Converting Your Basement to an Income Suite.

General Kristin Woolard 11 Sep

Converting Your Basement to an Income Suite.

With the current interest rates and economic scenarios, many Canadians may be looking for ways to bring in some extra cash. One option for this is to put your home equity to work and consider renovating your basement into a legal income suite! You can do this by using a secured credit line (home equity line of credit or HELOC) to help fund the upfront cash to make changes to your home.

A few things to consider before you invest in renovating to create an income suite include:

Zoning: Before looking into doing anything with an income suite, always double-check if you are zoned accordingly for a smooth renovation. If your zoning does not allow for secondary suites, see if you can rezone.

Local Regulations: Depending on your location, there may be particular regulations that you need to follow or be aware of regarding your suite. A few examples of how the regulations can differ between provinces or cities include:

  • In Coquitlam, you cannot have a suite that is more than 40% of the main house floor plan. You are also required to offer a parking spot for tenants.
  • In Kelowna, you can only have one secondary suite and the home must have an “S” designation.
  • In Calgary, updated zoning legislation has now made it easier to add income suites.
  • Toronto has also proposed reforms that will make it easier to add suites.
  • In Montréal, anyone carrying out a project involving the addition of at least 1 dwelling and a residential area of ​​more than 450 m² (equivalent to approximately 5 dwellings) must enter into an agreement with the City of Montréal in order to contribute to the supply of social, affordable and family housing. It can be a new building, an extension, or the conversion of a building.

Visit the official municipal websites or consult local building departments to obtain accurate and up-to-date information on the rules and requirements in your area BEFORE getting started.

Insurance & Legal Considerations: Before adding your secondary suite, ensure that you have proper insurance coverage or the ability to add additional coverage to protect both the primary residence and suite. In addition, you will want to consult a lawyer and draw up a tenant or rental agreement for any potential tenants. Ontario has a mandatory standard lease agreement that all landlords must use.

Unit Layout and Design: If the zoning and regulations in your area allow you to build an income suite, the next steps are to look at the suite layout and dimensions. Confirm any size restrictions or minimum ceiling height requirements as you are laying out the design for the unit. The unit should have, at minimum the following:

  • A separate parking space for the renter.
  • A separate entrance, kitchen, bathroom, and living/sleeping areas.
  • Ventilation and soundproofing measures to enhance livability.
  • Consideration of natural light.
  • Interlink smoke detectors for primary and secondary residences.
  • Separate, independently-controlled ventilation and heating system.
  • Proper drainage, sewage connections, and utility separations.
  • Outlets, circuits, and lighting that meet electrical code requirements.

Ensure that however your income suite is designed, you are hiring the appropriate building, plumbing, and electrical experts to ensure your suite is up to code and avoid any potential disasters.

Building & Trade Permits: Once you have confirmed that you are properly zoned and able to add an income suite and understand all the regulations for your area, you will want to draft your blueprints and submit a permit application, along with the fee, before you get started. For instance, in B.C. you are required to have a Building Permit for any suite to be considered legal.

IMPORTANT: Even if you are not required to have a building permit, it is important to get these permits for other aspects including insurance coverage should anything happen. Having a building permit will help protect your investment.

In addition to your building permits, you will need to get permits for any plumbing, electrical, and gas renovations prior to beginning your work.

Inspections & License: Once you have your permits and have begun construction, make sure you understand what inspections are required throughout the process and you schedule them accordingly with local authorities to ensure compliance with building codes, fire safety standards, and health regulations.

If the work meets all requirements, your suite will be approved. The last step is determining if you need a business licence. This is not required if your family (parents, children, etc.) will be living in the suite. In Vancouver, for example, if you intend to rent out your suite long-term, you DO need a license. Be sure to check any rules on this in your area.

