2017 Mortgage Consumer Survey

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CMHC recently completed an online survey of 3,002 recent mortgage consumers, all prime household decision-makers who had undertaken a mortgage transaction in the past 12 months. Sixty-five percent had undergone a mortgage renewal, 15% had refinanced their mortgage, and 20% had purchased a home with mortgage financing (11% First-Time Buyers and 9% Repeat Buyers). CMHC has conducted this survey since 1999. It is the largest and most comprehensive survey of its kind in Canada.

The Home Buying Process

  • Sixty-four percent (64%) of First-Time Buyers indicated they were renting before purchasing, and 34% lived with family.
  • Wanting to buy their first home (37%) and feeling financially ready (31%) were the most important reasons First-Time Buyers gave for purchasing a home in the past year.
  • Low interest rates (33%) was the most important reason for Repeat Buyers to purchase a home in the past year.
  • Fifty-three percent (53%) of buyers were aware of the latest mortgage qualification changes, and 19% noted that it impacted their purchase decision. For example, 11% of buyers said they increased their down payment, 6% purchased a smaller home, 5% purchased in a different location, and 3% delayed their purchase.
  • Buyers interact with a wide variety of people, and are most likely to consult a real estate agent (72%), or look to a family member or mortgage lender for advice (both at 57%). Forty-one percent (41%) reported interacting with a mortgage broker. Of all interactions, real estate agents were noted as most valuable.
  • Seventy-one percent (71%) of First-Time Buyers accessed savings for their down payment, while 18% received a gift from a family member.

Click to Read More -> [CMHC 2017 Mortgage Consumer Survey]

What is a credit score, and how to improve yours.

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What is a Credit Score:
Your credit score is a number that illustrates your financial health at a specific point in time. It also serves as an indicator of your financial past, and how consistently you pay off your bills and debts. This is one of the factors mortgage professionals consider in qualifying you for a mortgage.

How to Check Your Credit Score:
To find out your credit score, contact Canada’s two credit-reporting agencies: Equifax Canada at www.equifax.ca and TransUnion Canada atwww.transunion.ca. For a fee, these agencies will provide you with an online copy of your credit score as well as a credit report – a detailed summary of your credit history, employment history and personal financial information on file. You can also obtain a free copy of your credit report by mail. If you find any errors in your report, notify the credit-reporting agency and the organization responsible for the inaccuracy immediately.

What If You Do Not Have a Credit Score:
It’s important to begin building a credit history as early as possible. You can begin to build one by applying for – and responsibly using – a credit card. Your financial institution or mortgage professional can help.

How to Improve Your Credit Score:
Demonstrating your ability to manage credit is key to maintaining a good credit score. There are a number of things you can do to improve your credit score. These include: Always pay your bills in full and on time. If you cannot pay the full amount, try to pay at least the required minimum shown on your monthly statement. Pay off your debts (such as loans, credit cards, lines of credit, etc.) as quickly as possible. Never go over the limit on your credit cards, and try to keep your balances well below the limits. Reduce the number of credit card or loan applications you make. Once your credit score has improved, work with your mortgage professional to obtain a mortgage that works for you.

Find Out More:
To find out more about credit scores and reports, visit the Financial Consumer Agency of Canada website and download or request a free copy of their guide, Understanding Your Credit Report and Credit Score. This guide provides practical, straightforward information on how to obtain and understand your credit report and score, as well as how to build and maintain a good credit history.

First Time Home Buyers: how you can harness the power of your RRSPs

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RRSP season is here!

Use the first 60 days of the year to max out contributions to your RRSP.  You have until March 1st, 2017 to reduce your 2016 income and get a higher tax refund.

There are several advantages to maxing out your contributions to your RRSP.  All of the income you earn in the plan is exempt from tax (as long as the funds remain there).  Additionally, you can withdraw tax-free funds from your RRSP for qualifying home purchases.

The Home Buyers’ Plan (HBP) is a program that allows Canadians to withdraw up to $25,000 in a calendar year from their RRSPs to buy or build a qualifying home for themselves or for a related person with a disability.

Under this plan, only first-time home buyers are eligible to participate, unless the special rules for persons with disabilities apply.

Each spouse or common-law partner can withdraw eligible amounts under the HBP from any RRSP under which he or she is the annuitant. Each person can withdraw up to the $25,000 limit, or $50,000 if purchasing the property jointly.

Any RRSP contributions made must remain in the RRSP for at least 90 days before they can be withdrawn under the HBP. After 90 days, the RRSP may generate a tax refund, which can then also be applied toward the down payment.

You have up to 15 years to repay to your RRSP from the second year following the year of withdrawal. If the required repayment is not made, the owing amount will have to be included as income in the year of the shortfall.

This is an excellent opportunity to save for your first down payment, and we are happy to discuss the options.

Whole Life Insurance, A Whole New Investment Class

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The recent developments in investment markets and the volatile performance that has resulted have brought about a new appeal to an old workhorse.  For investors looking for a diversification in their investment portfolio and a more tax efficient fixed income investment alternative, a compelling argument can be made for the use of Whole Life Insurance.

Why is Whole Life Insurance a good investment?

  • The tax advantaged steady growth, combined with significant estate benefits are the primary reasons why Participating Whole Life is now being thought of as a new investment class.
  • Unlike other accumulation policies such as most Universal Life policies, mutual funds and other equity investments, the cash and dividend value of a Whole Life policy cannot decrease as long as premium payments are made.

Who should consider Whole Life Insurance as an investment?

  • Anyone looking for stable returns on their investment portfolio.
  • For those that have corporations and are accumulating surplus, the use of Whole Life in the corporation not only provides the same stable, tax deferred returns but also provides opportunities for Capital Dividend Account planning.

