be worth getting a second phone line or a dedicated business cell phone, as both of these are 100% deductible. If you only converse with clients occasionally, you can still write off the costs by noting the dates, times, and reasons for the calls and then circling the items on your regular phone bill to deduct at tax time.

You can also deduct part of the cost of your internet if you use it for business. There is no absolute percentage to use, but it will be difficult to write off more than 50% if other members of your family are using it for non-business purposes. Be reasonable and pick a defensible percentage that you won't regret in the case of an audit.

5. Entertainment expenses
You can wine and dine clients (preferably paying or likely to pay clients) and get a tax break. The tendency for business owners at all levels to abuse this write-off has scared many home business owners away from claiming it. However, it is acceptable for you to take out a client for a meal and some entertainment. It will be easier to defend a $200 deduction for a client who has brought you a lot of business than the same meal for a buddy who paid you $20 for an hour's work over the entire fiscal year.

6. Take a trip, not a vacation
Have to hit the road to expand your market? Save your receipts. On business trips, your travel expenses are 100% deductible and your food expenses can be deducted at 50% of the total. Keep all of your receipts because even things like dry cleaning and tips are considered a necessary expense when you're out pounding the pavement in new markets.

7. Automobile expenses
When it comes to automobile expenses, you can claim registration, repairs, oil changes, and gas. But it’s important you keep a log of the kilometres you are traveling for business on a daily basis, because you may need to prove how frequently you use your car for business.
 
8. Employ (not just pay) your family
You can use family members as employees and deduct their salaries as long as you account for their work and pay the going rate. If you have a business that lends itself to having a spouse and kids help out, then use that labour pool. You'll likely pay less than market rates for the help, and you can deduct insurance premiums for them as well.

9. Make justifiable deductions
Just because you have a home business doesn't mean you can go crazy with deductions. If you don't think you can face down an auditor with detailed proofs justifying the deduction, then perhaps it isn't a deduction you should be taking.

The CRA's T2125 form — Statement of Business or Professional Activities — needs to be filled out to claim these expenses. Page 3 of this form deals with the calculation of what is called business-use-of-home expenses.

Most tax software programs will let taxpayers claim home office expenses, although you may want to upgrade to a more expensive version that caters to the self-employed or small-business owners.

Working from home can result in big tax savings. But the rules are strict and the paperwork can be formidable. It might be wise for first-time claimants to seek the help of a professional.

What is Debt Consolidation?

Feeling overwhelmed by multiple bills? Looking for a solution to growing credit card debt? Reduce your debt, restore your credit and feel relief with a debt consolidation loan. 

A debt consolidation loan is where a bank, credit union, or finance company provides you with the money to pay off your outstanding debts and "consolidate" them (bring them all together) into one big loan. This usually applies to your unsecured debt, which may include your credit card bills, lines of credit, unsecured loans – or any other debt that doesn’t require collateral, such as a home or car. 

Advantages of a Debt Consolidation Loan

1. You only have one monthly payment to worry about
2. You often consolidate at a lower interest rate which saves you money
3. Your debt will be paid off in a set amount of time (typically 2 - 5 years)
4. Simple, monthly fund transfers by telephone banking, debit card, or money order
5. Timely, automatic payments to creditors, with full tracking
6. Any fees charged for this service are usually very low

 

Debt Consolidation Loan Interest Rates
Banks and credit unions usually offer the best interest rates for debt consolidation loans. Many factors can help you get a better interest rate with a bank or credit union including your credit score, your net worth, whether you have a relationship with them, and can offer good security (collateral) for a loan or not. Good security for a debt consolidation loan will often be a newer model vehicle, boat, term deposit (non-RRSP), or another asset that can easily be sold or liquidated by the bank if you don't make your loan payments.

For the past decade, banks have typically charged interest rates on debt consolidation loans of around 7% - 12%. Finance companies tend to charge anywhere from 14% for secured loans to over 3% for unsecured loans.

Disadvantages of a Debt Consolidation Loan

1. They usually require security (collateral)
2. You must have a decent credit score
3. Interest rates are higher than a home equity loan (refinancing your home)
4. Interest rates for unsecured debt consolidation loans can be high

While banks rarely approve unsecured debt consolidation loans, some do get approved from time to time. To qualify for one of these you would typically need to have a high net worth (the value of your assets after you subtract all of your debts) and a very strong credit score or a co-signer who has a very high net worth and a very strong credit score.