Incentives: Beyond the ability to earn extra income per month, there are a few additional government incentive programs when it comes to suites including:

  • First Nations: If you live on a First Nations reserve, you may be eligible for federal funding that will provide up to $60,000 to help you build an inexpensive secondary suite rental linked to your principal home. If you live in a northern or remote area, this amount is increased 25%. This is a 100% forgivable loan that is not required to be paid back assuming all guidelines are followed.
  • Residential Rehabilitation Assistance Program (RRAP) – Secondary and Garden Suites: This program is open to all First Nations or individual First Nation members, particularly those who own a family home that can be converted to include a self-contained suite for a senior or adult with disability.
  • Multigenerational Home Renovation Tax Credit: A credit for a renovation that creates a secondary unit within the dwelling to be occupied by the qualifying individual or a qualifying relation. The value of the credit is 15% of the lesser of qualifying expenditures and $50,000.
  • British Columbia: Beginning in early 2024, BC homeowners will be able to access a forgivable loan of 50% of the cost of renovations, up to a maximum of $40,000 over five years, for income suites.
  • Ontario: There are multiple secondary suite programs throughout Ontario, depending on your region. These loans provide $25,000 to $50,000 in funding and are forgivable assuming continuous ownership for 15 years.

While it is important to look online and do your research. Your best resource will be visiting local authorities at the “City of” to confirm that you completely understand the considerations before moving forward with implementing an income suite.

It’s Time to Crush Your Credit Card Blues.

General Kristin Woolard 26 Aug

It’s Time to Crush Your Credit Card Blues.

Although credit cards interest rates have not been affected by the recent surge in the prime lending rate, the fact remains that credit card debt is usually the most expensive debt you can have. The average is around 20% and even the so-called ‘low interest’ cards carry a rate in excess of 10%. Expediting the demise of your credit card balance should be the number one focus for anyone looking to improve their financial situation. Here are five actions to get you started.

  1. If you are carrying a balance, the first step is to put the card(s) away. Whether you put them in the food processor or just temporarily turn them off (our recommendation), you need to own up to your mistake and not add any more fuel to the fire. If it’s the case where you have no choice but to use the card (a prepayment for example) make sure to make a payment to cover that charge right away.
  2. Take a minute to fully understand the consequences of a credit card balance. Search out the details of your credit card statement until your find the section that tells you exactly how many years it will take to eliminate that balance with minimum payments. While you are at it, make sure to confirm the interest charge for that month and just how little of your payment is actually going toward reducing the balance. It can be a bit shocking, but also quite motivating! The government has a simple online calculator for you to easily analyze different repayment options.
  3. Plan your repayment attack. Making a few random spending sacrifices and hoping that you will have a little more left at the end of the month to pay towards your card is wishful thinking. You need to figure out ASAP the maximum amount you can throw at your credit card debt every month and chart out when you are going to be debt-free. Set up an automatic transfer from your bank account to your card every payday and make that money invisible – you can’t spend what you can’t see!
  4. Investigate balance-transfer credit card options… but only if you have a plan and are confident you can pay off the balance within the prescribed period! A balance transfer card shifts your debt to a new card (for little or no fee) which offers a limited time period (usually 6 -12 months) with a very low interest rate (often 0%) to pay off the balance. This cuts your interest expense to zero and ensures that 100% of your payment goes to reducing the balance. However, you have to be very disciplined and have the income to make regular payments. The card company is literally banking on you to fail and hopes you will miss the payment deadline, because that will trigger an avalanche of penalties, fees and interest charges that will put you worse off than ever!
  5. Pick up the phone and call your card company. It might be more possible and easier than you think to actually negotiate a lower interest rate on your credit card. If you have had a card for a while and have been carrying a balance and making the minimum payments, you are a valued customer! Your card issuer is very interested in keeping your business and may be willing to negotiate. You will have to get through to the right people and know what to say, but 15 or 20 minutes on the phone could save you a chunk of cash – even a few percentage points would help.

The above tips will help you get started on the road to eliminating your credit card balance. There are no shortcuts and it may require a lot of sacrifice depending on how much debt you have, but the mental burden that lifts when you see a big zero under “balance due” it will be worth it!

 

  • Written by my DLC marketing team

Debt Reduction Key as Interest Rates Soar.

General Kristin Woolard 5 Aug

Debt Reduction Key as Interest Rates Soar.

There are lots of reasons people fall into debt but only one way out — and it requires a combination of planning, discipline, and persistence. With the rise in interest rates, there is no better time to map out an action plan to reduce your debt.

Start by gathering information about all of your debts — student loans, credit cards, lines of credit, car loans, overdue bills — everything. Make a list of all the debts with the details of the amounts owed, interest rate, and minimum monthly payments. This will help you set goals, create a timeline, and prioritize your repayments.