What is Whole Life Insurance?

  • It is permanent life insurance protection – meaning it won’t expire before you do!
  • It has level guaranteed premiums for the life of the policy. (Shorter premium paying periods are often available.)
  • It has tax advantaged cash value growth.
  • It can pay annual dividends (participating whole life).
  • Dividends can be taken in a number of different ways but the option most often selected to provide the maximum tax advantaged growth is “paid-up additions”.
  • The assets of the participating pool are professionally managed and largely in fixed income investments.  Management fees are extremely low (some as low as 0.07% management fee) and the funds have very little volatility.
  • This combination of guaranteed cash value and the non-guaranteed portion from the dividend account grows tax deferred.  At death it is paid to the beneficiary tax free.

Can I access the cash value of the policy?

  • During the lifetime of the insured, the cash values can be accessed by way of partial or total surrender, or policy loan.
  • Income tax may be payable on withdrawals. However, one alternative to avoid paying income tax is to use the policy as collateral and borrow from a third party lender.  And if structured properly, the interest on the loan may be tax deductible.

Favourably compares to a long term, high yield bond

  • Today most portfolio managers recommend that a prudent investor have a diversified portfolio with a significant portion in fixed income investments, such as bonds, term deposits, etc.
  • Many investment managers suggest one third to 40% of an investment portfolio be in these types of investments for balanced growth.

Including participating whole life in your portfolio can produce some significant results, and reduce overall volatility.

Whether investing as an individual or via a corporation, the significant results that can be achieved by using Participating Whole Life are worth investigating.

Please call a member of Outline Financial if you think you would benefit from this strategy or use the sharing buttons to share this article with a friend or family member you think may find this information of value.

 

 

 

 

Copyright © 2017 Outline Financial & FSB  – All Rights Reserved

Does everyone keep a household budget?

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Do you have a household budget?  Do you know how much you’ll need to save to maintain your lifestyle in retirement?  Do you know how to get your credit report?

If you don’t consider yourself particularly money-savvy, you’re not alone. Nearly two-thirds of Canadians taking part in the 2014 Canadian Financial Capability Survey (CFCS) rate their own financial knowledge as poor.

The CFCS tests people’s financial know-how in five basic areas: keeping track, making ends meet, planning, staying informed and choosing products. The 2014 survey found that fewer than half of Canadians bother to take the most important first step in personal financial management—making a household budget. In fact, the number of people who do has gone down since 2009.

While almost 70 percent of those surveyed said they have no problem keeping up with their bills, three in 10 struggle to make their regular payments, and six in 10 do not know how much money they’ll need to save for retirement.

There is some good news however: More parents are saving for their children’s post-secondary education today than five years ago, while the number of new immigrants who use TFSAs rose from 13 percent to 33 percent.

According to Financial Literacy Leader, Jane Rooney, “The lack of financial knowledge continues to be a problem. Statistics show Canadian households are dealing with record levels of debt and with chronically low rates of saving.”

Those interested in measuring their own financial literacy can use a self-assessment quiz on the website of the Financial Consumer Agency of Canada: ItPaysToKnow.gc.ca. The quiz shows the user’s strength or weakness in each of the five key areas, and compares the results to those of other Canadians.

Also on the site is the portal to the Canadian Financial Literacy Database, which will guide you to resources and tools to improve your knowledge about money.

www.newscanada.com

Ways to use the equity in your home

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Once you’re a homeowner, the payoff can be great. When you make a mortgage payment each month, you build equity in a place of your own. As the equity in your home grows, your financial flexibility also increases. Think of it as an extra source of financing for when the unexpected happens.

An added benefit of borrowing money against the equity in your home, is it usually comes with a lower interest rate than other forms of credit, such as consumer loans, lines of credit and credit cards.

Here are some ways you can use the equity in your home:

  • Pay off other debts with higher interest rates (like credit card debt)

  • Renovate or repair your home – build a new room or put in a swimming pool

  • For important life events – a wedding, dream vacation or university tuition

  • Purchase a second home or vacation property

  • Emergencies – like a serious illness

If you have any questions, or would like to know more about how you can access the equity in your home, please don’t hesitate to contact us at any time.

Tips to make your mortgage renewals work for you

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In a Manulife survey in 2011, almost 2 out of 3 respondents failed to compare mortgage products and rates from various lenders when their mortgage came up for renewal.  Not knowing what your options are could costs you thousands if not tens of thousands of dollars in extra interest and fees.

Here are some things you should know about mortgage renewals:

Mark your calendars.

Most Canadians have a 5 year mortgage term and a lot can change in that time.  From marriage and kids or job and lifestyle change, it’s no surprise that mortgage renewal dates are the last thing on your mind.

But it’s important to make a note of this date in your calendar so you can get a head start and make sure you are in a good position to renegotiate your next mortgage term.

Know what your overall financial goals are

Mortgage products have different features.  Some allow you to prepay without penalty, others allow you to port your mortgage to a different property if you sell before your term is up.

It’s smart to have an overall idea of what you want to accomplish financially and in your life overall before committing to a new mortgage term.

If you are unsure about the next 3 to 5 years, maybe you want to look at mortgage products that have a slightly higher rate but lower penalties if you need to break the mortgage term.  Penalties can be up to tens of thousands of dollars.

Run the numbers… or let me do it for you.

Mortgages can be complex.  Put yourself in a better position by being informed of your choices.  Much like how a bank offers different credit cards with different fees and options, mortgage products have different features and options.

Please contact our team at any time to discuss the various options available, as it would be our pleasure to help.