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Finance

First-time homebuyer mistakes


If you’re on the hunt for your first home and want to have a smooth and successful home purchasing experience avoid these common first-time homebuying mistakes.

If you are looking for your first home and need advice on how much you can afford, please feel free to contact me at (250) 862-1806.


1. Thinking you don’t need a real estate agent

You might be able to find a house on your own but there are still many aspects of buying real estate that can confuse a first-time buyer. Rely on your agent to negotiate offers, inspections, financing and other details. The money you save on commission can be quickly gobbled up by a botched offer or overlooked repairs.
 
 
2. Getting your heart set on a home before you do your homework

The house that’s love at first sight may not always be what it seems, so keep an open mind. Plus, you may be too quick to go over budget or may overlook a potential pitfall if you jump in too fast.
 
 
3. Picking a fixer-upper because the listing price is cheaper

That old classic may have loads of potential, but be extra diligent in the inspection period. What will it really cost to get your home where it needs to be? Negotiating a long due-diligence period will give you time to get estimates from contractors in case you need to back out.
 
 
4. Committing to more than you can afford

Don’t sacrifice retirement savings or an emergency fund for mortgage payments. You need to stay nimble to life’s changes, and over extending yourself could put your investments – including your house – on the line.
 
 
5. Going with the first agent who finds you

Don’t get halfway into house hunting before you realize your agent isn’t right for you.The best source: a referral from friends. Ask around and take the time to speak with your potential choices before you commit.
 

If you need help with finding a real estate agent, home inspector, contractor or lawyer to make your home buying experience go more smoothly please contact me [email protected]



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Reasons to use a mortgage broker


1.  Get independent advice on your financial options.
 
As independent mortgage brokers, we are not tied to any one lender or range of products. Our goal is to help you successfully finance your home or property and start by getting to know your home ownership plans. We will provide you a mortgage that meets your specific need and make the process as stress free as possible.

2.  Save time with one-stop shopping. 
 
The number of lenders in today’s market are many - and we know you’d probably rather spend your time house hunting! We work directly with dozens of lenders, and can quickly narrow down a list of those that suit you best. It makes comparison-shopping fast, easy, and convenient.

3.  We negotiate on your behalf. 
 
Most people are uncomfortable negotiating mortgages directly with their bank - we negotiate mortgages every day on behalf of Canadian homebuyers. You can count on our market knowledge to secure competitive rates and terms that benefit you.

4.  More choice means more competitive rates. 
 
We have access to a network of major lenders in Canada, so your options are extensive.  In addition, we also know what’s being offered by credit unions, trust companies and other sources. And we can help you take care of other requirements before your closing date, such as sourcing mortgage default insurance if your down payment is less than 20% of the purchase price.

5.  Ensure you get the best rates and terms. 
 
Even if you’ve already been pre-approved by your bank or another financial institution, you’re not obliged to stop shopping! Let us see if there is an alternative to better suit your needs.

6.  Get access to special deals and add-ons. 
 
Many financial institutions would love to have you as a client, which is why they often offer incentives to attract credit-worthy customers.  These can include retail points programs, discounts on appliances, shopping clubs, and more. We do the math on which offers might be worth your attention when it comes to financing or mortgage insurance - so you get the perks you deserve.

7.  Things move quickly! 
 
Our job isn’t done until your closing date goes smoothly. We’ll help ensure your mortgage transaction takes place on time and to your satisfaction.

8.  Get expert advice.  When it comes to mortgages, rates and the housing market, we’ll speak to you in plain language. We can explain the various mortgage terms and conditions so you can choose confidently.

9.  No cost to you. 
 
There’s absolutely no charge for our services on typical residential mortgage transactions. Like many other professional services, such as insurance, mortgage brokers are generally paid a finder’s fee when we introduce trustworthy, dependable customers to a financial institution. These fees are quite standard and nearly industry-wide so that the focus remains on the customer.

10.  Ongoing support and consultation. 
 
Even once your mortgage is signed and paperwork is complete, we are here if you need any advice on closing details or even future referral needs. We are happy to be of assistance when you need it.
 

If you need help with any of your mortgage needs either purchasing a home, refinancing your existing mortgage or shopping the renewal of your existing mortgage please feel free to call 250  862 1806 or email me at [email protected].



The last great Canadian tax shelter

A guide to how flow-through fund limited partnerships can mightily aid your tax planning!

The end of the year will raise concerns among many professionals, self-employed persons, business owners and even regular wage earners about the amount of tax they will owe the Canadian Revenue Agency (CRA).

Tax demands can come as a nasty shock and place the unfortunate recipient in a quandary. What assets can be sold, income diverted or spending deferred are the questions that typically come to mind when a tax bill comes due.

Help is at hand with the flow-through fund limited partnership, one of the few tax shelters still available in Canada and one that will not only give investors a deduction against their taxes, but will potentially qualify for a British Columbia provincial tax credit. Oh yes, and they can also feel good about helping the Canadian economy. How come? And what’s the reason behind this official largesse?

In 1986, the Canadian government decided to encourage investment into small and medium oil & gas and mining companies by allowing them to transfer expenses (Canadian Exploration Expenses) directly related to exploration to investors. The government did this by instituting the Flow-Through Tax Credit under the Income Tax Act which allowed these companies to “flow through” these costs to investors via the purchase of flow-through shares. Broadly, this allowed for exploration and pre-production expenses to be generally 100-percent tax deductible against any source of income in the year the investment is made. Sounds great, eh?