What are your chances of getting a Debt Consolidation Loan?
If your credit score meets the bank's minimum requirement (meaning: not too many late payments or any big negatives on your credit report), you earn enough income, your total monthly minimum debt payments aren't too high and you can offer some good security for a loan, then you may qualify for a debt consolidation loan. If you don't quite meet all of these requirements on your own, you may still be able to qualify if you can find a good co-signer.

If your minimum monthly debt payments are too high - even after a consolidation loan is factored into the situation, you have bad credit, or you can't offer some reasonable security for a loan, then a consolidation loan probably won't work.

Safety Tips for Fireplaces and Woodstoves

A properly installed and carefully maintained fireplace or wood burning stove can provide the warmth and comfort you need in winter. It also provides the perfect heating alternative when there is a power outage. However, as more than 30% of residential fires are caused by these devices, it’s essential to know how to use them safely and understand the importance of regular maintenance.

Ensure the fireplace or stove is properly installed 

Most fire safety codes require that a wood-burning stove must be at least three feet away from drapes, furniture, and other items. Keep flammable materials away from your fireplace mantle. A spark from the fireplace could easily ignite these materials.

Choose the right wood 

Use well-seasoned firewood that has been dried for six months to a year. Logs that are soft or moist can burn off creosote, a residue that can build up in chimneys and is the leading cause of chimney fires. Never burn charcoal indoors. Burning charcoal can give off lethal amounts of carbon monoxide.

Light small fires 

Light a small fire and then add small pieces of seasoned firewood as required. Burning a big pile of wood causes incomplete burning and can result in overheating of the fireplace and chimney.

Before starting a fire in your wood stove or fireplace, be sure the draft is open wide. This allows proper ventilation for your fire.

Close the screen

Always use a fireplace screen or glass doors. Never keep your wood-burning stove door open unless you have a sturdy screen in front of it to prevent flying sparks from catching on something flammable.

Never burn paper or trash 

Burning paper or trash in the wood-burning stove may seem like a quick way to light a fire. However, this practice is dangerous because these substances are highly combustible and may emanate toxic gases.

Keep children and pets away 

Never leave a wood burning stove unsupervised. Make sure your children and pets are a safe distance away. Installing a safety gate around the wood burning stove is an effective way of maintaining a boundary.

Put out the fire before you go to sleep 

Make sure your fire is extinguished before you go to bed or leave your home. NEVER close the damper with hot ashes in the fireplace.  A closed damper will help the fire to heat up again and will force toxic carbon monoxide into the house.

Install smoke alarms and carbon monoxide detectors 

Any home that uses a wood burning stove must have a working smoke alarm and carbon monoxide detector. These devices warn you in times of danger and can save your home and family—keep a fire extinguisher nearby.

Keep the stove or fireplace clean  

A clogged chimney or a fireplace that is coated in residue will result in a smoky and possibly dangerous fire. Make sure to have your unit professionally cleaned at least once a year by a certified chimney sweep.

Average Home Sale Prices and Number of Sales Dip Slighlty in November - How Does Your Home Compare?

There were 597 residential homes sold last month through the Multiple Listing Service® (MLS® System) of the Kitchener-Waterloo Association of REALTORS® (KWAR) setting a new record high for November. Compared to the same month last year, November sales were up 4.4% and on par with last month. The previous ten-year average number of residential sales for November is 446.

“The elevated pace of home sales we’ve seen for the past year and a half showed no sign of slowing down in November,” says KWAR’s president, Megan Bell. “Despite some speculation of there being a housing market correction in store for Waterloo Region, sustained homebuying demand combined with a record low level of inventory in November produced continued price growth in the MLS® HPI benchmark price.”   

Total residential sales in November included 324 detached (down 3.9 per cent from November 2020), and 106 condominium units (up 27.7 per cent). Sales also included 30 semi-detached homes (down 25 per cent) and 136 townhouses (up 21.4 per cent).     

In November, the average sale price for all residential properties in the Kitchener-Waterloo area was $821,969. This represents a 28.9 per cent increase over November 2020 and a 2 per cent decrease compared to October 2021.

