Monday, December 19, 2011
Tuesday, December 13, 2011
Do you need cash for your retirement?
7 Facts You Need to Know
… to help you enjoy a comfortable,
Chances are you’ve been dreaming about this moment throughout your working life—BEING RETIRED and having the time and money to:
But now that you’re over 60, you may have been caught off guard by the expenses associated with retirement, such as property taxes, rising energy and utility expenses, and the overall cost of living which seems to get higher every year. Sure, you have your pension income, but it may not be enough to make ends meet.
Most Canadian seniors have 80% of their assets tied up in their house. But accessing that equity can be difficult. Most banks won’t give you a mortgage because you don’t have enough income to make monthly payments.
So what are your options?
Well, you could downsize and sell your house. But isn’t that where you always dreamed you’d spend your retirement? Leaving the home where you raised your family, put down roots and made lifelong friends would be heart-breaking. Besides, selling and moving can be very expensive once you’ve paid real estate fees, moving expenses, legal fees, etc. There’s got to be a better solution!
You don’t have to leave the family home!
There IS a better solution, and for many seniors it’s a reverse mortgage.
A REVERSE MORTGAGE is a specialized financial product for people 60 and over who own their own home. It lets you stay in your home while benefiting from the value you’ve built up in that property over the years. Compared to a regular mortgage, a reverse mortgage can offer substantial monthly cash savings, so you have all the income you need to live the retirement of your dreams.
As your local mortgage advisor, I can introduce you to all the benefits of a reverse mortgage. However, since I’m not tied to any one lender or type of product, before recommending a reverse mortgage, I’ll do a thorough analysis of your situation, needs and goals. Only then will I make an unbiased recommendation about which product is right for you. In most cases, that will be a reverse mortgage. But I also have access to innovative lines-of-credit and other home lending products which may fit your specific needs even better.
Let’s see if you’re one of the vast majority of Canadian seniors who can benefit from a reverse mortgage. Here are the 7 facts you need to know:
FACT #1: Regular mortgages require you to pay a lender.
If you and your spouse are 60 or older and you own your home as your principal residence, you may be eligible to receive up to 40% of your home’s current appraised value in cash. The specific amount you’ll receive is based on your age, your spouse’s age, the location and type of home you have, and your home's current appraised value. No matter how much you receive, you never have to make monthly principal or interest payments (until you move), so you get the money you need without reducing your cash flow!
FACT #2: There are no income, asset, employment or credit requirements.
Since the amount you receive is secured against your home, qualifying is easy and hassle-free—even if you’re living on a very limited retirement income.
FACT #3: You can receive the money whichever way works best for your lifestyle.
With a reverse mortgage, you can choose a single lump sum payment or ongoing monthly, quarterly, semi-annual or annual income. You can even choose a lump sum to begin with, followed by ongoing advances over time.
FACT #4: A reverse mortgage can be used to clear up all your remaining debts.
Maybe you still have a mortgage remaining on your house and the payments are cutting into your lifestyle. Maybe you have monthly credit card bills piling up. A reverse mortgage can be the ideal solution. In most cases, you can use the funds to eliminate mortgage payments and credit card debts, and still have enough left over so you can enjoy life more and not have to worry about money.
FACT #5: Your income taxes and pension are unaffected.
As a retired person, one of your major concerns is how much you’ll be paying in taxes each year, since that can really affect your cash flow. Fortunately, the money you receive from a reverse mortgage isn’t considered income—even if it’s invested in an account or annuity with monthly withdrawals. This is because the home equity you’re accessing has already been taxed, since you purchased your home with after-tax dollars. Not only don’t you have to pay taxes on your reverse mortgage proceeds, they won’t bump you up into the next tax bracket. And since they’re not considered income, they won’t affect your Old Age Security (OAS) or Guaranteed Income Supplement (GIS) payments.
FACT #6: It’s ALWAYS your home!
You’ll never be asked to move or sell your home to repay your reverse mortgage, as long as you maintain the property and stay up-to-date with property taxes, fire insurance and condominium or maintenance fees. Your equity and estate is fully protected since the reverse mortgage amount can never exceed your home value. Sure, the equity in your home will decrease over the years as you receive payments, but your home’s value will likely increase even more quickly over the same period.