Your first goal is to make sure everyone gets paid the minimum amount required to avoid your debts going into arrears. Overdue bills and missed payments are going to play havoc on your credit score and it can take a lot of time and effort to rebuild.

The next step is to figure out how much more you can allocate from your current income for debt repayment. One common debt pitfall is to look at your situation and conclude that more income is the solution — and immediately start looking for ways to make extra money. While more income can obviously help you reduce debt, it shouldn’t be your first step.

The most important step is to create a realistic budget. Reducing the expense side of your monthly budget is going to free money to pay off debt much faster than pumping up your income on the top line. You need to identify areas where you can reduce expenses and channel those savings to your debt repayment fund. It’s critical to start accurately tracking your expenses and get the actual data on your spending, not just a guesstimate based on your feeling.

When it comes to who to pay first, there are two commonly used strategies for prioritizing debts: the debt avalanche method and the debt snowball method. With the avalanche method, you focus on paying off the debt with the highest interest rate first while making minimum payments on other debts. The snowball method involves paying off the smallest debts first, regardless of interest rates, and then moving on to larger debts.

From a financial perspective, the avalanche method is the best way to pay off debt, especially if the interest rate differential is large. The snowball method may improve your motivation, but it makes no sense to pay off a small home equity loan at 6% if you are carrying credit card debt at 20%!

Interest rates on credit card balances haven’t been affected by Bank of Canada rate changes (unlike other loans!), but they are already so high that in almost every case they should be the starting point for your debt reduction efforts. If you have been making payments and your credit rating is not too bad, you may be eligible for a credit card balance transfer offer with a promotional 0% interest rate for a specific period. Make sure you have a realistic plan and are disciplined before you sign up for any balance transfer options or credit card consolidation loans. They are a good option for managing credit card debt as they lower or defer the interest, but you need to stay on the payment schedule. If you have any investments (TFSA?), selling them to pay off credit card debts usually makes financial sense.

Paying off debt is a long-term commitment that requires discipline — there is no quick way out. Once you get started and see some progress, your mindset will begin to shift, and a huge weight will start to lift. Becoming debt-free or at least in a position where debt stress doesn’t consume your life will do as much for your mental health as it will for your financial health.

 

  • Written by my DLC marketing team

Strata Insurance: The Importance of Deductible Coverage.

General Kristin Woolard 29 Jul

Strata Insurance: The Importance of Deductible Coverage.

Strata insurance has been steadily rising across Canada, but many homeowners are unaware of changes to their policies. In some areas, deductibles are doubling (or even tripling!), which can result in extremely high costs if you are not updating your individual policy.

To ensure that you remain up-to-date with your strata insurance policies, it is vital that homeowners living within a strata building check with their strata management for a copy of the most recent insurance policy. While it is good to check over the entire policy, a few key areas to review are your deductibles and comparing your coverage with your individual homeowner policy to ensure all gaps are filled.

Unfortunately, many homeowners within strata buildings do not realize the importance of having individual coverage. Typically, strata insurance covers the building itself. This means that, in the event of an accident, such as a fire or flood, the building can be re-established. Unfortunately many homeowners think this is enough coverage, but it is equally important to ensure that you have your own individual homeowners insurance policy.

The purpose of an individual policy is to help to protect the contents of your apartment, townhouse or condo in the event of an accident. This means that any upgrades you made to your unit would be covered, as well as your belongings. More importantly, however, is these policies also serve to fill in the cost gap relating to the strata building deductible.

Historically, deductibles in strata managed buildings averaged $25,000. This means that, in the event of an accident (flooding, fire, etc.), you would need to pay $25,000 upfront to have the repairs made. However, as the costs of strata insurance increases across the country, these deductibles are changing.

For many homeowners, there has been no change to the insurance cost or strata fees, leaving them unaware of any adjustments to their policy. Instead, the changes are being made directly to the deductible to cover the increased costs. In fact, in some cases the deductibles are doubling or even tripling, leaving homeowners with a hefty bill in the case of insurance coverage. Instead of having a $25,000 deductible, many homeowners are seeing this increase up to $250,000.

With so many increases to various fees and changes to policies within strata organizations, it has become even more important to maintain vigilance and be aware of any changes to your strata policies. Typically, these are shared with homeowners via meeting minutes and e-mails which every homeowner in a strata building should have access to.

