Finding Money For Closing Costs!

Sabeena Bubber • Aug 08, 2016

If you are planning on purchasing a property in the next couple of years, here is a really good video that will explain how you can find some extra money to put away into savings without impacting your lifestyle. Maybe you can even find enough money to cover the legal fees of buying your next home, that would be a nice challenge.

Transcript

Hey guys welcome to Mostly Money. I hope you like what I've done with the place, and if not keep your comments to yourself.

So this week, I thought I'd talk about how you can find the money to save in the first place because I think a lot of people are on board with the idea that saving money is in fact a good idea but sometimes they struggle with finding that money to put away. So here's one quick idea that I think anyone can put into practice, convert automatic expenses into automatic savings. Here's what I mean by that, when it comes to automatic savings it works well for people because they forget how much they've been saving automatically but it's the same with your expenses after a while you forget all the expenses that you've committed to. So there is the potential that you could reduce or eliminate some of these regular expenses that you haven't looked at in a long time.

Here's what you do, simply take a look at all your credit card statements and bank statements for the last two months. Go over it line by line and take a look at all the regular recurring automatic expenses and write them down. I'm talking Netflix subscriptions, TV packages, internet service, insurance premiums, subscriptions you have to magazines and newspapers anything that occurs on a regular basis on those statements. Write each of those items down, next write down how much you're spending per month for each of these items. The next thing you're going to do is take each of these expenses and figure out if there's any way to reduce or eliminate them. For example, Netflix subscriptions have three tiers: basic, standard, and premium .The premium services $11.99 per month and it gives you access to stream in ultra HD but if you don't even have an ultra HD capable device you're paying for something you don't even need. Or maybe you can settle for regular HD and if you do that you can downgrade to the middle tier, the standard package which is $9.99 per month so that's only $2 in savings but bear with me. Maybe it's been a while since you first signed up for streaming service and back then you thought there's no way i can get rid of cable just yet but fast forward two years and all you do now is Netflix and chill. Now is a great time to see if maybe you can reduce your cable package and easily save $30 per month or more.

When was the last time you looked at bank fees? If you haven't looked at your banking package in the last couple of years, I'm going to bet it's pretty easy to see that at least $5 per month. If you go through this simple exercise for all your regularly recurring expenses, I don't think it would be a surprise to find that a lot of people can find $50 per month in savings, but now here's the trick. Whatever savings you find you have to immediately commit to an automatic savings plan, for the exact same amount so if you find $50 in savings, you actually have to save the savings and put that $50 away into a savings account. You're not going to notice a big change to your cash flow, but after 12 months of saving $50 per month that's going to add up to $600! If you want to find a $1000 in annual savings you need to find $83.33 per month in expenses to cut out. The point is if you take a few hours to go through this exercise you can make a big positive change to your finances without having a big change to your lifestyle.

So to recap:

Make a list of all your automatic regularly recurring expenses.
For each of those items figure out if you can reduce or eliminate them.
Most importantly, whatever savings you find you have to direct either into a high-interest savings account or towards accelerating your high interest debt payments and that's it!

If you've done this exercise before or you were inspired to do because you watch this video I would love to see what your results were. Let us know in the comments section down below how much money you freed up and thanks for watching!

Hey guys, thanks for watching Mostly Money. I hope you enjoyed today's show don't forget to subscribe to my channel by clicking on the button in the bottom right hand corner of your screen a
little thing that says Subscribe. There are lots of videos to explore my channel like this one. So, if you want to learn more about money and personal finance in a fun way check those out! If you have any questions for me you can reach out to me on Twitter at Preet Banerjee or you can leave your questions and comments down below in the comments section. That's it for today see you next time.

