Find out how you can retire with peace of mind – at an enviable age – using a safe, secure investment plan! With almost another year behind us, this is a perfect time to starting thinking about creating a retirement plan or reassessing the one you already have. Are you certain that you're on track to reach your retirement financial goals? Do you have a plan in place? These are the kinds of questions you need to be asking yourself now before it's too late. Most people spend more time planning their next holiday than they do in planning their financial future. Sad but true. As the old saying goes, "Most people don't plan to fail, they simply fail to plan." Don't let that happen to you. With the right plan and the right advisors, you can position yourself, and your family, on the path to financial freedom. If you're not already working with a financial planner, or if you're not happy with the one you're using, I have a top-notch financial planner that I'd be happy to recommend. They can provide you with a free, no obligation consultation to help you analyze your current situation and map out a solid plan to help you achieve your financial goals. Whether you're looking to plan for retirement, reduce your taxes or increase and protect the wealth in your current plan, here's your chance to consult with a trusted financial advisor at no cost. For more info, call us today! Kupina Mortgage Team | www.kupinamortgage.com
Friday, 27 September 2013
Dividend Tax Credit: a Legal Way to cut your Taxes
When you're building savings for a long-term goal like retirement or education, keep in mind the tax implications of your investment. If you're earning bank interest, you pay income tax on that interest. But if you invest in stocks that pay a dividend, you can reduce taxes and keep more money for financial goals. Dividends are payments made by corporations to their shareholders. Since dividends are paid out of the corporations' after-tax profits, the government recognizes that those dividends shouldn't be taxed again when a shareholder earns them. To avoid double taxation, the federal government subjects dividends to a gross-up, which is then offset by federal and provincial non-refundable dividend tax credits. As a result, dividends end up receiving about the same preferential tax treatment as capital gains. In some cases, you can end up with enough tax credits left over from your dividends to apply to tax from other sources. It's important to remember that the gross-up and dividend tax credits don't apply to RRSPs. All the dividends earned within your RRSP are taxed as income when withdrawn, so it doesn't make sense to invest registered funds in dividend stocks. If you'd like some easy-to-understand advice about benefiting from the dividend tax credit, I'd be happy to introduce you to one of my trusted financial planner partners. Kupina Mortgage Team | www.kupinamortgage.com
Collateral Mortgages: the Devil is in the Details.
Many people are unaware that there are two basic types of mortgages: conventional and collateral. With a conventional mortgage, the amount you're borrowing (property value minus down payment) is the amount that's registered. But with a collateral mortgage, the amount that's registered is 100-125% of the property value, and the lender has both a promissory note AND a lien registered against the property for the total registered amount. TD Canada Trust switched to collateral mortgages in 2010, followed by ING DIRECT in 2011. The advantage of a collateral mortgage is easy access to credit. Since the mortgage is already registered for a larger amount than you need to buy the house, you can access additional funds in the future without any extra steps or legal fees. But there are also several downsides of collateral mortgages:
- *Free transfers or switches to a new lender when your term is up aren't usually available. Most other lenders don't like the fine print and restrictions of collateral mortgages and won't accept them unless they're a refinance, which costs you legal and appraisal fees.
- *You could end up paying a higher interest rate at renewal. If your collateral mortgage makes it difficult to switch lenders at renewal, you don't have the ability to shop around for the best rate. That could end up costing you up to 1% more on your mortgage rate.
- *Your home may be harder to sell. When buyers see the 100-125% lien that collateral mortgages put on your house, they may not be as motivated to buy.