Generally, 99% of homeowners have money left over when their reverse mortgage is finally repaid (when you move or die). On average, the amount left over is 50% of the value of the home when it’s sold.
FACT #7: The interest on your reverse mortgage can sometimes be tax deductible.
If you use the money you receive to make non-registered investments such as GICs and mutual funds, the interest costs on your reverse mortgage can be written off at tax time. This can help offset the taxes you owe on your income, RRIF or RRSP withdrawals. If you’re considering this strategy, I can refer you to a trusted local financial planner.
There you have it—7 compelling reasons why a reverse mortgage may be the right solution for you! Not only will you have all the cash flow and security you need to accomplish your retirement dreams, you’ll continue to live in your own home and own it with much of the equity left intact.
The next step is
If you’re interested in exploring the benefits of a reverse mortgage, I invite you to contact me today at:
(778) 881-0276
As I said, the vast majority of seniors can benefit from a reverse mortgage. However, I wouldn’t be doing my job as an independent mortgage advisor if I didn’t also have other solutions to offer you. Once we’ve discussed your needs and goals, I’ll be able to make a fully informed, entirely unbiased recommendation that’s in your best interest.
For instance, if you simply want money for a vacation or new car, a reverse mortgage can be a very expensive way to get it. If you want the money for investments, keep in mind that the cost of the reverse mortgage may be more than you can safely earn. In cases like these, I may be able to tailor a home equity loan or line of credit to meet your needs in a much more cost-effective manner. The only way to know for sure is to talk to me today!
Monday, November 28, 2011
Monday, November 21, 2011
Friday, November 18, 2011
Thursday, November 17, 2011
Friday, October 14, 2011
Thursday, September 29, 2011
9 secrets to making your home renovation pay for itself!
9 secrets to making your home renovation pay for itself!
Why move to an expensive new house when you can get all the new features you want in your existing home—without any net cost to you!
If your existing home has become outdated, cramped, inefficient, uncomfortable or too expensive to maintain, you may think buying a new house is the only alternative. But selling your existing home and buying again can be more expensive than you think. Factor in realtor fees, moving costs, legal fees, a potentially longer commute and decorating/furnishing expenses—and the price of a new home may be out of reach!
Fortunately, there’s a better solution. Renovating your existing home can provide all the lifestyle enhancements you’re looking for at a fraction of the cost. And if you renovate and refinance strategically, not only can your outlay be minimal, your increased asset value can be HUGE!
Of course, a key part of this renovation strategy is getting the right financial advice. As a mortgage broker, I understand the local home market and have access to the most innovative lending products available. Please consider my 9 Secrets, then contact me for a free consultation.
SECRET #1: Make sure you understand WHY you’re renovating.
Before you go too far, stop for a minute and consider why you’re renovating. Is it to make your home more livable for you and your family? Or is it to make your home more marketable so it will sell at a higher price? Both of these are good reasons to renovate.
But an even better reason to renovate is to achieve BOTH! By making improvements that suit your lifestyle AND add value to your house, you can cover much—if not all—of your renovation expenses, so there’s no net cost to you!
CASE STUDY #1:
Renovation Saves Over $2,120/month and Boosts Property Value By $300,000!
Problem: The client’s home was seriously outdated and they were looking to move into a new home with all of the comforts: cathedral ceilings, palladium windows and a spacious master bathroom. The lowest priced home with these features would cost close to $4,000 a month even if they put a 25% down payment on the purchase. To make matters worse, the daily commute would be an hour longer each way!
Solution: After assessing their options, the clients decided to renovate the home that they were going to sell. They added a whole second story to the existing structure which included two extra bedrooms and a bath. They added cathedral ceilings throughout the downstairs and the existing kitchen and baths, including the master bath which was also doubled in size. The recommended architects were very creative and were so reasonably priced, there was money left over to add palladium windows as well.
Result: By opting for the renovation, this family saved themselves over $2,100 per month in added expenses not to mention the added hassle of moving. For only $150 more a month, the clients had a dream home without sacrificing their prime location!