• The average price of a detached home was $990,447. This represents a 31 per cent increase from November 2020 and a decrease of 0.6 per cent compared to October 2021.
• The average sale price for an apartment-style condominium was $494,548. This represents an increase of 23.5 per cent from November 2020 and an increase of 7.1 per cent compared to October 2021.
• The average sale price for a townhouse was $700,476. This represents a 44.8 per cent increase from November 2020 and an increase of 0.9 per cent compared to October 2021.
• The average sale price for a semi was $717,143. This represents an increase of 27.3 per cent compared to November 2020 and a decrease of 1.3 per cent compared to October 2021.

KWAR cautions that average sale price information can be useful in establishing long-term trends but should not be used as an indicator that specific properties have increased or decreased in value. The MLS® Home Price Index (HPI) provides the best way to gauge price trends because averages are strongly distorted by changes in the mix of sales activity from one month to the next.

Effective Outdoor Lighting for Your Home

 

Well-executed exterior lighting can enhances the architectural detail of your property and makes your home look beautiful in the evening adding an abundance of curb appeal.   Aside from aesthetics, good exterior lighting can give you and your guest’s added security and peace of mind when entering and leaving your home.

Much of the success of exterior lighting depends mainly on its design. Professional lighting designers often talk about “moonlight effect.” That’s a naturalistic look that features light no more intense than that of a full moon, but still strong enough to make beautiful shadows and intense highlights.

A well-lit front entrance enables you to greet guests and identify visitors. Wall lanterns on each side of the door will give your home a warm, welcoming look, while assuring the safety of those who enter.

Install a single fixture above the garage door to provide lighting for safety and security. Consider installing a motion sensor on these fixtures or a photocell that turns the lights on at dusk and off at dawn to save energy.

Another important factor is making your home secure and safe from intruders and animals. Good lighting around the entire perimeter of your home can be a deterrent in itself. Illuminate any side of the house that would otherwise be in shadows. Spotlights installed on your eaves will accomplish this, or, for a more dramatic look, consider ground lights pointed up to graze your walls.

Steps, paths, and driveways should be illuminated to make sure family members and guests are able to move about easily and safely after dark. You can install path lights or post lanterns or attach lights to the side of the house.  Low-level path lights, which spread circular patterns of light, will brighten your walkway while highlighting nearby flower beds, shrubs and ground cover. Low-level path lights can also be used to define the boundaries of long driveways.

If you have added exterior features like a swimming pool, an exterior porch or entertaining space, ensure these areas are well lit as well.

Choose lighting fixtures that look beautiful, but also throws light a good distance away from your home. This will help illuminate dark areas, and aid your vision to see outside from inside your home. If you have a large property, flood lights installed on the corners of your home will help throw light further than average wall sconces on the exterior of your home.

Another consideration to keep in mind is to select outdoor light fixtures that are energy efficient and made of durable material to suit the harsh outside temperatures during the hot summer days and cold winter nights.  In most cases, fixtures made of cast aluminum are a very durable option.

Pros and Cons of Investing in Real Estate

 

Buying rental property can be one of the most secure and fastest ways to build wealth. However, before you begin your entrance into real estate investing you should consider the following pros and cons.

Main advantages:

1. Tax advantages
You can deduct certain expenses from your income – reducing the taxes you owe. Deductions can include mortgage interest, property taxes, insurance, utility bills, maintenance/upgrades and property management fees.

2. You may be able to deduct losses for tax purposes
If your expenses exceed your rental income, you may be able to deduct that loss from any other sources of income you have. This could reduce your total tax bill.

3. You get a regular monthly income
Other kinds of investments may pay out less often or income may be less predictable.

4. Real estate value usually appreciates over time.
You may end up with a sizable profit when you sell your property after a few years. However, this is only true as a long term investment.

As a landlord, you can deduct certain property expenses from your income – reducing the taxes you owe. If your expenses exceed your rental income, you may be able to deduct that loss from any other sources of income you have.

Key disadvantages:

1. You take on the responsibilities and challenges of a landlord
Rental units need repair – sometimes on an emergency basis. Dealing with tenants can be challenging, especially if they don’t pay their rent on time and cash flow is tight. If you hire a property manager to take care of these things for you, their salary is an added cost.

