31 May

9 Reasons People Break Their Mortgage

General

Posted by: Tyler Cowle

Did you know, approximately 60 percent of people break their mortgage before their mortgage term matures? While this is not necessarily avoidable, most homeowners are blissfully unaware of the penalties that can be incurred when you break your mortgage contract – and sometimes, these penalties can be painfully expensive.

Below are some of the most common reasons that individuals break their mortgage. Being aware of these might help you avoid them (and those troublesome penalties), or at least help you plan ahead!

Sale and purchase of a new home

If you already know that you will be looking at moving within the next 5 years, it is important to consider a portable mortgage. Not all mortgages are portable, so if this is a possibility in your near future, it is best to seek out a mortgage product that allows this. However, be aware that some lenders may purposefully provide lower interest rates on non-portable mortgages but don’t be fooled. Knowing your future plans will help you avoid expensive penalties from having to move your mortgage.

Important Note: Whenever a mortgage is ported, the borrower will need to re-qualify under current rules to ensure you can afford the “ported” mortgage based on your income and the necessary qualifications.

To utilize equity

Another reason to break your mortgage is to obtain the valuable equity you have built up over the years. In some areas, such as Toronto and Vancouver, homeowners have seen a huge increase in their home values. Taking out equity can help individuals with paying off debt, expand their investment portfolio, buy a second home, help out elderly parents or send their kids to college.

This is best done when your mortgage is at the end of its term, but if you cannot wait, be sure you are aware of the penalties associated with your mortgage contract.

To pay off debt

Life happens and so can debt. If you have accumulated multiple credit cards and other debt (car loan, personal loan, etc.), rolling these into your mortgage can help you pay them off over a longer period of time at a much lower interest rate than credit cards. In addition, it is much easier to manage a single monthly payment than half a dozen! When you are no longer paying the high interest rates on credit cards, it can provide the opportunity to get your finances in order.

Again, be aware that if you do this during your mortgage term, the penalties could be steep and you won’t end up further ahead. It is best to plan to consolidate debt and organize your finances when your mortgage term is up and you are able to renew and renegotiate.

Cohabitation, marriage and/or children

As we grow up, our life changes. Perhaps you have a partner you have been with a long time, and now you’ve decided to move in together. If you both own a home and cannot afford to keep two, or if neither has a rental clause, then you will need to sell one of the homes which could break the mortgage.

Divorce or separation

A large number of Canadian marriages are expected to end in divorce. Unfortunately, when couples separate it can mean breaking the mortgage to divide the equity in the home. In cases where one partner wants to buy the other out, they will need to refinance the home. Both of these break the mortgage, so be aware of the penalties which should be paid out of any sale profit before the funds are split.

Major life events

There are some cases where things happen unexpectedly and out of our control, including: illness, unemployment, death of a partner or someone on the title. These circumstances may result in the home having to be refinanced, or even sold, which could come with penalties for breaking the mortgage.

Removing someone from title

Did you know that roughly 20% of parents help their children purchase a home? Often in these situations, the parents remain on the title. Once their son or daughter is financially stable, secure and can qualify on their own, then it is time to remove the parents from the title.

Some lenders will allow parents to be removed from title with an administration and legal fees. However, other lenders may say that changing the people on Title equates to breaking your mortgage resulting in penalties. If you are buying a home for your child and will be on the deed, it is a good idea to see what the mortgage terms state about removing someone from title to help avoid future costs.

To get a lower interest rate

Another reason for breaking your mortgage could be to obtain a lower interest rate. Perhaps interest rates have plummeted since you bought your home and you want to be able to put more down on the principle, versus paying high interest rates. The first step before proceeding in this case is to work with me to crunch the numbers to see if it’s worthwhile to break your mortgage for the lower interest rate – especially if you might incur penalties along the way.

Pay off the mortgage

Wahoo!!! You’ve won the lottery, got an inheritance, scored the world’s best job or had some other windfall of cash leaving you with the ability to pay off your mortgage early. While it may be tempting to use a windfall for an expensive trip, paying off your mortgage today will save you THOUSANDS in the long run – enough for 10 vacations! With a good mortgage, you should be able to pay it off in 5 years, thereby avoiding penalties but it is always good to confirm.