If you receive any updates from your strata management, you must be sure to review them. Always take your strata and individual policy to an insurance agent to ensure you are aware of your coverage and that your individual homeowner’s policy is working in your favor. Investment property owners especially need to check their existing deductible against the updated deductible and insurance policies to avoid any future issues.

 

  • Written by my DLC marketing team

Understanding Mortgage Rates.

General Kristin Woolard 22 Jul

Understanding Mortgage Rates.

While not the only factor to look at when choosing a mortgage, interest rates continue to be one of the more prominent decision criteria with any mortgage product. Understanding how mortgage rates are determined and the differences between your typical fixed-rate and variable-rate options can help you make the best decision to suit your needs.

HOW RATES ARE DETERMINED

The  chartered  banks  set  the  prime-lending  rate  (the  rate  they  offer  their best customers). They base their decisions on the Bank of Canada’s overnight rate, because that’s the rate that influences their own borrowing. Approximately  eight  times  per  year,  the  Bank  of  Canada  makes  rate announcements that could affect your mortgage as variable  mortgage  rates  and  lines  of  credit  move  in  conjunction with the prime-lending rate. When it comes to fixed-rate mortgages, banks  use  Government  of  Canada  bonds. In the bond market, interest rates can fluctuate more often and can provide clues on where fixed mortgage rates will go next.

To put it simply: a variable-rate is based off of the current Prime Rate, and can fluctuate depending on the markets. A fixed-rate is typically tied to the world economy where the variable rate is linked to the Canadian economy. When the economy is stable, variable rates will remain low to stimulate buying.

FIXED-RATE VS. VARIABLE-RATE

Fixed-Rate Mortgage

First-time homebuyers and experienced homebuyers typically love the stability of a fixed rate when just entering the mortgage space.

The pros of this type of mortgage are that your payments don’t change throughout the life of the term. However, should the Prime Rate drop, you won’t be able to take advantage of potential interest savings.

Variable-Rate Mortgage

As mentioned, variable-rate mortgages are based on the Prime Rate in Canada. This means that the amount of interest you pay on your mortgage could go up or down, depending on the Prime. When considering a variable-rate mortgage, some individuals will set standard payments (based on the same mortgage at a fixed-rate). This means that, should Prime drop and interest rates lower, they would end up paying more to the principal as opposed to paying interest.

If the rates go up, they simply pay more interest instead of direct to the principal loan.

Other variable-rate mortgage holders will simply allow their payments to drop with Prime Rate decreases, or increase should the rate go up. Depending on your income and financial stability, this could be a great option to take advantage of market fluctuations.

Want to learn more about rates or need mortgage advice? Contact me today!

 

  • Written by my DLC marketing team

Don’t Be House Poor.

General Kristin Woolard 15 Jul

Don’t Be House Poor.

Having the biggest and best home on the block sounds great – but not if it is at the expense of your life and monthly finances! Be smart about your budget and avoid buying a home at the very top of your pre-approval value, which might lead to cash flow issues and being “house poor” down the line.

Home Expenses

When it comes to your home, it is more than just your purchase price and mortgage cost. While you might be able to afford to buy a $800,000 home, can you also afford the maintenance, property taxes, utilities and more?

When it comes to your home expenses and overall monthly budget, the goal is that the costs to maintain your home do not exceed 35% of your total monthly income.

Monthly Budget

To help you keep track of your finances, consider breaking up your monthly budget into the following categories:

  • Housing – mortgage payments, property taxes, utilities, etc.
  • Transit – car payments or transit passes, gas, maintenance, etc.
  • Debt – payments to credit cards, lines of credit, etc.
  • Savings – your long-term savings for retirement, etc.
  • Life – food, vacations, fun, medical, childcare, etc.

From there, you would want to look at how much you spend on each category. The below is a good rule of thumb:

  • Housing – 35% of your monthly income
  • Transit – 15% of your monthly income.
  • Debt – 15% of your monthly income
  • Savings – 10% of your monthly income
  • Life – 25% of your monthly income

By spending too much on housing, you are forced to sacrifice in other areas of spending such as your life or savings, but it is better to be life RICH than house POOR.

If you’re not sure what you should budget for your new home, or have questions about making your home costs more affordable (such as changing your mortgage payments), please don’t hesitate to reach out to a Dominion Lending Centres expert today!