2. It may be difficult and costly to sell the property later
Real estate is not a liquid investment. That means it can take time to sell, depending on market conditions. It can also be costly to sell due to real estate and legal fees.

3. It may be difficult to finance the purchase
You must have a down payment of at least 20% when you buy a second property. You may need a mortgage. And, you will have high monthly expenses to cover when you own a building. Of course, you hope the income you receive from your tenants will cover this.

Buying and then renting a property is a lot more complicated than investing in stocks and bonds. Talk to an accountant, lawyer, mortgage broker or other financial expert about how it may affect your taxes and financial situation and be sure it is going to be a worthwhile investment for you.

Tips on Dealing With Mortgage Payment Difficulties

 

When unforeseen financial circumstances impact your ability to make regular mortgage payments, it’s important for you to take quick action. With early intervention, cooperation, and a well-executed plan, you can work together with your mortgage professional to find a solution to your financial difficulties.

If you or your spouse has lost employment and no longer make as much money, and you see meeting your mortgage payment obligations is going to be problematic, the first step is to take a deep breath. There are literally millions of people that face the same problem. Fortunately, there are ways to avoid default and keep your home, so read on for more information on how to avoid a mortgage default.

1- Get moving on a solution. Your first option is to find a way to make up the back payments and continue fighting to make your payment on time every month. Although not an attractive option, it is an option.

Explore options to decrease expenses and increase income, such as an additional job, selling possessions, and look to community resources for help. You may have to temporarily cut back on things like dining out, internet and cable.

If you have a basement or spare room you may consider renting it out. The extra income could be up to 50% of your mortgage payment.

2- Work with your lender. Contact your mortgage lender. Banks do not want to foreclosure on properties. The process is long and costly, and in the end, mortgage lenders lose money. Instead, they would rather work alongside borrowers that are slightly behind on payments, and come up with a practical solution.

Consider extending your mortgage term to reduce your monthly payments. The downside is that you will end up paying more in the long term. However, if it means you are able to continue meeting the minimum mortgage payments, it is worth doing.

Set up a repayment plan. If you are unable to pay your mortgage payment for one or more months, the lender may agree to a repayment plan. The mortgage lender adds additional money to each subsequent mortgage payment until the loan is up-to-date.
Your lender may also suggest an Interest Only Mortgage. This will also reduce your monthly mortgage payments, often quite substantially. However, again the disadvantage is that in the long term you will need to find an alternative investment plan to pay off your mortgage capital.

3. Refinance your mortgage. 
This is perhaps the easiest and most effective method. If you happen to be on your bank’s existing standard rate, the chances are you will be able to find a much better deal.

4. Talk to a Financial Advisor. 
If the situation is becoming overwhelming and you are really in danger of defaulting, you may need to consider speaking to a financial consultant or accountant. This will arm you with expertise and resources with which to approach planning your financial future and make the most of your current circumstances.

5. Resell – Downsize. 
This option is probably the most drastic and only to be undertaken when the others have failed. If you are able to sell your house, you can temporarily rent somewhere cheaper or buy a cheaper house in a different location. The money saved can be used to pay off your mortgage. This option is not easy, due to the costs involved in moving, but it might be worth doing in the long term.

If you can see that things are going to get worse in relation to meeting your mortgage payment obligations, take a deep breath and take action now—it will help in the long run.

Home Maintenance Checklist for Fall and Winter

 

As the winter season approaches and the air becomes crisp, it's time to start thinking about preparing your house for the season. The winter season means spending more time indoors, hence roofs need to shed rain and snow, windows and doors need to reject the cold, and the heating system needs to keep rooms comfortable. If any of these components don't hold up, you might be faced with scrambling around in the wet, cold and dark to fix them.

By handling these important yet reasonably easy tasks now, you can avoid considerable grief later.