Case Study #1 Table: Buying New Home vs. Reno
Buy New Home
|
Renovation
|
Savings Due to
| |
Realtor Fees
|
$30,000
|
N/A
|
-
|
Down Payment
|
$162,500
|
N/A
|
-
|
Out of Pocket Costs
to Buy New Home
|
$192,500
|
N/A
|
$192,500
|
Financing Needed
|
$487,500
|
$200,000
|
-
|
Monthly Mortgage Payment
|
$3700/month
|
$2580/month
|
$1,120/month
|
Monthly Payment on High Interest Credit Cards:
|
$1000
|
Everything was rolled into new mortgage above
|
$1,000/month
|
Property Value Increase Due to Home
|
N/A
|
$300,000
|
-
|
Total Monthly Savings of Doing Renovation vs. Buying New à
|
$2,120/month
| ||
SECRET #2: Choose a renovation that delivers as high a return as possible.
Not all home renovations are created equal. Sure, almost all improvements increase the resale value of your home. But the increase may not always be enough to pay for the cost of the improvement. To make your renovations pay back as much as possible, it’s important to keep in mind what future buyers want, as well as what you want.
Fortunately, the renovations with the biggest payback are usually the ones you’re likely to want too. Here are the TOP THREE renovations for return on investment:
RENOVATION RETURN ON INVESTMENT
Kitchen (see SECRET #3) 75% - 100%
Bathroom (see SECRET #4) 75% - 100%
Interior/Exterior painting (see SECRET #5) 50% - 100%
If the renovation you had in mind isn’t in the top three, here’s a list of the renovations that offer AVERAGE payback potential:
Roof shingle replacement 50% - 80%
Furnace/heating system 50% - 80%
Basement renovation 50% - 75%
Recreation room addition 50% - 75%
Installing a fireplace 50% - 75%
Flooring 50% - 75%
Constructing a garage 50% - 75%
Window/door replacement 50% - 75%
Building a deck 50% - 75%
Central air conditioning 25% - 75%
(Based on data from AIC 2006 Renovations and Home Improvement Survey.)
SECRET #3: How to make your new kitchen increase your home’s value.
OK, so you’ve decided to renovate your kitchen. Great choice! Now here are the improvements you—and future buyers—are likely to find most appealing.
Open wide. Your kitchen should be the nucleus of your home, not an isolated warren that people visit only at feeding time. Consider removing walls between the kitchen and dining room or den. This gives your home an open feeling, as opposed to the chopped up look of outdated homes.
Triangulate. Create a triangle between the refrigerator, stove and sink so you can move efficiently from point to point. Ideally, the sides of the triangle should be 4-9 feet. Include an island if space allows.
Lighten up. Lighting should illuminate while setting a warm mood. Replace harsh overheads with hanging lights above work areas or recessed lighting under cabinets. Install dimmers. Lighting can create a dramatic difference very inexpensively!
Resurface. Painting or re-facing old kitchen cabinets and adding new door pulls makes a huge difference at minimal cost. Install hardwood or tile flooring. For extra drama (if it fits your budget), replace the countertop with natural stone.
Replace. Get rid of brightly coloured or outdated appliances and replace with energy-efficient built-ins.
SECRET #4: How to make your new bathroom increase your home’s value.
Whether you’re renovating an existing bathroom or adding a new one, chances are you’ll recoup most of your costs at resale time. Again, here’s what adds the most value for you and potential buyers.
Shiny and new. One truth about real estate is that buyers like new stuff. This is especially true in the bathroom where steam and water make fixtures age rapidly. New tubs, sinks and toilets should be white or cream. For extra pizzazz add a steam shower or whirlpool tub.
Resurface. As in the kitchen, paint or reface old cabinets and add new door pulls. Textured or slate tiles make great flooring, especially if they’re heated.
Lighten up. Make the room look airy and new with bright yet warm lighting and large unframed mirrors.
Maximize space. Choose a small but deep tub, and a tall but compact toilet. Eliminate cabinets and vanities, and install a behind-the-mirror cabinet or cut a niche into the wall. Choose a sleek wall-mounted or pedestal sink, the smaller the better. Use towel rings rather than rods.
SECRET #5: How to increase your home’s value by painting.
Painting is so inexpensive—roughly 75¢ per square foot—yet it pays for itself in visual appeal and resale value.