 

  • Written by my DLC marketing team

How Job Loss Affects Your Mortgage Application.

General Kristin Woolard 8 Jul

How Job Loss Affects Your Mortgage Application.

Whether you’ve made an offer on a home already or are still in the process of looking, you already understand that buying a home is likely the largest investment you’ll ever make.

When it comes to your mortgage application, there are a few things that you should avoid doing while you’re waiting for approval – such as making large purchases (i.e. a new car), applying for new credit, pulling additional credit reports, etc. Another issue that can come up is the loss of your job.

What you can afford to qualify for in relation to your mortgage depends on your income. As a result, the sudden loss of employment can be quite detrimental to your efforts. So, what do you do?

Should You Continue With Your Mortgage Application?

If you’ve already qualified for a mortgage, but your employment circumstances have changed, your first step is to disclose this to your lender. They will move to verify your income prior to closing and, if they have not been told in advance, it may be considered fraud as your application income and closing income would not match.

In some cases, the loss of your job may not affect your mortgage. Some examples include:

  • You secure a new job right away in the same field as previously. Keep in mind, you will still need to requalify. However, if your new job requires a 3-month probationary period then you may not be approved.
  • If you have a co-signer on the mortgage who earns enough income to qualify for the value on their own. However, be sure your co-signer is aware of your employment situation.
  • If you have additional sources of income such as income from retirement, investments, rentals or even child support they may be considered, depending on the lender.

Can You Use Unemployment Income to Apply for a Mortgage?

Typically this is not a suitable source of income to qualify for a mortgage. In rare cases, individuals with seasonal or cyclical jobs who rely on unemployment income for a portion of the year may be considered. However, you would be asked to provide a two-year cycle of employment followed by Employment Insurance benefits.

What Happens During Furlough?

If you did not lose your job entirely but have instead been furloughed or temporarily laid off, your lender may take a wait-and-see approach to your mortgage application. You would be required to provide a letter from your employer with a return-to-work date on it in this situation. However, if you don’t return to work before the closing date, your lender may be required to cancel the application for now with resubmitting as an option in the future.

Have You Talked to Your Mortgage Professional?

Regardless of the reason for the change in your employment situation, one of the most important things you can do is contact a Dominion Lending Centres mortgage expert directly to discuss your situation. They can look at all the options for you and help with finding a solution that best suits you.

 

  • Written by my DLC marketing team

The Bond Market and Fixed Mortgage Rates

General Kristin Woolard 1 Jul

The Bond Market and Fixed Mortgage Rates

We have all heard about the Bank of Canada’s (BoC) aggressive increase in their overnight, rate but many people don’t realize that those hikes affect Variable Rate mortgages and unsecured debt. There is a vast difference in the way Fixed Rate mortgages are determined.

Banks buy bonds from the BoC as a source of fixed income. Fixed rates are also a source of income, but they cost more to operate mortgage loans.

Bond prices and bond yields have an inverse relationship. When demand for bonds decreases so does their price and the yield increases. Banks set their fixed rates for mortgages higher than bond yields to keep the two sources of income on par.

Fixed rates are typically set at a spread of 1-2% above bond yields so the activity in the bond market is an indicator of whether fixed rates will go up or down. When bond yields are up fixed rates will go up. If bond yields go down fixed rates may as well but they usually come down more slowly.

Bonds are traded daily and while fixed rates aren’t always set exactly as bond yields fluctuate it is a very good indicator of what to expect. When you hear of a weakening bond market (lower prices) that means yield will increase and fixed rates could be on the rise.

One of the main factors affecting bond prices and yields is inflation. High inflation drives down bond value and increases the yield.

In a time of high inflation such as this, fixed rates are high as well. Another good reason for the Bank of Canada to do everything in its power to get inflation under control to give us some relief.

As always, if you have questions feel free to reach out. I’m here to help.

 

  • Written by Kristin Woolard

10 Questions to Ask Your Home Inspector.

General Kristin Woolard 24 Jun

10 Questions to Ask Your Home Inspector.

While home inspections might not be the most exciting part of your home buying journey, they are extremely important and can save you money and a major headache in the long run.

In a competitive housing market, there can sometimes be pressure to make an offer right away without conditions. However, no matter how competitive a market may be, you should never skip out on things designed for buyer protection – such as a home inspection.