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Understanding a Spousal Buyout Mortgage

By Sabeena Bubber • 01 May, 2024

If you’re going through or considering a divorce or separation, you might not be aware that there are mortgage products designed to allow you to refinance your property and buy out your ex-spouse. If you’re like most people, your property is your most significant asset and is where most of your equity is tied up. If this is the case, it’s possible to structure a new mortgage that allows you to purchase the property from your ex-spouse for up to 95% of the property’s value. Alternatively, if your ex-spouse wants to keep the property, they can buy you out using the same program. It’s called the spousal buyout program. Here are some of the common questions people have about the program. Is a finalized separation agreement required? Yes. To qualify, you’ll need to provide the lender with a copy of the signed separation agreement, which clearly outlines asset allocation. Can the net proceeds be used for home renovations or pay off loans? No. The net proceeds can only buy out the other owner’s share of equity and/or pay off joint debt as explicitly agreed upon in the finalized separation agreement. What is the maximum amount that you can access through the program? The maximum equity you can withdraw is the amount agreed upon in the separation agreement to buy out the other owner’s share of the property and/or retire joint debts (if any), not exceeding 95% loan to value. What is the maximum permitted loan to value? The maximum loan to value is the lesser of 95% or the remaining mortgage + the equity required to buy out other owner and/or pay off joint debt (which, in some cases, can total < 95% LTV. The property must be the primary owner-occupied residence. Do all parties have to be on title? Yes. All parties to the transaction have to be current registered owners on title. Your solicitor will be required to confirm this with a title search. Do the parties have to be a married or common-law couple? No. Not only will the spousal buyout program support married and common-law couples who are divorcing or separating, but it’s also designed for friends or siblings who need an exit from a mortgage. The lender can consider this on an exception basis with insurer approval. In this case, as there won’t be a separation agreement, a standard clause will need to be included in the purchase contract to outline the buyout. Is a full appraisal required? Yes. When considering this type of mortgage, a physical appraisal of the property is required as part of the necessary documents to finalize the transaction. While this is a good start to answering some of the questions you might have about getting a mortgage to help you through a marital breakdown, it’s certainly not comprehensive. When you work with an independent mortgage professional, not only do you get a choice between lenders and considerably more mortgage options, but you get the unbiased mortgage advice to ensure you understand all your options and get the right mortgage for you. Please connect anytime; it would be a pleasure to discuss your needs directly and provide you with options to help you secure the best mortgage financing available. Also, please be assured that all communication will be held in the strictest of confidence.

Why Downpayment Source Matters

By Sabeena Bubber • 24 Apr, 2024

If you’re looking to purchase a property, although you might not think it matters too much, the source of your downpayment means a great deal to the lender. Let’s discuss the lender requirements, what your downpayment tells the lender about your financial situation, a how downpayment helps establish the mortgage loan to value. Anti-money laundering Lenders care about your downpayment source because, legally, they have to. To prevent money laundering, lenders have to document the source of the downpayment on every home purchase. Acceptable forms of downpayment are money from your resources, borrowed funds through an insured program called the FlexDown, or money you receive as a gift from an immediate family member. To prove the funds are from your resources and not laundered money from the proceeds of crime, you’ll be required to provide bank statements showing the money has been in your account for at least 90 days or that you’ve accumulated the funds through payroll deposits or other acceptable means. Now, if you’re borrowing all or part of your downpayment, you’ll need to include the costs of carrying the payments on the borrowed downpayment in your debt service ratios. If you’re the recipient of a gift from a direct family member, you’ll need to provide a signed gift letter indicating that the funds are a true gift and have no schedule for repayment. From there, you’ll need to show the money deposit into your account. Financial suitability Lenders care about the source of the downpayment because it is an indicator that you are financially able to purchase the property. Showing the lender that your downpayment is coming from your resources is the best. This demonstrates that you have positive cash flow and that you’re able to save money and manage your finances in a way that indicates you’ll most likely make your mortgage payments on time. If your downpayment is borrowed or from a gift, there’s a chance that they’ll want to scrutinize the rest of your application more closely. The bigger your downpayment, the better, well, as far as the lender is concerned. The way they see it, there is a direct correlation between how much money you have as equity to the likelihood you will or won’t default on their mortgage. Essentially, the more equity you have, the less likely you will walk away from the mortgage, which lessens their risk. Downpayment establishes the loan to value (LTV) Thirdly, your downpayment establishes the loan to value ratio. The loan to value ratio or LTV is the percentage of the property’s value compared to the mortgage amount. In Canada, a lender cannot lend more than 95% of a property’s value. So, if you’re buying a home for $400k, the lender can lend $380k, and you’re responsible for coming up with 5%, $ 20k in this situation. But you might be asking yourself, how does the source of the downpayment impact LTV? Great question, and to answer this, we have to look at how to establish property value. Simply put, something is worth what someone is willing to pay for it and what someone is willing to sell it for. Of course, within reason, having no external factors coming into play. When dealing with real estate, an appraisal of the property will include comparisons of what other people have agreed to pay for similar properties in the past. You’ll often hear of situations where buyers and sellers try to inflate the sale price to help finalize the transaction artificially. Any scenario where the buyer isn’t coming up with all of the money for the downpayment, independent of the seller, impacts the LTV. All details of a real estate transaction purchase and sale have to be disclosed to the lender. If there’s any money transferring behind the scenes, this impacts the LTV, and the lender won’t proceed with financing. Non-disclosure to the lender is mortgage fraud. So there you have it; hopefully, this provides context to why lenders ask for documents to prove the source of your downpayment. If you’d like to talk about mortgage financing, please connect anytime; it would be a pleasure to work with you.