Friday, 13 September 2013
More Mortgage Legislation Changes Impacting Home Buyers
Rising Rates and Stricter Qualifying Guidelines May Make it Harder for you to Qualify for a Mortgage and Lower your Purchasing Power Even Further (to be in effect by December 31, 2013) Rising Rates and More Emphasis on Debt May Impact Borrowers and their Mortgage Options When purchasing a home, the key areas that impact whether you qualify for a mortgage at all and for how much, are based on your income, credit and debts including your new mortgage payments and available down payment. In July 2012 there were some significant mortgage legislation changes that impacted qualifying for a mortgage including using a higher interest rate to qualify depending on the term you select, more income verification and down payment for the self-employed as well as lowering the amortization to 25 years. All these changes impacted mostly those that have less than 20% down payment and therefore require default insurance (CMHC, Genworth or Canada Guaranty). Unfortunately, there is more to come that has already taken effect with some lenders now, and others by December 31st, 2013. All these changes are intended to curb consumer debt accumulation over and above income levels and to reinforce the importance of ensuring that borrowers do not over extend themselves financially with more debt than they can handle. Overall, these changes are a good thing to ensure consumers don't overspend and become "house rich and cash poor"; meaning being a home owner but living pay cheque to pay cheque with so much debt (including credit cards, loans, lines of credit etc.) that there is no extra cash for savings to build a financial cushion should there be an income loss in the future. The downside is that these changes are impacting the ability for many to qualify to purchase a home, especially impacting first time home buyers who are struggling to find an affordable property that they qualify for close to where they live and work. So what are the new changes coming into effect by December 31st, 2013 and how will they affect your borrowing and purchasing power? The changes fall into three categories which are focused on your debt to income ratios and this will determine how much of a mortgage you qualify for; 1. Debt: The payment that must be considered when calculating how much you qualify for is now a minimum of 3% of the outstanding balance on all unsecured lines of credit and credit cards that you have. Even if you have a lower minimum monthly payment required by the creditor, this will no longer be used. For secured lines of credit that are registered against real estate, a minimum monthly payment that is to be factored into your qualifying is now the outstanding balance calculated over a 25 year amortization using either the benchmark rate (5.34% as of Sept 12th, 2013) , or the actual interest you are paying. Even though your secured line of credit might only have a minimum payment of interest only, you now have to qualify using a much higher payment. Some lenders are taking this one step further and using the "credit limit" instead of the outstanding balance. How to overcome this challenge; if you pay your entire balance off each month, and can provide confirmation of this, then you will not be impacted by this change. Work with me on your personal household budget so we can create a plan to pay down your existing debt to a point where you qualify for the mortgage you require 2. Guarantors: if you can't qualify for a mortgage on your own, often a guarantor can be added to your application. The guarantor is not on title but is on the mortgage and typically doesn't live in the property with you. The new changes mean that you can no longer use the income of the guarantor to help qualify for the mortgage unless they will be living in the property with you. You will now be required to prove you can afford the property without using your guarantors income as well. How to overcome this challenge: Ensure that you purchase a home and obtain a mortgage that you can actually afford to pay back on your own without any financial contribution from a guarantor. You may have to adjust your wish list a bit, or purchase a more affordable home to get you onto the property ladder. 3. Heating Costs; using about $75 to $100 per month to calculate the cost of heat in your qualifying has been the norm til now. Changes now require that a higher amount than this be used as determined by the lender and will be based on the the purchase price, size of the property and location. How to overcome this challenge: The reality is you are most likely going to be paying more than $100 per month on heat and utilities anyway so ensuring you can afford these bills is a good thing before you buy the home. When you find a property you want to buy, ask the existing home owners for copies of the utility bills over the last twelve months so you can see what it will actually cost to heat your home thru the entire year. Of course, your usage might change from the existing home owners but at least you will have an idea. Again, ensuring you can actually afford to pay the utility bills before you purchase the home is good. These changes, along with recent rising interest rates, are impacting the amount borrowers qualify for which in turn determines the purchase price of a home. So what happens next? Firstly, don't panic as these changes may not impact your particular situation at all. If you are considering either moving and purchasing a bigger home or purchasing your first home, call me for a free consultation to see exactly how these changes may impact your qualifying for a mortgage. There are many strategies we can discuss together to make your dreams of home ownership an affordable reality. Be prepared for these changes so you we can create a clear plan and path to home ownership for you. Kupina Mortgage Team | www.kupinamortgage.com
Wednesday, 4 September 2013
Today's Bank of Canada Announcement