You may have a good eye for décor and love the layout of your potential new home, but what is under the surface is typically where headaches can lie. We have all heard the expression “don’t judge a book by its cover” so why would you make the most important purchase in your life without checking it out?

Below are a few key questions you can ask your home inspector to ensure that you are getting a complete and thorough inspection:

  1. Can I see your licence/professional credentials and proof of insurance?
  2. How many years of experience do you have as a home inspector?
    • Note: Make sure they’re talking specifically about home inspection and not just how much experience they have in a single trade.
  3. How many inspections have you personally completed?
  4. What qualifications and training do you have? Are you a member of a professional organization? What’s your background – construction, engineering, plumbing, etc?
  5. Can I see some references?
    • Note: Don’t just ask for references, be sure to follow up with them. Ask the clients how they felt about the home inspection, did any issues crop up down the line that they were not made aware of, etc.
  6. What kind of report do you provide? Do you take photos of the house and specific problem areas (if any) and include them in your report?
  7. What kind of tools do you use during your inspection?
  8. Can you give me an idea of what kind of repairs the house may need?
    • Note: Be hesitant if they offer to fix the issue themselves or are willing to recommend someone cheap. Home renovations and repairs are one area you should never skimp on.
  9. When do you typically do the inspections?
    • Note: Ideally you want a home inspector operating full-time and can view the house during the day to inspect all areas, especially the roof.
  10. How long do your inspections usually take?

While hiring a home inspector may seem daunting, it will be the best few hundred dollars you ever spend. There is no price on peace of mind!

 

  • Written by my DLC marketing team

How to Pay Off Your Mortgage Faster.

General Kristin Woolard 17 Jun

How to Pay Off Your Mortgage Faster.

When it comes to homeownership, many of us dream of the day we will be mortgage-free. While most mortgages operate on a 25-year amortization schedule, there are some ways you can pay off your mortgage quicker!

1. Review Your Payment Schedule: Taking a look at your payment schedule can be an easy way to start paying down your mortgage faster, such as moving to an accelerated bi-weekly payment schedule. While this will lead to slightly higher monthly payments, the overall result is approximately one extra payment on your mortgage per calendar year. This can reduce the total amortization by multiple years, which is an effective way to whittle down your amortization faster.

2. Increase Your Mortgage Payments*: This is another fairly simple change you can execute today to start having more of an impact on your mortgage. Most lenders offer some sort of pre-payment privledge that allows you to increase your payment amount without penalty. This payment increase allowance can range from 10% to 20% payment increase from the original payment amount. If you earned a raise at work, or have come into some money, consider putting those funds right into your mortgage to help reduce your mortgage balance without you feeling like you are having to change your spending habits.

3. Make Extra Payments*: For those of you who have pre-payment privileges on your mortgage, this is a great option for paying it down faster. The extra payment option allows you to do an annual lump-sum payment of 15-20% of the original loan amount to help clear out some of your loan! Some mortgages will allow you to increase your payment by this pre-payment privilege percentage amount as well. This is another great way to utilize any extra money you may have earned, such as from a bonus at work or an inheritance.

4. Negotiate a Better Rate: Depending on whether you have a variable or a fixed mortgage, you may want to consider looking into getting a better rate to reduce your overall mortgage payments and money to interest. This is ideally done when your mortgage term is up for renewal and with rates starting to come back down, it could be a great opportunity to adjust your mortgage and save! This may be done with your existing lender OR moving to a new lender who is offering a lower rate (known as a switch and transfer).

5. Refinance to a Shorter Amortization Period: Lastly, consider the term of your mortgage. If you’re mortgage is coming up for renewal, this is a great time to look at refinancing to a shorter amortization period. While this will lead to higher monthly payments, you will be paying less interest over the life of the loan. Knowing what you can afford and how quickly you want to be mortgage-free can help you determine the best new amortization schedule.

*These options are only available for some mortgage products. Check your mortgage package or reach out to me to ensure these options are available to you and avoid any potential penalties.

If you’re looking to pay your mortgage off quicker, don’t hesitate to reach out a Dominion Lending Centres mortgage expert today! They can help review the above options and assist in choosing the most effective course of action for your situation.

 

  • Written by my DLC marketing team