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Divorce in retirement

Are you a divorced retiree? 

Financial settlements from a divorce can have a big impact on your security. The concern doubles when a marriage comes to an end later in life.

If divorce in retirement is happening to you, you’re not alone. The so-called 'grey divorce' has been identified as a growing 21st century trend.

You can tap into your house for extra income

Although divorcing later in life poses many challenges, you may have access to financial tools not readily available to people in their 30s and 40s.

For instance, if the house is settled on your side of the ledger, you may be able to shore up your finances and enhance cash flow by tapping into the equity of your home.

This is done by arranging a reverse mortgage.

“Instead of selling your house and downsizing or even renting, why not stay in it and receive payments based on its real estate value?” says Arthur Krzycki, a director with HomEquity Bank. “Accessing the equity in your home with a reverse mortgage like a CHIP Home Income Plan is a simple and sensible way to reduce the financial burden normally associated with divorce.” 

How CHIP works

•  If you’re aged 55 and over, you can convert up to 50 per-cent of your home equity into tax-free cash.

•  Unlike other loans on the market, you are not required to service the interest, or repay the principal until you choose to move or sell.

•  You have the option to take a lump sum to pay off your debts or for home repairs and modifications.

•  Or you can schedule monthly advances to enhance your cash flow on a regular basis. Some homeowners do both.

“It’s never too late to bolster your finances by taking money out from your house while continuing to live there. For example, using a reverse mortgage to provide additional cash income could save homeowners from having to sell non-registered investments, or prevent the need to withdraw money from a RRIF above the annual minimum. Both of these strategies will likely have tax implications, so be sure to work with a financial advisor for solutions that fit your needs,” adds Kryzcki.

Additional information on this option is available at CHIP

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I wanna buy a house

What will I need to get a mortgage?

I often get asked what to bring to a mortgage appointment, and I usually tell my clients to bring a list of assets, liabilities, payments, and maybe grab a pay stub.  

That’s a good start, but what if you are self-employed? It would be helpful to know what your net declared income is, which you can find on your Notice of Assessment (NOA) that you get back from Canada Revenue Agency (CRA) after they have reviewed your tax return.

Most lenders will require an employment letter and pay stub dated within 30 days, so I recommend holding off until you are ready to make an offer.

If you are hourly or have recently started your job, it is a good idea to pull out your previous year’s T4s and/or your NOA from CRA for the previous year. 

For self-employed borrowers, the documentation varies between lenders, but if you have two years of T1 Generals (income tax returns) and NOAs, it is a good start.

Once you have submitted an offer on a property, ask your realtor for a copy of the MLS (multiple listing system) which provides details about the property for the lender. You will also need a copy of the accepted offer to purchase and the Property Disclosure Statement (PDS). 

The PDS is a checklist filled out by the seller of the property detailing the condition of the property, as well as any know deficiencies. It also describes the type of building materials used in construction. 

If the property is a condo, it is helpful to have a copy of the Form B, which will state any outstanding fees for the unit and any pending repairs on the building.

Another confirmation which is required for financing is for the downpayment and closing costs.  

Most lenders require that you show the downpayment and 1.5% of the purchase price for closing costs. Closing costs include legal fees, property transfer tax, property taxes due and title insurance costs.  

There are several forms of downpayment, such as savings, a gift from family, or proceeds from a sale. For savings, the lender usually requires a 90 day history of the money in your account to show it is not borrowed. If the downpayment is a gift, then a gift letter is needed stating the amount, that it is an outright gift, and the relationship of the donor. 

If the downpayment is from the sale of a property or something else, then a copy of the offer to purchase or sales agreement should be included, as well as a mortgage statement (in the case of real estate sale), to show the equity.

Prompt submission of all the paperwork will greatly speed up the time for approval, and ensure that you receive a non-conditional approval for financing.

Questions or comments, email [email protected]

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Often missed finance tool

The pop and sizzle of New Year’s Eve is a distant memory now, and many well-intentioned New Year’s resolutions have probably fallen by the wayside. It’s likely clear by now that you’re not going to reduce your weight by 50%, change your personality, or qualify for the Olympics. 

So let’s focus on a serious resolution for 2016. This year, vow to make your mortgage your top financial tool.

Your mortgage can be a goldmine of savings, or the pot of gold you’re looking for to tackle the renovation or landscaping project you’ve been dreaming of. It’s a powerful financial tool: Make it work for you.

Begin by dusting off your mortgage – wherever you are in your mortgage term – and seeking expert and independent analysis. 

The mortgage brokerage industry is becoming a powerful new influence in the Canadian financial scene. Last year in Canada, more than 35% of all mortgages came across a mortgage broker’s desk. While a good investment advisor can earn you thousands of dollars, a good mortgage broker can save you thousands – by finding the best possible combination of mortgage features and rates to suit your situation.