Outdoor Preparation

• Check the roof for cracked or missing shingles, bald spots on shingles, missing or damaged flashing, and other conditions that might allow leaks. Replace any roof shingles that are missing or damaged. Seal minor cracks or tears with roofing cement.
• Check the gutters. If they are clogged with leaves and debris, clean them. Gutters prevent basement and foundation flooding and water damage to siding, windows, and doors.
• Check the siding for cracks or damage and seal any leaky spots with clear caulking compound.
• Windows and doors. Make sure they are properly sealed with weather stripping and replace any damaged parts. Weather stripping prevents drafts and winter heat loss.
• Trim trees and bushes away from the house.
• Cover air conditioner and barbecue to prevent winter damage.
• Store lawn and patio furniture in a shed or basement. If space is limited, weather-resistant covers can protect outdoor furnishings.
• Close your pool before leaves start to fall, and night-time temperatures begin to drop and you risk an algae bloom.
• Drain and shut off outdoor water faucets and remove and store garden hoses.
• Store kids toys indoors or in an outdoor shed to prevent rusting and fading.
• Check and repair exterior lighting before daylight fades.
• Scrape peeling paint and apply touch up paint to your siding, trim and fences, and apply waterproofing sealer to your deck if necessary.
• Examine driveways and walkways for cracks. Larger cracks should be sealed to keep out water.

Lawn and Garden

• Prepare planting beds when the soil is relatively dry. By adding soil and mulch to your beds, you'll be a step ahead for spring planting.
• Plant spring blooming bulbs and perennials.
• Protect roses, saplings and small trees by sheltering them with a burlap screen.
• Pull weeds to reduce the number of seedlings next spring.
• Mow grass short for the final cut of the year by reducing the cutting height gradually to 3.5 cm (from 7.4 cm) until the grass stops growing.
• Check ground grading around the house. All surfaces next to the walls  should be sloped to shed water away from the house. This is most important on warm winter days, as melting snow runs quickly across the surface of frozen ground. If the grading is incorrect, water will potentially flow into the house, causing basement leakage. Now is the time to use a shovel to re-slope the grass, or call a paving contractor to correct a negatively sloped walkway or driveway.

Indoor Preparation

• Bring container plants inside and make sure they are free of pests. Doing so may enable plants to survive the season and bloom again in spring.
• Caulk around window and door casings to keep out air and water. If your house has wood siding with window frames that stand out from the siding, caulk the top and sides of the frame. Don't caulk under the sill as this space should be left open to allow moisture inside the wall to escape. If your house is brick or stone, with window frames that are set into the finish material, caulk all four edges of each frame where the brick mould meets the masonry.
• Clean or replace furnace filters as needed. Check and clean dryer vent, air conditioner, stove hood and room fans. Keep heating and cooling vents clean and free from furniture and draperies.
• Ensure that all smoke detectors, carbon monoxide detectors and fire extinguishers are in good working order. Replace batteries as needed, or at least twice each year.
• Have your heating system checked by a licensed heating/air-conditioning professional. Most furnace manufacturers recommend annual inspections.
• Have your chimney(s) inspected by a chimney service and, if necessary, cleaned. Cleaning is generally recommended at least once a year for an active fireplace.
• Store plenty of salt or rock salt, snow shovels, and any other items you will need during the winter.
• Examine the basement floor and walls for cracks or leaks; seal as needed.

If you plan to reside elsewhere during the winter months, you may want to partially shutdown your home. In addition to the tips above, consider the following:

• Leave the temperature at its lowest setting, usually between 5 to 7 degrees Celsius or install a low-heat thermostat to maintain the air temperature at approximately 5 degrees Celsius
• Turn off and drain the water heater; leave a reminder to refill before restarting.
• Keep the electricity on so lights will continue to function (put lights on timers).
• Unplug the microwave, clothes dryer, televisions and other appliances not in use.
• To avoid large repair bills and the hassle associated with breakdowns, take the time now to develop an action plan for the coming months. You'll feel secure in your warm home or while you're away from home.

Winter can be hard on a house, following these easy steps will help preserve your investment and prevent any unnecessary chores or repairs that might be difficult to do during winter.

Average Sale Price of Single-Detached Homes in K-W hovers around the $1,000,000 mark

KITCHENER-WATERLOO, ON (November 3, 2021) –– A total of 593 residential homes sold last month through the Multiple Listing Service® (MLS® System) of the Kitchener-Waterloo Association of REALTORS® (KWAR), a decrease of 11.1 per cent compared to last October and a decrease of 16.5 per cent compared to September. 

