Mortgagesuccess’s Blog

Giving you some great DIY tips on staging your home. When selling your home it is really important to do staging, most of the changes made during staging are to make it easier for the buyer to picture their life in the house. When buyers’ walk into a home they are thinking about all their stuff and where it could go. Minimize what space you take up so they can fill the space with their dreams. hiring professionals can be expensive, so here are the long true and tried tips for staging your house.

Do it yourself

By Andrew Allentuck, Financial Post April 4, 2012

Paying down the mortgage on your home first can free up money for contributions to RRSPs and RESPs. Photograph by: ReMax , handout  It is every family’s dilemma: What to pay first — the mortgage, the kids’ education or putting something away for retirement? Plan it right and a life free of many financial worries follows. Get it wrong and the kids may not get the education you want and your retirement could be threadbare. You might even be forced to sell your home if interest rates soar before you’ve paid down the mortgage a lot.

“Pay for the home first,” suggests Benoît Poliquin, lead portfolio manager at ExPonent Investment Management Inc. in Ottawa. The reason: Buying your home quickly has financial advantages so powerful and so immediate that it would be foolish to ignore it.

“Look what the homeowner gets,” Mr. Poliquin says. “There is the return on equity. That is what the home gains in owner equity every month as the debt declines. The more you pay and the sooner you pay, the faster you gain equity through the mortgage.”

There is the possibility of capital gains that, in Canada, are not taxed as long as the home is a primary residence. Moreover, in many cities, price gains more than pay for interest costs, says Graeme Egan, a financial planner and portfolio manager at KCM Wealth Management Inc. in Vancouver.

On top of probable price gains, there is the tax advantage. Today, if you pay 3.5% on a five-year mortgage and you have a 40% tax rate, your actual cost of paying the mortgage with after-tax dollars is 5%, Mr. Poliquin says. “The rational thing is to pay the mortgage while your income is lower, though it may be harder. As your tax rate rises, the after-tax cost of the mortgage goes up.”

Finally, the home offers a rental service, Mr. Poliquin says. That is, what it would cost to rent a similar property. Add it up and the case for paying the mortgage down quickly is compelling.

Next – the kids’ post-secondary education. On the one hand, much of the value of education is intangible. But in terms of cost management, there are solutions.

The Canada Education Savings Grant of the lesser of 20% of sums contributed or $500 per year and the supplemental Quebec Education Savings Incentive of the lesser of 10% of sums contributed or $250 per year mean that any contribution up to the specified limits pays instant returns of 20% or 30%. You can lose the terrific boosts or the underlying contribution through bad luck in investments, so the incentive is to invest these funds conservatively.

How much to contribute over years is not hard to calculate. Assume that you have one child, just born, and you want to build up $50,000, which happens to be the lifetime RESP limit per beneficiary. If you can get a 3.5% average annual compounded return in GICs, then to build up that $50,000 takes an annual contribution of $2,130. That works out to $1,775 per year for all provinces except Quebec and $1,638 in Quebec. In 17 years, with those assumptions, the child has $50,000 in RESP savings.

Finally, there is the problem of retirement. You can estimate a cost of living in retirement. That could be today’s annual cost of living with education savings or retirement savings taken out and perhaps elimination of mortgage payments after your home is fully paid.

Assume you will need $50,000 per year after tax. Take off what you may get from pensions and Old Age Security, say $30,000 per year for a couple in 2012 dollars. You have a $20,000 annual income gap to fill. Push it up to $25,000 to allow for error or higher tax rates – it’s best to budget for a few unknowns. $25,000 is the annual income of $500,000 yielding 5% per year. Your income at the start of retirement will be $30,000 from public pensions and $25,000 from investments, for a total of $55,000. If you manage taxes well and take advantage of certain pension income tax credits, your average tax rate could be as low as 9%. That will leave $50,000 and a little change for spending.

If you have 30 years to go to retirement, you need to save $7,167 per year, or $597 per month, at a 5% rate of interest to get to $500,000. You can take a little more risk than you would with education savings when you have three decades to get your returns. Finding money for RRSP savings may be tough if you are working hard to pay down your mortgage, but income tax actually creates a strategy.