Think about your financial goals, just to name a few: Are you’re looking for a way to reduce monthly payments? Save on your mortgage interest over the long-term? Pay down the mortgage sooner? Or finance a special project or vacation?

Thousands of Canadians have been taking a second look at their fixed-rate mortgages in the last few months. We don’t have an economic crystal ball, but it seems clear that – with mortgage rates lower than they were in our parents’ generation – the odds of an upward trend in mortgages are pretty good. It means that right now you have a historic opportunity to get that mortgage working for you.

Even if your mortgage is not up for renewal any time soon, it’s worth a review to see if you can re-negotiate for a better rate. Don’t assume that you’re stuck with a fixed rate mortgage, which is several points higher than today’s rock-bottom rates.

End of the mortgage in sight? Lucky you! Either take a watch-and-wait approach or consider a blend and extend now – to combine your old rate and current rates to help you take advantage of the current rate opportunity.

The current low rates are a boom to spenders as well as savers. Thinking about that home renovation or landscaping project this year? Find out about using a mortgage to finance the project. Mortgage rates are typically far lower than other types of loans or lines of credit, so you can put your equity to work at rates that you couldn’t have dreamed of ten years ago. 

There has never been a better time for homeowners to borrow against their homes.

Whether your goal this year is to save, or to save while you spend, make your mortgage work for you. It is a resolution that’s easy to achieve.

Questions or comments, [email protected]

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Property Transfer Tax

On February 16th, the Liberal Government announced changes to the Property Transfer Tax. 

The two major changes:
• Exemption for new homes up to a purchase price of $750,000
• A new tier of 3% for properties over $2,000,000

Here are the highlights in a question and answer format:

Q: How will the government monitor the one year occupancy detail?

A:  As with the First Time Home Buyer (FTHB) exemption, the Ministry will send a letter to the purchaser at the end of the year to confirm compliance.

Q: If a client is a FTHB and purchases $550,000 used (not new) property, do they still pay Property Transfer Tax (PTT)?

A: Yes, the $475,000 limit remains the same for the FTHB's first property. The FTHB Exception values remain as they were.

Q: Does this apply to contracts already in place that haven't completed yet?

A: The new amendments to the PTT Act deal only with the registration date, not the date of the contract.

Q: For the New Housing Exemption of $750,000 is there any portion over $750,000 subject to 1% , or does it start at 2% on the portion over $750,000?

A: Much like the FTHM exception, a partial exemption is available where the fair market value is over $750,000 but less that $800,000.  If the price is $800,000 or more, PTT is payable on the entire price. So if the price is $801,000, PTT is on the entire amount, not just the last $1000.

Q: Does this apply to commercial property purchases?

A: Yes it does. This is significant, as many commercial/industrial/office buildings are valued quite high. There is a 3% tax on the value over $2,000,000 on these buildings.

Q: Is the exemption based on the pre-GST or net purchase price, or the purchase price including GST?

A;  We back out the GST from the price so that the PTT is calculated on net price, which must be under $750,000 for the full exemption.

Q: Can a buyer qualify for the FTHB or the New Housing Exemption even if they move here from another province?

A: For the FTHB exception, the buyer must be either a Canadian citizen or permanent resident AND have lived in B.C. for 12 consecutive months immediately before the date they take ownership of the property, or they have filed at least two income tax returns as a B.C. resident in the last six years. For the New Housing Exemption, the buyer must be an individual, and either a Canadian citizen or permanent resident. Note the difference, for the FTHB exemption there is a residency-in-BC requirement, but not for the New Housing Exemption.

Q: Does the New Housing PTT exemption apply to all real estate purchases whether they are principal residence or investment?

A: These exemptions only apply to principal residence, full PTT applies to investment properties.

Q: How does this ‘equal to or smaller than 0.5 hectare’ thing work with attached properties?

A: The attached property must be equal to, or less, than 0.5 hectare. This is not an issue with attached properties, at least not one that I have encountered before.

Q: For a property over $2,000,000, the PTT is first $200,000 for 1% , and then remaining is now 3% instead of 2%?

A: It is 1% on the first $200,000, 2% on values over $200,000 up to $2,000,000, and 3% on any value over $2,000,000.

Q: I have a realtor selling a newly constructed work/live townhouse. Retail space is on the main floor. Separate stratas, but sold as one unit. Assuming the buyer is living on the property, will they get the PTT waived even though the main floor is retail space?

A: If they are strata, the PTT is based on individual units and their values. There will be an exemption for the townhouse that is principal residence, but not for the retail portion.

Questions or comments, [email protected]


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About the Author

Laurie Baird is a Mortgage Broker with Verico Complete Mortgage Services. She has been in the mortgage business since 1991 and a broker since 1997. 

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 Laurie at 250-862-1806 or visit:

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

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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