A flow-through partnership is a professionally managed portfolio of junior resource stocks that exists for a defined period of time, usually one to three years. At the end of that period, a “disposition” must occur in which the shares are sold or rolled over into another security, usually a mutual fund. On disposition, proceeds would be treated as a capital gain.

The flow-through concept has been enormously successful in raising money for resource exploration. According to the Department of Finance, approximately $1.4 billion per year was raised by flow-through shares from 2007 to 2012 alone.

You’re probably wondering by now how a potential investor can take advantage of this uniquely Canadian tax innovation to their best advantage. Well, below is a hypothetical example of a flow-through share fund, assuming the top tax bracket of 43.7 percent for a B.C. investor. For the sake of simplicity, the fund is also assumed to be invested entirely in B.C. resource companies, though in actual fact a fund manager is more likely to spread risk across the country.

Investment amount                                                        $1,000

Combined Fed & Prov Tax rebate (43.7 tax rate)          $   437

Federal Tax Credit                                                         $   120

B.C Tax Credit                                                               $   200 +

Total tax savings                                                                                      $757

Less income tax on inclusion of federal & provincial income tax            $139 –

                                                                                                                 $618

 

So, an investment of $1,000 garnered a cash return from tax savings of $618; however, an investor can still make a profit even if the fund is redeemed at a lower value than $1,000.

“What?” I hear you saying. “I lost money on the fund but can still realize a gain? How so??”

Let’s assume the fund is redeemed at a modest 60 percent of the investment value, bearing in mind the proceeds are fully taxable as a capital gain.

Now let’s do the math!

Proceeds of the sale                                        $600

Less capital gains at 43.7% tax bracket          $109 –

Net proceeds                                                   $491

 

In the end, money can be made since the investment also garnered some handsome tax savings, making the total return to the investor of:

Tax savings                $   618

Net proceeds             $   491 +

                                  $1,109

 

Therefore, the final cash benefit to the investor is $1,109 on an investment of $1,000. Certainly better than handing the same grand to the tax man and the investor’s money would be locked up for a little less than one year.

As you can see from the previous example, if the fund was redeemed for anything more than 60 percent, the investor would begin to realize a profit.

Who can benefit from investing in a Flow-Through Fund? Just about anyone. It includes individuals and corporations interested in reducing or deferring taxes; individuals wanting to reduce Old Age Security claw backs; or recipients of lump-sum payments.

Interested? Then you’d better hurry. The last date to invest in this last, great Canadian tax shelter to achieve tax savings for earnings in 2014 is December 15th.


This article is for information purposes only and does not constitute an offer to sell or a solicitation to buy the securities referred to herein. The information contained in this article is not intended to provide any tax, legal, or financial advice. We recommend that you consult an investment professional before investing in this or any investment product. Please consider a fund's objectives, risks, and charges and expenses, and read the Offering Memorandum carefully before investing.

 

 

Chuck Duerden is a dealing representative for Pangaea Asset Management in Kelowna. He may be reached at 250.575.3798 or at [email protected]. Follow Chuck as Charles Duerden on Facebook and LinkedIn.





Danger of focusing on low rate mortgages

Mortgage brokers know that a great rate and a great mortgage are not always synonymous.  Many clients have tunnel vision when it comes to interest rate but it is only one component.

How do we as mortgage professionals convince our clients of this when rate is the only thing they can easily compare?  How do we explain that avoiding potential costs like high mortgage penalties, refinance restrictions etc., often justifies paying more up front?

It is important for a consumer to ask their mortgage broker or specialist about the differences between a collateral change and a standard charge and the impact a collateral charge may have on their ability to shop for the best rate at maturity.  Also it is critical to understand the difference between the penalty charges by the Big 5 Banks versus the penalties of some of the other lenders with the same interest rates.

Most mortgage consumers do not realize that 63% of mortgages are broken before maturity and sometimes the differences in penalties can be over $10,000.  Some of the low interest, rock bottom mortgages are usually part of a no frills product and can cost thousands of dollars more in the future.

Some of the other components that are not always offered in a low rate mortgage are flexible prepayment options which will save thousands of dollars in interest costs over the life of the mortgage.  Add to this portability, assumability and the ability to refinance which are important considerations.

Sometimes saving money involves much more than the best rate.  It is essential to understand the trade-offs associated with some of the mortgage rates advertised.  This is why using an Accredited Mortgage Professional (AMP) is so important.

 

Please feel free to call me at 250-862-1806 or email me at [email protected] to set up your FREE mortgage rate consultation.



Read more Home Finance articles




About the author...

Laurie Baird is a Mortgage Broker with Verico Complete Mortgage Services. She has been in the mortgage business for 17 years starting as a lender with Royal Trust. She later worked at the Royal Bank as a Mortgage Consultant and 11 years ago became a Mortgage Broker. As a Mortgage Broker she is able to match her clients' needs with a lender who will provide them with competitive rates and products. Laurie has a Bachelor of Education degree from UBC.

Contact her at 250-862-1806 or by fax 712-0209 or visit:
http://www.okanaganmortgages.com/

Visit Laurie's blog at: http://www.okanaganmortgages.com/blog.html




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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet presents its columns "as is" and does not warrant the contents.


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