Tips on Saving for Your First Home Purchase

Contact me at www.kimlouie.net for a Free Home Value Report email directly to your inbox!

When it comes to buying your first home, a big part of that decision should be based on what your current financial position is and the impact a home loan will have on your finances and lifestyle.

For many first-time homebuyers, saving what is required for a down payment can seem overwhelming. However, sometimes saving for a down payment is as simple as managing your budget differently.

Start with a goal
One of the best ways to save is to have a goal. It will keep you motivated and give you something to work towards. For example, you may choose to save a 10% deposit plus expenses (usually 5%) for your first home. But the more you can save, the better off you’ll be. Find out how much you need to put aside in order to reach your savings goal.

Create a budget
Write down how much money you bring home each month; write down the payment amounts for each of your monthly bills; subtract your expenses from your income to determine how much extra money you have each month.

Develop a culture of saving
Your first priority should be developing a culture of saving. This not only helps you in budgeting and planning for the future but also satisfies banks and other lending institutions that you have a clear commitment to save.

When you go shopping, ask yourself if you really need the item you are thinking of buying. If you don't need it, don't buy it. Put the money into your savings account instead. Remember that small amounts of money can add up to large sums over time.

Start an automatic saving plan
Make saving automatic by setting up an automatic savings plan at your bank to regularly move a specific amount of money directly from your chequing account to a savings account. You’ll be surprised at how much you can save and how quickly the “pay yourself first” approach adds up.
  
Borrow from your RRSPs
If you qualify as a first-time homebuyer, you may be eligible for the government's Home Buyers' Plan (HBP). This allows you and your spouse or partner to withdraw up to $25,000 each from your Registered Retirement Saving Plans (RRSPs) to add to your down payment or to cover purchase-related costs.

Best of all, you don't have to pay income tax on the funds, as long as you repay the total amount to your RRSP over the next 15 years. The repayment period starts the second year following the year you made your withdrawals. If the full $25,000 is withdrawn, the minimum annual repayment would be $1,666.

Take a holiday from tax
If you open a new Tax-Free Savings Account (TFSA), you won’t pay any tax on earnings, which will help you compound your savings. You can contribute up to $5,000 a year to a TFSA, and save for anything you like, tax-free.
 
Review your mortgage options
Once you make the decision to purchase a property, the next choice is the type of loan to suit your budget. The two most common types of loans are the variable interest rate loan and the fixed interest rate loan. 
 
You can now choose to pay back your mortgage over 25 or 30 years, instead of the traditional 20-year amortization period. This means you will pay more interest over the long term, but you can reduce monthly payments to get into your starter home. You can always change this later, once your income rises and you can pay your mortgage down faster.
 
Get into a starter house
Try to be as flexible as possible when choosing your first home. Unless you’re status conscious, your first home doesn’t necessarily have to be your dream home. You could settle for a starter home, which you can afford with a small down payment and easy mortgage installments. There are plenty of lower-priced houses out there in need of repair, with some "Do-It-Yourself" projects where you can add more value to the house. Be careful not to buy a place where the cost of repairs will eat up any profits you might make when you sell.

In just a few years you will build enough equity in your starter home to make it easier for you to sell and move into your dream home.

Buying your first home is an exciting process. After all, your home could be the largest asset you’ll ever own. Being able to finance most of its cost will take a load off your back in the future.

Quick Ways to Build Equity in Your Home

Contact me at www.kimlouie.net for a free home value report email directly to your inbox!

One of the primary goals of homeownership should be the building of equity in your home. Equity is simply the difference between the current value of a property and the balance of all mortgage obligations.

For example, if you have a home that is valued at $375,000 (based on an appraisal or a Comparative Market Analysis) and a mortgage balance of $175,000, you have $200,000 ($375,000 -$175,000) equity in your home. As long as the market remains stable, this is like money in the bank. As your house value increases over time and mortgage payments you make reduce the level of your debt, your home equity increases.

Why Equity in a Home is Important?

Simply stated, the appreciation of equity in a home is one of the easiest and most successful paths to wealth that is available to you. To a large degree, it is almost painless—you make the mortgage payment that you would have to make anyhow and the balance is reduced. The value of the home, meanwhile, is rising. As a result, your nest egg should be growing. The quicker you find yourself at 100% equity—owning nothing on your home—the quicker the route to less financial stress and true wealth.

How to Build Additional Equity?

There are a number of ways to build additional equity in a home, some easier than others but all effective:

1) Higher initial down payment
The most obvious way to build additional equity is at the first opportunity—making a larger down payment at the time of purchase. This extra money is immediately "banked" in the home, making it much less tempting to spend.