Inside your house, warm and neutral colours such as bisque, cream, fawn, gray, walnut or soft green are often best for quick sale because they’re inoffensive and easy to cover. But you may prefer decorator shades, like vibrant red, bronzed orange, gray/brown or gray/green. Often these decorator shades have strong appeal for buyers too, but it may take a little longer to find the right buyer. Fortunately, it’s quick and inexpensive to change colours at resale if you have to.
The decision’s a little easier outside where natural colours like taupe, gray, olive, gold and warm brown are both stylish and easy to sell.
SECRET #6: Energy savings and safety should also be considerations.
Up to now, we’ve been discussing renovations that enhance appearance, convenience and luxury. But there’s also value in more practical considerations. How much your house costs to operate, how green it is and how safe your family feels are equally important to you and future buyers. Here are some things that can save money—and may save your life!
- Energy efficient furnaces and air conditioners
- Improved insulation
- Energy efficient windows
- Ceiling fans in rooms with high ceilings to push warm air down
- Heat circulating fireplaces
- Low flow and dual flush toilets
- Flood alarms and wired-in CO and smoke detectors
- Security systems
Some of these items can be expensive, but over time the money you save on heat, light and water can pay for the upgrades—and make your home more appealing to buyers! For instance, installing an energy efficient furnace and air conditioner can cut energy consumption by 50%. You may also save on insurance by installing security systems and other hazard prevention devices.
CASE STUDY #2:
Renovation Saves Home Business Owners $11,400 a Year!
Problem: A tiny kitchen…the clients had no room to entertain friends and business associates. They couldn’t enjoy their passion for cooking. They had gotten their mortgage when they were just starting out in business, but it had just adjusted. Having built a successful company, they were so busy in their daily lives that they just couldn’t make the time to move. They felt squeezed from all directions.
Solution: The clients expanded the kitchen into an open floor plan extending into a large room with a fireplace. Guests could mingle while they whipped up course after gourmet course. The fireplace was energy efficient and heated the whole house. They enlarged the home office which had been next to the kitchen, creating two offices – both with great closet space and windows overlooking the garden. If they ever wanted to sell, the offices were large and would easily qualify as bedrooms. The extra office allowed them to have their assistant on site and eliminated the need for outside space or rent. This saved them $950 monthly.
Result: Clients instantly added $180,000 to the value of their home while saving $950 a month!
Case Study #2 Table: Pre-Reno vs. Post-Reno Comparison
Pre-Reno
|
Post-Reno
|
Net Result
of the
| |
Financing Needed to Complete
|
N/A
|
$110,000
|
-
|
Monthly Mortgage Payment:
|
$4025
|
$4175
|
$150/month Increase
|
Monthly Payment on Outside Office Space
|
$1200
|
ARM Refinance into Fixed Rate Loan at
7%
|
$1,200/month Saved
|
Appraised Value
|
$695, 000
|
$875, 000
|
$180, 000 Increase
|
Property Tax (Monthly)
|
$325
|
$425
|
$100/month Increase
|
Appraised Value
|
$695, 000
|
$875, 000
|
$180, 000 Increase
|
Total Savings of Doing Renovation à
|
$950/month
| ||
SECRET #7: Always keep marketability in mind.
Taking a strategic approach to renovations means thinking about future salability every step of the way. Here are some important considerations:
- The more recent the improvement, the higher the return on investment.
- Even if your renovations don’t recoup their entire cost, they usually make your home sell faster.
- If your home's market value is above the average for your neighborhood, expect a relatively low return on renovations. But if your home is below the average, your return will be much higher.
- Renovations offer a better payback if you live in an appreciating neighborhood.
- If the homes in your neighborhood all have family rooms or third bedrooms, it pays to bring your house in line.
- For maximum resale value, renovations shouldn’t raise the value of your house more than 10-15% above the median sale price of other houses in your area.
SECRET #8: Be sure you understand all the financial details before you start.
There’s no point calculating how much your renovations will pay back if you can’t afford to do them in the first place. You need to be absolutely clear on the costs before you begin. Get quotes from at least two local renovators, architectural firms or materials suppliers. Then, take the most reasonable quote and add 10-15% for unexpected costs.