 “While not as red-hot as last year’s record-breaking October, it was still a higher-than-normal number of home sales for the month, and the second-highest October on record,” says KWAR’s president, Nicole Pohl. “The number of listings coming on the market can scarcely keep up with the demand for homes in Waterloo region, and the continued price growth we see in October reflects this.” 

 Total residential sales in October included 348 detached (down 13.2 per cent from October 2020), and 84 condominium units (down 8.7 per cent). Sales also included 40 semi-detached homes (down 9.1) and 121 townhouses (down 6.9 per cent). 

 In October, the average sale price for all residential properties in the Kitchener-Waterloo area was $841,764. This represents a 32.9 per cent increase over October 2020 and a 6.1 per cent increase compared to September 2021. 

 The average price of a detached home was $997,654. This represents a 34.2 per cent increase from October 2020 and an increase of 3.5 per cent compared to September 2021. 

 The average sale price for an apartment-style condominium was $464,738. This represents an increase of 18.1 per cent from October 2020 and a decrease of 7.1 per cent compared to September 2021. 

 The average sale price for a townhouse was $693,324. This represents a 39.4 per cent increase from October 2020 and an increase of 7.3 per cent compared to September 2021. 

 The average sale price for a semi was $726,313. This represents an increase of 34.6 per cent compared to October 2020 and an increase of 5.6 per cent compared to September 2021.

KWAR cautions that average sale price information can be useful in establishing long-term trends but should not be used as an indicator that specific properties have increased or decreased in value. The MLS® Home Price Index (HPI) provides the best way to gauge price trends because averages are strongly distorted by changes in the mix of sales activity from one month to the next.

 

The MLS® HPI composite benchmark price for all residential properties in Kitchener-Waterloo was $803,900 in October. This represents a 34.3 per cent increase over October 2020 and a 2.5 per cent increase compared to September 2021.

 

• • The benchmark price for a detached home was $887,500. This represents a 35.5 per cent increase from October 2020 and 2.1 per cent increase compared to September 2021.
•  
  • The benchmark price for an apartment-style condominium was $406,400. This represents a 22.7 per cent increase from October 2020 and a 3.5 per cent increase compared to September 2021.
•  
• The benchmark price for a townhouse is $603,900. This represents a 42.5 per cent increase from October 2020 and a 3.8 per cent increase compared to September 2021.

“With ongoing constraints on supply versus demand, home prices continued to accelerate in October,” says Pohl.

 

There were 621 new listings added to the MLS® System in KW and area last month, a decrease of 18.4 per cent compared to October of last year, and a 12.1 per cent decrease compared to the previous ten-year average for October.

 

The total number of homes available for sale in active status at the end of October was 288, a decrease of 36 per cent compared to October of last year, and 76.5 per cent below the previous ten-year average of 1,285 listings for October.

 

The number of months of inventory remained at 0.5 in October. Inventory has settled at under 1 month for twelve consecutive months. The number of months of inventory represents how long it would take to sell off current inventories at the current rate of sales.

 

The average number of days to sell in October was 10 days, compared to 13 days in October 2020 and a previous 5-year average of 22 days.

 

“Affordability throughout Waterloo Region continues to be challenged, creating significant barriers especially for many people who are just trying to get their foot in the door of the housing market,” says Pohl. “We are urging all levels of government to work together to tackle the supply issue facing housing markets across the country and right here in Waterloo region.”

 

Over the past two weeks representatives of KWAR, alongside REALTORS® from across Canada have been meeting with Members of Parliament to talk about Canada’s economic recovery plan and the need to prioritize housing. You can read about the ideas that REALTORS® are proposing here:  https://www.crea.ca/mp

Commonly Used Mortgage Terms

Last month we introduced some of the commonly used real estate terms and explained how these terms can make up a language of their own. This month we complete this series by introducing the commonly used Mortgage terms.

Amortization
This is a schedule that outlines your loan payments for the duration of the home buying loan. It details how much of each monthly payment goes toward the principal and how much goes toward the loan interest. Initially, the bulk of your payments will be applied toward the interest.

Appraised Value
An estimate of a property’s market value, used by lenders in determining the amount of the mortgage. Usually made by a qualified professional called an “appraiser”.

Assessment
The value of a property, set by the local municipality, for the purposes of calculating property tax.