2) Extra principal payments
Making extra payments of principal (or just adding money to your monthly payment designated to go to the principal) has a double effect on your equity. First, every dollar you contribute reduces your debt by the same amount. Second, reduced debt means less interest paid, which means that each month more of your payment goes to principal and less goes to interest.

NOTE: Although most loans allow it, check with your lender to see if they accept extra payments of principal with no penalty.

3) Shorter mortgage term
The lower mortgage interest rates that we have seen recently means that for many buyers, they are able to either initially secure a mortgage with a shorter term or, if they are currently in a long term mortgage (such as 30 years) refinance and get a shorter term. Shorter mortgage terms mean that you will be paying down your principal much quicker and therefore gaining additional equity at a much faster rate.

4) Home improvements
When you improve the quality or size of your home, you also increase its value and thus your equity. Be aware, though, that although virtually all home improvement projects will bring some return, some are much more advantageous than others. For example, remodeling kitchens or bathrooms traditionally have brought a greater return than adding leisure amenities such as pools or whirlpools. To get the maximum equity enhancement, make certain that the kind of improvements you want to make will increase the home’s value appreciably.

Purchasing a Home During the Pandemic

Contact me at www.kimlouie.net for a Free Home Value Report emailed directly to your inbox!

The coronavirus has changed our lives in many ways. With businesses temporarily shutting down, people asked to stay at home and a virus that is easily passed from person to person, it has certainly changed the real estate industry and the business of buying and selling homes.

People still need to buy or sell properties even while COVID-19 is an issue. The reality is that the real estate market operates continuously because people start new jobs, welcome new additions to the family, or don’t renew their lease because they intend to buy a starter home.

Since mid-March, the local government has put in place a few guidelines to prevent the spread of COVID-19. It is important to respect these guidelines during the home hunting and buying process.

Online listings

These days, you can search for properties online first to see what properties are available on the market and even take a first tour of the property remotely when the 3D virtual tour is available. 

The information in the online listing allows potential buyers to quickly determine whether the property meets their needs and budget, thus preventing needless visits.

Once the listing has been viewed carefully, it's time to contact the seller. Whether by phone, email, or video call, it’s important to double-check the information in the listing and to ask the owner as many questions as possible. So, the buying process begins from the comfort of your living room!

 

Planning a safe visit

Once questions have been answered and it’s clear that the property meets your needs, it’s a great idea to do the first tour via video call. This can complement the 3D virtual tour or compensate for it if it isn’t available in the listing. It also lets the owner show the potential buyer how rooms are set up or view aspects that aren’t as easily visible in photos.

After the initial steps above, it is possible to make an appointment for a visit. During that visit, certain hygiene measures issued by the public health department must be respected.

Once the buyer settles on a property, it’s possible to use technology to negotiate the terms of the offer to purchase remotely.

For many buyers, making an offer from virtual showings alone is a big concern. Some buyers are not comfortable unless the contract is subject to a second physical showing of the home before the deal is finalized. This is an important step in order to avoid buyer’s remorse.

Finally, it is important to keep in mind that the COVID-19 impact will be felt in the economy for years to come. Assess both of your current risk areas as far as your ability to make the mortgage payments and stay in the current area without needing to leave to find a new job and see if you are okay with the commitment.  

October marks four straight months of record home sales in Kitchener -Waterloo. How does your home compare?

Contact me at www.kimlouie.net for a Free Home Value Report emailed directly to your inbox!

 KITCHENER-WATERLOO, ON (November 4, 2020) ––There were 691 residential homes sold through the Multiple Listing System (MLS® System) of the Kitchener-Waterloo Association of REALTORS® in October, the most ever recorded for the month. October’s home sales represented an increase of 28 per cent compared to the same month last year, and a decrease of 9.6 per cent compared to the previous month. The previous ten-year average number of residential sales for October is 471.

 

“This is the fourth month in a row we have set a monthly record number of home sales,” said Colleen Koehler, President of KWAR. “Demand for homes in October continued to strongly outpace supply in Kitchener-Waterloo and area.”

 

Total residential sales in October included 417 detached homes (up 25.6 per cent from October 2019), and 94 condominium apartments (up 34 per cent). Sales also included 134 townhouses (up 26.4 per cent) and 46 semi-detached homes (up 48.3 per cent).