Understanding the Recent Housing Affordability Measures in Canada

By Sabeena Bubber • 18 Apr, 2024

In recent years, housing affordability has become a significant concern for many Canadians, particularly for first-time homebuyers facing soaring prices and strict mortgage qualification criteria. To address these challenges, the Canadian government has introduced several housing affordability measures. In this blog post, we'll examine these measures and their potential implications for homebuyers. Increased Home Buyer's Plan (HBP) Withdrawal Limit Effective April 16, the Home Buyer's Plan (HBP) withdrawal limit will be raised from $35,000 to $60,000. The HBP allows first-time homebuyers to withdraw funds from their Registered Retirement Savings Plan (RRSP) to use towards a down payment on a home. By increasing the withdrawal limit, the government aims to provide young Canadians with more flexibility in saving for their down payments, recognizing the growing challenges of entering the housing market. Extended Repayment Period for HBP Withdrawals In addition to increasing the withdrawal limit, the government has extended the repayment period for HBP withdrawals. Individuals who made withdrawals between January 1, 2022, and December 31, 2025, will now have five years instead of two to begin repayment. This extension provides borrowers with more time to manage their finances and repay the withdrawn amounts, alleviating some of the immediate financial pressures associated with using RRSP funds for a down payment. 30-Year Mortgage Amortizations for Newly Built Homes Starting August 1, 2024, first-time homebuyers purchasing newly built homes will be eligible for 30-year mortgage amortizations. This change extends the maximum mortgage repayment period from 25 years to 30 years, resulting in lower monthly mortgage payments. By offering longer amortization periods, the government aims to increase affordability and assist homebuyers in managing their housing expenses more effectively. Changes to the Canadian Mortgage Charter The government has also introduced changes to the Canadian Mortgage Charter to provide relief to homeowners facing financial challenges. These changes include early mortgage renewal notifications and permanent amortization relief for eligible homeowners. By implementing these measures, the government seeks to support homeowners in maintaining affordable mortgage payments and mitigating the risk of default during times of financial hardship. The recent housing affordability measures announced by the Canadian government are aimed at addressing the challenges faced by homebuyers in today's market. These measures include increasing withdrawal limits, extending repayment periods, and offering longer mortgage amortizations. The goal is to make homeownership more accessible and affordable for Canadians across the country. As these measures come into effect, it's crucial for homebuyers to stay informed about the changes and their implications. Consulting with a mortgage professional can help individuals explore their options and make informed decisions about their housing finances. If you're interested in learning more about these changes and how they may affect you, please don't hesitate to connect with us. We're here to walk you through the process and help you consider all your options and find the one that makes the most sense for you.