Category Archives: Personal Finance

How to Save For a Down Payment

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Mortgage Savings Sign

Flickr: 68751915@N05

The following article is a guest post by Kyle Grooms, a financial security advisor in Toronto, and looks at tactical ways to use TFSAs and RRSPs to save for a down payment.

A common thread that ties recent generations is the desire to own a home. I feel this is a safe statement, however antidotal it might sound, considering conversations with grandparents, parents and peers. As a financial advisor working with young professionals, this seems to be their number one short-term financial goal. This article will focus on a strategy that will look to provide value and flexibility in people’s approach to saving for their first home.

After a review of some the rules and regulations associated with the First-Time Home Buyers’ Plan (HBP), some people may come to the conclusion that it is complicated and rigid in character. I think the HBP is a great way to save for the purchase of a new home for the average Canadian; however, I would not disagree with the above assessment of the program. A recent study by Canada Revenue Agency (CRA) indicated that close to 50 per cent of people do not replenish their RRSPs after withdrawing for a home via the HBP. This is likely due to two reasons: cash flow and not having the proper advice. Unfortunately, the result of not replenishing RRSPs defeats the original purpose of utilizing the HBP. Continue reading →

Canadians are carrying mortgage debt into their 70s

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According to a recent RBC poll, a disturbing mortgage trend was revealed, that one third of Canadian mortgage owners will carry that debt into their 70s. Specifically, 33% of these Canadians aged 55 and older still have 16+ years left on their mortgage term! This marks a contrast with the 72% of Canadians that say they hope to be mortgage-free by the time they reach the retirement age of 65. Somewhere along the line, Canadians aren’t planning their retirement smart enough or aren’t taking advantage of the necessary steps to reduce mortgage debt.

Canadian Mortgage Debt

With regard to Canadians aged 18-34, more than a quarter project themselves to be mortgage-free by the of age 45. That’s two full decades before the retirement age of 65. Even more shocking is that one in ten predict to be mortgage-free by 35! Is this a product of a younger generation that is financially smarter and better at forecasting and planning? Or is it a symptom of naïve dreaming and unrealistic expectations? We’ll have to check back with RBC after a few years to confirm the results as time reveals all things.

On the positive side, 41% of Canadian homeowners are mortgage-free, representing the highest level it has been in 5 years. This is in part with the majority of baby boomers that have been at or near the end of their mortgages over the past year.

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How to recover some of your wedding spending for a down payment

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Are you newly married and wondering how you’re ever going to save enough to cover the 5% minimum down payment (approximately $18K on the average home in Canada), especially with wedding bills piling up?

We chatted with our friends at SmartBrideBoutique.com, a premium wedding classifieds website where brides can buy, sell and save on everything wedding, from new and used wedding dresses and bridesmaid dresses to wedding décor and accessories.  Their number one piece of advice is to consider selling your wedding dress (and other wedding items) online to recover some money from your recent wedding.

Used Vera Wang WV351011 Wedding Dress→ Vera Wang VW351011 wedding dress available for purchase at SmartBride Boutique

The average cost of a wedding dress in Canada is about $1150, with many brides spending upwards of $2000 +.   If you decide to sell your wedding dress after the wedding, you can recover about 50% of your cost.  Depending on how much you paid for your dress, this could go a long way in providing a nice little nest egg for your first home purchase.

Beyond that, selling your wedding dress, plus other wedding accessories (veils, jewelry) and wedding décor (vases, table runners) online, lets you:

  • Clear up space to make room for shared closets
  • Love the Earth! Recycling wedding items reduces carbon emissions from shipping
  • Get karma points by helping another bride save on her wedding

Sound like something you’d be interested in?  Here are 7 tips to help you sell your wedding dress:

1.  There’s no time like the present!

Post your dress for sale as soon after your wedding as possible. You’re not going to wear it again, so why leave it hanging in your closet?  Used dresses continue to hold their resale value for roughly 2 – 3 years after they’re purchased and worn (depending on the style) but generally sell for the most money within the first year when they are most current.

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Should you buy your kids their first home?

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With the new university year underway, parents and kids alike are facing overwhelming rent costs.  Not many students have the option of living at home and housing accommodation doesn’t come cheap these days.

Consider this option:  Parents play ‘landlord’ to their children.

According to TD Canada Trust, one in every ten Canadians is considering this possibility; this number is up from 5% of Canadians just a year ago[i].

However, there can be severe tax and estate-planning repercussions with this route[ii] .

  1. If you purchase a second property in your own name and then rent it out to your child, this second home won’t meet the requirements of the tax-free capital gain because it won’t qualify as a primary residence.
  2. An alternative is to present the cash as a gift to your child. Then they can buy the property in their own name.
  3. You can lend your child the money by setting up an interest – free mortgage.

Continue reading →

Comment on our Experts’ Guide to Home Hunting and WIN AIR MILES!