 

The average sale price of all residential properties sold in October increased 19.4 per cent to $635,301 compared to the same month last year, while detached homes sold for an average price of $742,596 an increase of 21.7 per cent. During this same period, the average sale price for an apartment-style condominium was $395,627 for an increase of 14.8 per cent. Townhomes and semis sold for an average of $499,641 (up 15.6 per cent) and $539,434 (up 16.6 per cent) respectively.

 

The median price of all residential properties sold in October increased 19.2 per cent to $595,000 and the median price of a detached home during the same period increased 20.5 per cent to $686,000.

 

“Consumers buying/selling real estate continues to be one of the few shining lights to help Ontario’s economy recover from the pandemic,” said Koehler. “We’re continuing to see more buyers than sellers, including additional buyers migrating here from out of the region looking for the quality of life this region offers.”

 

There were 783 new listings added to the MLS® System in KW and area last month, an increase of 16 per cent compared to October of last year, and 11.5 per cent more than the previous ten-year average for October.

 

The number of Months Supply (also known as absorption rate) continues to be very low at just 1 month for the month of October. The previous ten-year average supply of homes for October was 3.2 months, and in the past 5 years, the average supply for October was 1.8 months.

 

KWAR’s president says the market we have been experiencing is extraordinary. “While our association does not track where buyers are coming through the MLS® System, I can say unequivocally we are seeing strong demand from GTA buyers. What people want and need in a home, and where they want to be located has been redefined in a very short period. Waterloo region is quite rightly, a highly desirable place to own a home.”

 

The average days to sell in October was 13 days, compared to 23 days in October 2019.

 

9 Tips to build and boost your credit score

 

Contact me at www.kimlouie.net to have a Free Home Value Report emailed directly to your inbox!

A good credit score is the key to buying a house, taking out a loan, applying for a credit card as well as many other important economic transactions. Banks use your credit score to determine your credit risk—the higher the score, the lower the risk and the more appealing you look on paper, which can give you better interest rates on loans.

Boosting your credit score from merely good to great will give you access to the best offers and best rates on nearly everything. Here are the best ways to do it.

1. First - Know where you stand
To improve your credit score, it's important to know where you stand now. You can get free credit reports once a year at sites like www.canadacreditfix.com or www.equifax.ca, but you typically have to pay to see detailed scores.

If you find negative information on your credit report that’s inaccurate, notify the appropriate institutions immediately. Credit report companies are required to launch an investigation on anything you report as false.

2. Get a credit card if you don't have one
Don't fall for the myth that you have to carry a balance to have good scores. You don't, and you shouldn't. But having and using a credit card or two can really build your scores.

If you can't qualify for a regular credit card, consider a secured credit card, where the issuing bank gives you a credit line equal to the deposit you make. Look for a card that reports to all three credit bureaus.

3. Add an installment loan to the mix
You'll get the fastest improvement in your scores if you show you're responsible with both major kinds of credit: revolving (credit cards) and installment (personal loans, auto, mortgages and student loans).

If you don't already have an installment loan on your credit reports, consider adding a small personal loan that you can pay back over time. Again, you'll want the loan to be reported to the credit bureaus.

4.  Don't be a credit card collector
Never apply for more than two credit cards at any one time. If a credit bureau sees that you have applied for three or more cards in a short period of time, the company will probably assume you’re in desperate need of cash—and desperate people do not make good credit risks. An even worse scenario: The credit bureaus think your identity has been stolen, which would also send your credit rating down the tubes.

5. Pay down your credit cards
Paying off your installment loans (mortgage, auto, student, etc.) can help your scores but typically not as dramatically as paying down —or paying off —revolving accounts such as credit cards.

Lenders like to see a big gap between the amount of credit you're using and your available credit limits. Getting your balances below 30% of the credit limit on each card can really help; getting balances below 10% is even better.

Though most debt gurus recommend paying off the highest-rate card first, a better strategy here is to pay down the cards that are closest to their limits.

6. Use your cards lightly
Racking up big balances can hurt your scores, regardless of whether you pay your bills in full each month. What's typically reported to the credit bureaus, and thus calculated into your scores, are the balances reported on your last statements.

You often can increase your scores by limiting your charges to 10-30% of a card's limit. If you regularly use more than half your limit on a card, consider using other cards to ease the load or try making a payment before the statement closing date to reduce the balance that's reported to the bureaus. Just be sure to make a second payment between the closing date and the due date, so you don't get reported as late.

7. Pay your bills promptly
Don't wait to pay off your bill all at once. You don't have to wait until the first of the month, or whenever your credit card is due, to make payments. You can make little payments throughout the month that can help lower your debt quicker. Small payments help your credit score because they lower your debt utilization ratio, which accounts for 30% of your credit score.