Assumable Mortgage
A mortgage held on a property by the seller can be taken over by the buyer, who then accepts responsibility for making the mortgage payments.

Blended Mortgage
A combination of two mortgages, one with a higher interest rate than the other, to create a new mortgage with an interest rate somewhere between the two original rates.

Bridge Financing
Interim financing to bridge between the closing date on the purchase of the new home and the closing date on the sale of the current home.

Buy-down
When the seller reduces the interest rate on a mortgage by paying the difference between the reduced rate and market rate directly to the lender, or to the purchaser, in one lump sum or monthly installments.

Canada Mortgage and Housing Corporation (CMHC)
The National Housing Act (NHA) authorized Canada Mortgage and Housing Corporation (CMHC) to operate a Mortgage Insurance Fund which protects NHA Approved Lenders from losses resulting from borrower default.

Closed Mortgage
A mortgage that cannot be prepaid, renegotiated, or refinanced during its term.

Commitment
A notice from a mortgage lender to a prospective borrower that the lender will advance mortgage funds of a specified amount under certain conditions.

Conventional Mortgage
A mortgage loan of up to a maximum of 75% of the lending value of the property for which a lender does not require loan insurance.

Debt Service Ratio
The percentage of a borrower’s income that can be used for housing costs. Gross Debt Service (GDS) Ratio is the amount that a lender will permit a borrower to use from his/her gross income in order to qualify for a loan for housing costs, including mortgage payment and taxes (and condominium fees, when applicable). Total Debt Service (TDS) Ratio is the maximum percentage of a borrower’s income that a lender will consider for all debt repayment (other loans and credit cards, etc.) including a mortgage.

Default
Non-payment of installments due under the terms of the mortgage.

Discharge
The removal of all mortgages and financial encumbrances on the property.

Equity
The difference between the price for which a property can be sold and the mortgage(s) on the property. Equity is the owner’s “stake” in a property.

First Mortgage
The first security registered on a property. Additional mortgages secured against the property are “secondary” to the first mortgage.

Foreclosure
A legal process by which the lender takes possession and ownership of a property when the borrower doesn’t meet the mortgage obligations.

Gross Debt Service (GDS) Ratio
The percentage of gross income required to cover monthly payments associated with housing costs. Most lenders recommend that the GDS ratio be no more than 32% of your gross (before tax) monthly income.

Gross Household Income
Is the total salary, wages, commissions, and other assured income, before deductions, by all household members who are co-applicants for the mortgage.

Hazard Insurance
An insurance policy is required by lenders to protect a property against damage or loss caused by fire, weather, etc.

High Ratio Mortgage
A mortgage that exceeds 75% of the loan-to-value ratio; must be insured by either the Canada Mortgage and Housing Corporation (CMHC) or a private insurer to protect the lender against default by the borrower who has less equity invested in the property.

Hold-back
An amount of money is withheld by the lender during the progress of construction of a house to ensure that construction is satisfactory at every stage. The amount of hold-back is generally equivalent to the estimated cost to complete construction.

Interest Rate Differential Amount (IRD)
An IRD amount is a compensation charge that may apply if you pay off your mortgage principal prior to the maturity date or pay the mortgage principal down beyond the prepayment privilege amount. The IRD amount is calculated on the amount being prepaid using an interest rate equal to the difference between your existing mortgage interest rate and the interest rate that we can now charge when re-lending the funds for the remaining term of the mortgage. For more information, click on compensation amounts.

Interim Financing
Short-term financing to help a buyer bridge the gap between the closing date on the purchase of a new home and the closing date on the sale of the current home.

Maturity Date
Last day of the term of the mortgage agreement.

Mortgage
A contract between a borrower and a lender. The borrower pledges a property as security to guarantee repayment of the mortgage debt.

Mortgage Broker
A licensed individual who, for a fee, brings together a borrower in search of a mortgage and a lender willing to issue that mortgage.

Mortgage Insurance Premium
A premium which is added to the mortgage and paid by the borrower over the life of the mortgage. The mortgage insurance insures the lender against loss in case of default on the part of the borrower.

Mortgage Life Insurance
A form of reducing term insurance available for all mortgagors. In the event of the death of the owner or one of the owners, the insurance pays the balance owing on the mortgage. The intent is to protect survivors from losing their homes.