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 House HuntMost experts will agree that you should decide what you want in a home before you start your search. The second thing experts will agree on is that your wants will trade off between three important, and often conflicting, factors: location, style and cost.

For example, you may decide you want a detached family home in an urban neighbourhood for $300,000. However, you may have to settle for two out of three and look to the suburbs for the style of house you require within your price range.

Location, location, location

Of course, you want to ensure you can access amenities that serve your current lifestyle, but trusted Toronto condo realtor and host of Inside Toronto Real Estate Brian Persaud warns “Location is an investment too.” Neighbourhoods evolve and you should investigate an area’s urban progression as well as zoning by-laws.

The types of things you want to evaluate in your current and future location are:

●      Transportation

●      Work

●      Doctor/dentist

●      Places of worship

●      Shopping

●      Police department

●      Hospital

●      Schools

●      Fire department

●      Recreation

Eugene Mezini, a Toronto realtor, also says Walkscore, an application that rates an address’s ‘walkability’ is something he lists with every property as many of his customers value this.

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Top 10 Money Saving Apps for your Smartphone

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Purchasing a Smartphone can leave a dent in your monthly budget. But, consider it an investment. Coupled with new apps that are being developed, your Smartphone may actually help you plan and budget for savings goals in future. The term “App” is short for application, which is a software tool that can be downloaded from the internet right onto your handheld device.

Here at RateHub we like saving money, so we did some research to find the top 10 money-saving apps.  

1.       Mint  

Money Saving AppsMoney Saving Apps

This app claims to be the “can`t-live-without-it” tool to keep track of your personal finances. It has been listed on TIME Magazine`s “50 Best iPhone Apps of 2011” and been named “Best Finance App” at the 1st Annual App Awards. Apart from having impressive accolades, this app genuinely does seem to be the package deal.

The app is a budgeting tool that allows you to access your updated account information and budgets, rendering it easier to make those crucial “where should I eat tonight?” decisions. Is it hot dogs or lobster?

An added advantage is that you can enter deposits or transactions when they occur and see immediately your available funds and credit balances. For those of you who like to visualize your finances, Mint provides graphs that make it easier to spot trends.

Mint allows you to track your investments, monitor your goals, find savings and receive reminder alerts. Also, the app is password protected.  This app covers all the bases.

Available for: iPhone, Android

Cost: Free

2.    Coupone Sherpa

Money Saving AppsThis is a great app for coupon-clipping junkies. The Coupon Sherpa is “the most trusted authority for coupons online”.

The app makes locating and using coupons convenient and accessible. You can search over 5,000 available coupons by store name, category or location. You can also email coupons to friends and family.

Although some stores are finicky and might not accept coupons from a phone, Coupon Sherpa has an easy print feature so that you can have a hard copy as well.

With Coupon Sherpa, you can flag businesses as favorites, so if you shop at certain places often, those specific coupons make themselves available to you immediately. It’s nice when people and apps – remember what you like.

Available for: iPhone

Cost: Free
Continue reading →

Best Money Saving Tips

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Recently Ratehub.ca held a “Money Saving” contest on Facebook, where fans had the chance to win prizes by sharing their best money saving tip. The contest was a success with three runner-up winners taking home $15 iTunes gift cards and the grand prize winner walking away with a Sony Blu-Ray player! Now that the dust has settled, we’ve had time to look at the entries and analyze the data. The contest was fairly open-ended so we received all kinds of great advice from people.  However, we discovered most of the data fell under eight categories. They are as follows:

RE-USE

This included using the Freecycle network, buying used, shopping in thrift stores, garage sales, and utilizing your local library.

“Dryer Sheets! Cut them in half, do `em all at once, bit of a nuisance but worth it because they last TWICE as long, ie: you aren`t having to buy another box anywhere near as quickly. You will not notice any difference by having a 1/2 sheet in the dryer load as opposed to a full sheet ;-) ” – Debra Anderson

“Use the library. The latest books, DVDs and CDs are all available.” – Nancy J. Montgomery

BARGAIN HUNTING/SHOPPING AROUND

Most comments were centered around haggling, shopping in more than one location, and delaying “want” purchases.

“Don`t be afraid to ask for a discount – the worst that can happen is that you`ll get refused.” – Francine Fogel

SAVINGS

These tips involved utilizing smart withdrawals and rewarding savings accounts

“Have savings come out the same day you get paid – that way it`s like you never had the money to begin with!”- Tonya Wagenaar

SELF-CONTROL/BUDGET

This type of comment was the most popular.

“Write a list of savings goals you want to achieve, and then create a plan to get you there. Putting it down on paper will make it more real, and will increase the chances of you succeeding.” Give Me My Five Bucks Back

COUPONS

This is pretty self-explanatory.

“Extreme couponing !!!!! aww yea” – Kate Thomson
Continue reading →