“Just as it makes sense to pay down the mortgage early in your career before your tax bracket goes up and raises the after-tax cost of the mortgage, it makes sense to defer your retirement savings until your salary or inflation push up your tax bracket and give you bigger tax savings,” explains Derek Moran, head of Smarter Financial Planning Ltd. in Kelowna, B.C.

In the end, the sequencing of savings turns out to be a problem with rational solutions. Time and tax rates are on your side. Pay down the house and you have money to build up education savings. Hit the $50,000 RESP limit per dependent and then salary gains and relatively large RRSP tax savings are on your side.

“You can add to any category at any time, but this plan is rational allocation,” Mr. Poliquin concludes. ©

Copyright (c) National Post  Read more: http://www.ottawacitizen.com/business/fp/money/question+what+first/6407506/story.html#ixzz1rBhXYqiV

1. Put yourself aside.

When searching for a primary residence, you’re looking at each home as a place where you could potentially envision yourself living. When searching for an investment property, you’re looking at it through the eyes of a business person. Don’t get your two personas mixed up. The components that make a good investment property are quite different from those that make a good primary residence.

2. Find an up-and-coming market.

While established, highly-coveted areas will likely attract plenty of rental demand, they are more than likely also highly priced – which means it will be difficult, if not next to impossible, to generate positive cash flow from your rental property. Seek out smaller areas where homes come with smaller price tags but where you’re able to charge a high enough rent to balance your books. A low rental vacancy rate is also a good sign that you won’t have difficulty finding tenants for your property.

3. Pay attention to local economic factors.

To make sure that your prospective area is a lucrative one, take a moment to look beyond the real estate market. You want to find a place that has a growing population, is generating new jobs year after year, and where wages have either remained flat or increased over the last few years.

4. Think like a tenant.

While it’s true that you won’t be living in this property, someone will be. And, in all likelihood, they’ll value things like proximity to schools, highways and public transportation. Keep an eye out for proposed improvements to a specific area – if the government is setting up to improve public transit, or if a new factory is going to be built a few blocks away, your property will likely be more in demand, and worth more money down the road.

PHEW!

Brokers are breathing a sigh of relief after the Finance Minister rejected calls to tinker with mortgage insurance rules, offering a budget that leaves the maximum amortization cap at 30 years and the minimum down payment at 5 per cent.

While moving to cut 19,200 bureaucratic jobs over the next three years with an eye toward slashing $5 billion a year from the federal budget, Jim Flaherty left the current regime of mortgage rules in place.

The reprieve, at least for now, was anticipated by mortgage industry leaders from one end of the country to the next, and comes on the heels of broker lobbying efforts, spearheaded by CAAMP.

CEO Jim Murphy was in Ottawa for Wednesday`s budget focused on eradicating deficits by as early as 2015. He argued that the government listened to broker concerns about the importance of letting rule changes introduced over the last two years take effect, outside of the current extraordinary period of low interest rates.

“CAAMP is pleased that the federal government and Minister Flaherty are listening to CAAMP’s key messages.” said Murphy said Thursday. “CAAMP will continue to work on the OSFI Underwriting Principles and will also continue to work with the federal government on the mortgage ceiling.

With today’s budget announcement, Flaherty effectively rejected a chorus of banker calls for a 25-year amortization cap, down from the 30 years the government now allows. Some economists also wanted the government to increase down payment requires to a minimum 7- or 10-per cent.

Both suggestions were billed as a way of cutting record levels of household debt and slow down the consumer rush to buy homes.

Exactly a week prior to Thursday’s communiqué, Flaherty used a media scrum to suggest he would resist calls for stricter rules.

“I find it a bit off that some of the bank executives are taking the position that the Minister of Finance or the government somehow should tell them how to run their business,” Jim Flaherty told reporters just outside Ottawa Thursday. “They decide what they want to charge in interest rates.

“The new housing market produces a lot of jobs in Canada so there’s a balance that needs to be addressed.”

Still, The government did move to shore up some areas of mortgage industry oversight: it will bring in legislation to provide increased oversight of CMHC commercial activities; and legislation for covered bonds, which will be administered by CMHC.