As you know, your variable rate mortgage, line of credit and/or student loans are all based on the Prime Rate and here is your personal update from me on the recent Bank of Canada announcement on changes to their Overnight Rate which in most cases impacts your Prime Rate. At 10:00 am EST, Wednesday September 4th, 2013, the Bank of Canada again did what we expected them to do … they continued to maintain their overnight rate. What this means to you is that once again the prime rate on your mortgage, line of credit or student loan will not change and remains at 3.00%... a recurring theme as you can tell. This of course is fabulous news but as always, I like to remind you to make the most of the low payments you still have as the rate will increase in the future. If you haven't done so already, give me a call and we can chat about helping you get set up with a great GIC, Tax Free Savings Account, or Retirement Savings Plan as your payments continue to remain low. Maybe you are thinking of saving for a special occasion or expect a large expenditure in the near future (car, college/university, cottage or investment property purchase), and would like to chat about some budgeting and saving strategies – let me know as I would be happy to assist. Here is an excerpt of the announcement from the Bank of Canada and what they had to say about their decision: "The global economy continues to expand broadly as expected, but its dynamic has moderated. In the US, the process of normalization of long-term interest rates has begun in the context of stronger private domestic demand. Recent data, however, point to slightly less momentum overall than anticipated. In Europe, there are early signs of a recovery, and Japan's situation remains promising. In a number of emerging market economies, financial volatility has increased, adding uncertainty to growth prospects, although China continues to grow at a solid pace. Commodity prices have been relatively stable, with geopolitical stresses putting some upward pressure on global oil prices. Uncertain global economic conditions appear to be delaying the anticipated rotation of demand in Canada towards exports and investment. While the housing sector has been slightly stronger than anticipated, household credit growth has continued to slow and mortgage interest rates are higher" Based on this news and the continued subdued inflation, the Bank does not expect to increase their rate in the foreseeable future with any change most likely to occur well into 2014! Remember, that any increase to the prime rate since 1992 has only been by 0.25% at any ONE time, so you won't see a large significant increase all at once. Fixed rates have gone as the bond market has rallied over the last few weeks, at around 3.49% to 3.69% for a five year fixed term. Based on this recent announcement, and the anticipation that the prime rate will still remain low for a while now, unless you feel otherwise, I'd recommend that you remain with your current variable rate product as the interest is lower than a fixed term rate right now. However, if having a fixed payment is important to you, call me so I can calculate what your new payment would look like and also if it is suitable for you. The next announcement on any change to the prime rate is October 23rd, 2013 at which time I'll be in touch again. I wonder if I can ask a favour – despite rates going up a little, they are still very low and it is a great time for home owners that have significant high interest credit card or other debt to consider their options for refinancing. If you know of someone that is looking for advice on their mortgage options and strategies on how to save unnecessary interest, would you mind passing my contact information on to them – this is very much appreciated. Kupina Mortgage Team | www.kupinamortgage.com
Wednesday, 28 August 2013
Tax Advantages of being Self-Employed
If you're looking for a way to accelerate your savings so you can achieve financial independence more quickly, consider self-employment. The safest way to start is by earning self-employed income on the side while keeping your current full-time job. But regardless of whether you're self-employed part-time or full-time, you can benefit from many tax-deductible business expenses:
- *Home Office. Calculate the portion of your home that you use for self-employed income, then deduct that percentage of rent or mortgage payments, utilities, home insurance, property tax and home maintenance.
- *Business Entertainment. Deduct 50% of the cost of meals or events that involve business discussions.
- *Communications. Calculate the portion of phone, cellphone and Internet that are for business, then deduct that percentage of monthly bills.
- *Transportation. Keep track of how much of your vehicle's mileage relates to business, then deduct that percentage of costs for gas, maintenance, insurance, etc.
- *Subscriptions. Deduct the cost of magazines, newspapers, websites and cable channels related to your business.
- *Travel. Deduct business travel costs such as airfare, subway tickets, hotels and en route meals.
- *Continuing Education. Deduct the cost of courses that make you more effective in your business.
How recent CMHC changes affect Canadians
Over the past few years, the Canadian government has been taking several steps to encourage Canadians to reduce their outstanding debt. The main way the government's been doing this is by restricting mortgage availability and making mortgages more expensive. In August, CMHC announced a new policy which reflects the government's goal to reduce household debt. Unfortunately, this latest change may cause mortgage rates to rise yet again. Here's how this change came about. Earlier this year, Ottawa announced it was limiting the amount of mortgage-backed securities it would guarantee in 2013 to $85 billion. Mortgage-backed securities are pools of mortgages that lenders sell to investors. Since mortgage-backed securities are insured by CMHC, investors are willing to accept a lower rate of return, and lenders can pass on this lower rate to consumers in the form of lower mortgage rates. Canadians are so hungry for low mortgage rates, by the end of July lenders had already used up $66 billion of the $85 billion annual limit on mortgage-backed securities. This means lenders have to get through the rest of the year on a much reduced volume of low-cost lending funds. To make sure the remaining funds are shared equitably, CMHC is limiting each lender to $350 million worth of mortgage-backed securities per month. This means lenders suddenly have far less low-cost mortgage funds available to pass on to consumers. The good news for Canadians is that taxpayers are guaranteeing fewer mortgages and therefore exposed to less risk. But the bad news for homebuyers and people refinancing their mortgages is that longer-term mortgage rates are likely to start creeping up. If you're in the market for a mortgage or refinancing, give me a call. As a mortgage broker, I have access to lenders who are less likely to be affected by this latest change (such as credit unions), and I can provide you with professional advice to help make sure you and your family enjoy the most affordable financing possible. Kupina Mortgage Team | www.kupinamortgage.com
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