Some of these reasons are avoidable, others are not. Unfortunately, life happens. That’s why it is best to seek the advice of an expert. I want to be part of your journey and help you get the best mortgage for YOU.

Published by the DLC Marketing Team!

2 Mar

When the Future Becomes the Present.

Money

Posted by: Tyler Cowle

Thinking about retirement before it happens is just common sense. But what questions should you be asking yourself? While seeking the advice of a professional like a retirement advisor can be helpful, there are a few questions to start thinking about as you begin to plan.

Deciding early what your wants and priorities will be in your golden years will determine the steps you need to take now. Will travel be more important to you than having a house big enough for the whole family to visit? Will you want to live simply and not have several cars and a large house? Of course, wants and desires will change over the years, but having a set plan to begin with is a good idea.

What are your liabilities, income, and expenses? These will be considered when planning your retirement. You need to identify how much money you will need and where it will have to come from.

It is important to identify all possible income sources that will be available to you on the day you retire. Those could include pensions, RRSPs, savings accounts, government benefits, investment property you own, and your home. Keep in mind you don’t want to rely on the Canadian Pension Plan (CPP). The average payout is $20,000 or around $1,300, and is taxable.

If you think you’ve done everything right, life can bring surprises.

DID YOU KNOW…

About 20% of retirees are found to be still paying for mortgages, while 66% are carrying credit card debt.

COMMON FINANCIAL WOES THAT CAN PREVENT RELAXING RETIREMENT

Had to retire early due to a health issue.

A heart attack or a bad back or hip can force people into early retirement. It doesn’t even have to happen to you…it could happen to a spouse and have the same devastating effect. There are a number of health reasons that could keep someone from continuing to work. Don’t rely on disability from the government to cover all your expenses. Make sure you are paying into a RRSP or other investment from an early age so that unexpected illnesses won’t keep you from the retirement you deserve.

Still had unsecured debt.

If you are not aware of your credit card balances, you just might carry that debt into your retirement where you weren’t counting on it still being an expense. It might not have even been a frivolous vacation or an out-of-control spending habit. It’s just the longer you have credit, the more the credit companies will throw at you, so it is best to pay off your balances every month as often as you can.

Still owed on a house and/or investment properties.

Again, retirement can sneak up on you or be forced upon you. When investing in property or managing the mortgage on your primary residence, keep this in mind. A 2nd mortgage might sound fine to pay for an elaborate vacation or to fund a grandkid’s wedding, but you will have to pay it back eventually.

Spent more money before retiring or after retiring than you should have.

People get excited at the prospect of not having to go to work anymore. They see a healthy sum of money in their retirement portfolio and decide they’ve earned a little fun. New cars, expensive vacations, purchasing vacation homes, etc. all will hit your retirement money in a big way. Stick to your retirement plan so your retirement can work for you.

Published by the DLC Marketing Team

24 Jan

Improving Your Financial Direction!

Mortgage Tips

Posted by: Tyler Cowle

Make 2022 the year of finance by improving your financial direction from the start! Even if you are living paycheck-to-paycheck, a few changes to the way you spend and look at money can make all the difference. It’s never too late to start again and reverse course! Here are a few simple ideas to get you started:

  • Create a Budget: In order to stop living paycheck-to-paycheck , you need to know where that paycheck is going. Creating a budget is simple with Google docs, or look into other online tools and sites to get started.
  • Pretend You Earn Less Than You Do: Give yourself a cut in pay. The goal is to put 10% in savings from each paycheck into your savings account. The easiest way is to do an automatic direct transfer from your chequing account to your savings every pay period.
  • Pay Down Debt: If you have a lot of credit card or unsecured debt, try paying the minimum on all but one of them and aggressively pay down that one card. Once it’s paid off, attack the next one. If you’re so deep in debt that you can’t fight your way out, consider consulting with myself or your local mortgage broker about your debt consolidation options and if your mortgage can be used to help you clean the state. They will be able to review your debt and possibly recommend a way to consolidate it into one simple payment with a single point of interest charges.
  • Build an Emergency Fund: Once you have your budget in place, review it and break it down into non-discretionary expenses (rent, groceries, utilities, etc.) and discretionary expenses (eating out, entertainment, clothes, etc.). See where you could cut down on discretionary spending and put that money towards your emergency fund. Even starting with just a little amount is great and helps you build the habit of saving.
  • Don’t Forget Your Future: Putting at least 3% of your paycheck into a retirement fund is a great idea, or maybe when you get your first raise instead of thinking of it as free money, simply put it into a fund and forget about it. You’ll be glad it’s there when you need it in the future.
  • Consider Downsizing: It may be time to consider a lifestyle change. Consider moving to a smaller place. Get rid of that cost of going to that expensive gym with a trip to the local park. Think about if you really need that brand new car or if a used one would work just as well.

Contact me for more great advice like this!!!

 

15 Dec

Millennials vs Gen X’ers.

First Time Homebuyer

Posted by: Tyler Cowle

Are millennials better or worse off than Gen-Xers at the same age?

Millennials are now the largest generation of people in Canada. They’re the most educated and diverse generation, but they face unique challenges…

  1. Millennials had higher after-tax household incomes than young Gen-Xers. Median after-tax household income between 25 and 34 years old
    • Millennials in 2016 $66,500
    • Young Gen-Xers in 1999 $51,000
  2. Millennials had higher assets and net worth than young Gen-Xers, but they also carried more debt.
    • Homeownership, living in Toronto or Vancouver, and having a higher education were three factors associated with higher net worth.
  3. Millennials are relatively more indebted… Debt-to-after-tax income ratio
    • 216% Millennials in 2016
    • 125% Young Gen-Xers in 1999
  4. Though millennials are entering the housing market at similar rates as previous younger generations, they are taking on larger mortgages.
  • Though their median net worth is higher, there are greater differences in economic well-being among millennials. Millennials in the top 10% held 55% of all total net worth accumulated by their generation.

Notes: Unless otherwise notes, millennials represent those between 25 and 34 years old in 2016, and young Gen X-ers indicate those between 25 and 34 years old in 1999.

Results are presented in 2016 current dollars and adjusted for inflation to allow a comparison over time. Statistics provided refer to the age and generation of the major income earner in the household or family.

ASSETS VS. LIABILITIES

Assets are what you own:

  • Cash
  • The value of your residence
  • Artwork
  • Automobile
  • Checking account
  • Collectibles
  • Electronics
  • Jewelry
  • Investment accounts
  • Retirement account
  • Savings account

Liabilities are what you owe:

  • Unsecured debts
  • Car loan
  • Mortgage
  • Student loans
  • Accounts payable
  • Income taxes payable
  • Bills payable
  • Bank account overdrafts
  • Accrued expenses
  • Short-term loans

Published by the DLC Marketing Team!

8 Sep

How to Teach Your Kids About Money.

Money

Posted by: Tyler Cowle

“You’re teaching them way too young,” joked the man next to me and my three girls at the bank machine; clearly he assumed we were taking out cash, and thought it would be funny to tease me about that. “No, man,” I teased back warmly; “I teach my girls to make deposits.” He laughed, I laughed, and then I invisibly high-fived myself for actually teaching my kids how to do just this. Because it’s a skill, isn’t it, to be confident and capable in money and its management.

And too often, the learning curve feels steep even for ourselves, let alone to share the key messages with our kids.

The thing is, that teaching our kids to use and value money for the powerful tool that it is, is one of the most empowering gifts we can give them, from even an early age. How do you do it? It’s so much easier than you think; even if you grew up with a distorted view or approach to wealth and personal finance, here are our top five teaching tools for parents and kids to learn to speak the language of money, and develop a healthy attitude towards money straight away.

“It’s not too late to start right now!”