Mortgage Payment
The regular installments made towards paying back the principal and interest on a mortgage.

Mortgage Term
The length of time a lender will loan mortgage funds to a borrower. Most mortgage terms run from six months to five years, after which the borrower can either repay the balance (remaining principal) of the mortgage, or renegotiate the mortgage for another term.

Mortgage Prepayment Penalty
A fee paid by the borrower to the lender in exchange for being permitted to break a contract (a mortgage agreement); usually three months’ interest, but it can be higher or it can be the equivalent of the loss of interest to the lender.

Mortgagee
The entity that lends the money.

Mortgagor
The entity that borrows the money. The borrower pledges a property as security to guarantee repayment of the mortgage debt.

Open Mortgage
A mortgage that can be prepaid or renegotiated at any time and in any amount without penalty.

Payment Frequency
The choice of making regular mortgage payments every week, every other week, twice a month or monthly.

Principal
The mortgage amount initially borrowed or the portion still owing on the mortgage. Interest is calculated on the principal amount.

P, I & T
Principal, interest and taxes due on a mortgage.

P & I
Principal and interest due on a mortgage.

10 Beginner Tips for Staging Your Home for Sale

Home Staging is a proven system for preparing properties for sale. Your aim is to present your home in the best possible light to win the hearts of prospective buyers. With Staging, the focus is shifted from the furnishings to the home itself, the views, the space, and the unique features of the property.

In preparing your house for selling you need to take a step back and have the mindset that this is no longer your home but your investment. You want your home to stand out from the crowd and have a broad buyer appeal. Following these 10 tips will help you sell your house sooner and possibly for more money.

1. Curb Appeal – stand back and view your home as if you were seeing it for the first time. This is the ‘first impression’ stage. Depending on the season you may want to have pots of colourful and attractive flowers to greet buyers; a clean and inviting door mat; new and shiny door handles and/or knockers with a freshly painted door.

2. Declutter – Start your pre-pack as soon as possible. You need to decide what you are going to keep, give away, sell or throw away. You may rent storage lockers so you can start to clear out what is not going to make the house look good.

3. Clean – you would think this one is common sense but let me assure you, I wish it was so! A clean home translates into “They must have really cared for their home.” Use environmentally friendly cleaners where you can and for hard cleaning areas, tsp is a good product. Bathrooms and kitchens must be sparkling clean at the very least.

4. Depersonalize – we know you love your family photos and your personal treasures and for living they are perfect. However, when it comes to selling your home, you want buyers to focus on the best features of the house and not your personal collection. Pack personal items and photos carefully and store them away so you can showcase them in your new home.

5. A neutral colour scheme is the way to go for selling. Choose only three colours or less to paint your house for selling. If you have an open floor plan then paint the main floor all the same colour. Bedrooms look good in light sage greens or warm blues like the new aqua.

6. Highlight your home’s best architectural features – Place your furniture in each room so that you have very obvious focal points that show off the home’s best-selling features. For example, if you have a beautiful fireplace then place the furniture in a parallel grouping so that the eye is drawn to the fireplace.

7. Decide on the function in each room – if you were using your guest bedroom as your den for living, for selling turn it back into a bedroom with bedroom furniture in it. If you do not have the right furniture for each room consider renting it. There are more and more rental furnishing companies opening up every day. If you don’t want to rent then borrow.

8. Lighting your home to its best advantage – Spend money on new light fixtures in brushed nickel or stainless steel. Brass is out so don’t fight it. There are many low-cost lighting stores to select from so no excuses for having dated light fixtures.

9. Use window treatments that sell your home – the most popular on the market are the 2” faux woods in a white tone to go with your trim. Decorative side panels will do the trick if you need to add warmth and colour.

10. Flooring needs special attention and is a good investment for updating the look of your home – tile or linoleum is great for entranceways, bathrooms, kitchens, laundry rooms; a good quality laminate or hardwood is perfect for living rooms and family rooms; bedrooms are attractive in a neutral carpet.

By planning and budgeting, you can get yourself to the “OPEN HOUSE READY” stage. Remember that over 79% of prospective buyers have already checked you out through the MLS listings. Will they like what they see?

Happy Selling!