To save money, you may be able to do some simpler steps yourself—like painting—but don’t overextend yourself and end up with an unfinished or substandard job. You may also be eligible for incentives from utilities or governments for energy-efficiency upgrades.
A home renovation requires a careful budget. As a mortgage broker, I can provide helpful advice at this stage. Not only do I know what tends to sell best in the local market, I can also do a financial analysis of your plans and realities, and recommend a strategy that fits your needs best.
SECRET #9: How to make your home pay for your renovations.
Now that you know what you want to accomplish and how much it’s going to cost, I can show you where to find the cash. If you’ve lived in your home for a while, chances are you’ve built up substantial equity. Here are two affordable ways to access that equity to pay for your renovations.
Refinancing your existing mortgage. Since interest rates are dropping, your newly refinanced mortgage may carry a lower rate than your previous loan. And even though your mortgage balance will be higher—to cover the renovation costs—I can often keep your payments the same by extending your amortization period. I may even be able to accommodate debt consolidation into the refinance, so you’ll save on total interest costs as well as increasing your home’s value!
A home equity line of credit (HELOC). This is a line of credit secured against your home’s current value. HELOCs usually have an adjustable interest rate, which is an advantage in a falling rate environment. Like any line of credit, a HELOC approves you for the full amount you need, but you only access it—and pay interest on it—as you need it. This makes it a good option if you need to pay contractors in stages. You also have the flexibility to make interest-only payments or make additional lump sum payments as desired.
I’ll sit down with you, discuss these and other options, and recommend the renovation/financing strategy that maximizes current affordability AND future payback!
CASE STUDY #3:
Problem: The clients loved their park-like yard, but the small house seemed like a dot in the middle of a football field. It had two closet sized bedrooms for their eight year old twin boys and their seven year old daughter. There was no dedicated activity room for the children. Even though their mortgage payment was low, they were paying $2,500 every month in credit cards and car payments. They knew that they should be saving money on a regular basis but just hadn’t gotten around to setting it up.
Solution: The clients knocked down walls in the children’s bedrooms. They expanded that space and created a playroom. They added three large bedrooms and two baths. Each child could have their own room. They replaced all of the windows in the house. Even though they increased their living space, the new windows would save them at least $900 a year in heating and air conditioning. They put a swimming pool and gazebo in their beautiful yard. They paid off their credit card debt and took some cash out of the equity in their home to start a college fund for the children. The clients couldn’t imagine ever leaving their piece of heaven.
Result: For only $390 more monthly, the clients now have their dream home with a swimming pool, gazebo and all the other bells and whistles. The renovation increased their property value by $495,000. Plus, their college fund will have a minimum of $133,000 in ten years!
Case Study #3 Table: Pre-Reno vs. Post-Reno Comparison
Pre-Reno
|
Post-Reno
|
Net Result
of the
| |
Cash Out Into Interest Bearing Account For College and Other Expenses @ 8%
|
N/A
|
$60,000
|
$133,160/In 10 Years Liquid Fund
|
Financing Needed to Complete
|
N/A
|
$275,000
|
$1,605/month
|
Monthly Mortgage Payment:
|
$1,295
|
$4,145
|
$2,850/month
|
Monthly Debt: Credit Cards and Car Payment
|
$2,500
|
Refinance Loan at
7%
|
$1,580/month saved
|
Heating & Air Conditioning Savings
|
N/A
|
$75/month
|
$75/month saved
|
Property Tax (Monthly)
|
$300
|
$475
|
$60/Monthly Tax Benefit
|
Appraised Value
|
$680, 000
|
$1,175, 000
|
$495, 000 Increase
|
Still not sure whether to buy or renovate? Call me today at 778-881-0276!
Making decisions about your biggest financial investment can be scary. As your mortgage broker, I can put your mind at ease by listening to your dreams, analyzing your plans and gauging your financial realities. Then together, we’ll crunch all the numbers and come up with a plan that results in the best solution for you and your family, at the lowest possible cost.
Yes, you CAN get all the lifestyle enhancements of a new home WITHOUT any net cost to you! Let me show you the way.
Ronald Ephard
Mortgage Alliance Company of Canada
Office: 1-877-366-3487
Fax:1-888-378-2519
eMail: rephard@tmacc.com
Website:www.tmacc.com/ronaldephard
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