1. ALLOWANCE IS A TEACHING TOOL

Use it. Allowance is a fantastic hands-on learning tool to teach the actual process of money management. (Don’t give your kids money for chores – chores are a part of family life, and it is an expectation that they participate in them.) Give allowance because it shows your kids how to be responsible for their own saving, spending, and sharing, and give them the wide berth to make bad decisions in spending it; better to learn the lesson that the glow in the dark Beanie Boo was a bust as a seven year old, than to realize that the car they bought at 21 was a lemon.

Get them familiar with the pattern of reserving part of their money to share with others, to cultivate a spirit of generosity, and to reserve part for saving – this is crucial in developing a pattern and attitude of “I don’t spend all my money once I get it.”

2. MONEY IS A LANGUAGE

Speak it. If you are someone who grew up with a bitter taste in your mouth about money, more than likely there were messages and feelings of shame associated with it; stop that cycle with your kids, and open up the conversation in all of the age appropriate ways. Talk about saving for the mini Golden Doodle you all want as a family pet. Talk about the $25 budget at the toy store for their friend’s birthday present. Talk about the cost difference between a dance class and the competitive dance team. And have each of these conversations in a frank and open way, not of guilt or shame, just in a way that draws attention and awareness to the fact that there is an energetic cost to everything we do.

Are you into stocks? Show them bits of your portfolio, especially the visual charts, and let them in on the secret pattern that over time, it always goes up. Each of these micro-conversations plants an essential seed that you can continue to grow over the course of your child’s lifetime.

3. THE BANK IS AN EXPERIENCE

Take them. Chances are, unless you’re keeping your cash in a jar under your bed, the bank is the hub of your personal financial transactions. Include your kids in this area of daily life: let them not only “press the buttons” at the ATM, but take them to the teller, get them familiar with the processes behind daily banking, let them count cash when it comes out, and let them fill deposit envelopes with bills and cheques. Teach them to look at the balance on the receipt and say “thank you” for what’s there.

Let them know how grateful you are to have this wonderful tool in your life that enables a whole lot of freedom, and how it got there.

4. THE IMPORTANCE OF PAYING YOUR BILLS

And pay them together. There is something deliciously analog about getting a paper bill in the mail. I kid you not, when my girls see a bill in the mailbox, they actually say “Yessss! Bills are here!” Why? Because we have carved out a ritual in which we sit together one on one and pay our bills together. Show your kids to find the vendor, the amount due, and to circle that amount and write “Paid on [date].” As they gather that info from the bill, you can enter it into your own online payment system.

Not only is this much needed and celebrated time together, but it’s another conversation about personal finance: why do we pay a hydro bill? Why is this utility bill higher in the winter? Can you imagine a world without internet – let’s happily pay that one! These conversations draw kids’ awareness to the daily happenings of life, and connect them to their own resources.

If your attitude towards bills is “man, I’m so grateful to have a house that is heated in the winter and cool in the summer, with a one click connection to anywhere the world,” suddenly the entire experience is a joy for you, too. And where there is gratitude and joy, there is the cultivation of more gratitude and joy.

5. SOME THINGS ARE WORTH THE WAIT

So wait, and teach patience and a mentality of “earned, not given.” One of the greatest parenting challenges our generation faces is exactly this: how on earth do we teach patience and process while we live in an instant, on-demand world? Well, we simply teach it.

Just because we can access something instantly doesn’t mean we should; you know from your own experience how sweet a victory it is when you buy something with your own money, or hold something in your hands you know is irreplaceable. These feelings are part of healthy brain development, and in their absence we cultivate a near constant dopamine rush of instant gratification that becomes stronger, and harder to fulfill over time. It’s ok to say “no” to things, to hold out, and to appreciate the consumption of less, not more.

Children thrive when they feel like they are a real part of our family life, and respected enough to be included. Having these grown up conversations distilled into a child friendly way shows your kids that you have confidence in their abilities to handle it, and that they are valued members of your tribe. And in the same breath, you are teaching them an incredibly valuable life skill they will continue to hone and use over the course of their lifetime.

Published by the DLC Marketing Team!