8. Keep your cards active
Simply having a credit card is not enough to maintain a good credit score. It's important to use the card, even if you just buy lunch. That way, it will get reported. You want to show that you can use credit responsibly. So don't close credit card accounts when you're not using them; that will bring your score down. Keep them active, so that you have as much credit history established as possible. The longer you have an account, the better.

9. Monitor your credit and make a plan to rectify poor spending decisions and become more diligent about paying bills on time.

Tips on decorating a small apartment

 

Contact me at www.kimlouie.net to have a Free Home Value Report emailed directly to your inbox!

Decorating a small space can be challenging, especially if you are moving from a home to a small apartment. Fortunately, there are many easy and affordable ways to convert your small apartment into a stylish sanctuary that is cool, comfortable, and never feels cramped.

1. Select small furniture.
A small apartment living room can easily be overwhelmed by excessively large furniture. Many furniture and decorating stores like Ikea understand this and offer a large selection of apartment-friendly furniture. If you have a large piece of furniture, make sure it does not dominate the room by adding colourful smaller accent pieces.

2. Create an attractive focal point with your piece of furniture.
Creating a focal point in each room helps the room feel more cohesive and less cluttered. Whether it is your sofa, a window, or a favourite piece of art, a focal point helps draw the attention to one area of the room, providing a distraction from any less attractive areas.

3. Use tall items to draw the eye upwards.
Use stacks and tall items to draw the eye upwards to create the illusion of higher ceilings. If your windows are small try purchasing long curtains and hang them as close to the ceiling as possible. Not only will this create a beautiful focal point, but also gives the appearance of a larger window.

4. Choose a cohesive colour scheme. 
Use paint colours and fabric swatches to create an attractive colour scheme and use it throughout the apartment. Having a unified colour scheme creates a designer feel and makes your space feel pulled together.

5. Keep clutter to a minimum.
Create areas for your art collections where they can be displayed together. If you have a problem finding storage in your apartment be creative and make your own. Many stores like Lowes carry affordable storage systems that you can install yourself.

6. Use mirrors to your advantage.
Placing mirrors and other reflective surfaces opposite of windows and other light sources creates the illusion of more light and makes the space appear larger than it really is.

7. Add your own artwork.
Creating your own art is a fantastic way to personalize your space. Choose what interests and appeals to you and run with it. Let your imagination go wild and create a painting or project tailored to your home.

8. Accessorize
Once you have established and arranged your furniture, it’s time to accessorize. Use items that you already own; small coffee tables, books, and other accessories can complement your furniture and make your space look more stylish. Small or unusual games like Japanese puzzle boxes also make interactive and attractive accessories. Remember, your living room is for living in, not staring at—make it fun, functional, and fabulously decorated.

Do you qualify for a mortgatge?

 

Contact me today to have your Free Home Value Report emailed directly to your inbox!

Many people wonder if buying a home is really within their reach. It often seems like a daunting purchase for the first time buyer. The good news is that with the large variety of options available today, it has never been easier to secure a mortgage.

Mortgage lenders assess a variety of criteria when considering mortgage applications. Most lenders look at the following factors when determining whether you qualify for a mortgage loan.

One of the first questions a lender will consider is how much of your total income you’ll be spending on housing. This helps the lender decide whether you can comfortably afford a house.  Mortgage payments for principal, interest and taxes generally should not exceed 30% of your gross monthly income.

A lender will then look at your debts, which generally include house payments as well as payments on all loans, charge cards, child support, etc., that you make each month.

A history of steady employment, usually within the same job for several years, helps you to qualify. However, a short history in your current job shouldn’t prevent you from getting a loan, as long as there have been no gaps in income over the last two years.

Good credit is also very important in qualifying for a loan, and the lender will want to know that the house is worth the price you plan to pay.

Down payments are not always required as there are mortgage programs that provide 100% financing for qualified purchasers.  If you have a down payment of 20% or more of the purchase price, this is known as a "conventional" mortgage, and the mortgage lender will not require default insurance.  However, with mortgage loan insurance to cover the potential default of payment, you may be able to qualify for a mortgage with a down payment of as little as 5%.

When budgeting, also consider other monthly-related expenses such as condominium fees, heat, hydro, water, property tax, insurance and household maintenance.

Even if you can’t buy a home right now, homeownership is possible. If you make it a serious goal and plan for it, within two years you can probably overcome most or all of the obstacles that usually face first time buyers.