In the midst of the booming real estate market in Canada (mainly in Vancouver and Toronto), many Canadians are entertaining the idea of downsizing in order to sell their homes at a high value and purchase a smaller home or condo at a lower price.

Is downsizing the way to go? What are the costs associated with downsizing? The truth is, there are many costs to downsizing, and not all of them are obvious.

Why Downsize?

Canadians have many reasons to downsize. They include:
• Less house to upkeep
• Move closer to loved ones
• Spending the winter in a warmer place, therefore they don’t live in their home year round
• Getting equity out of their home to help fund retirement

Costs to sell your home

But let’s break down the more obvious costs of downsizing so that you can weigh the financial pros and cons. Keep in mind that the example below is for illustration purposes only. There may be other expenses not mentioned, but the key expenses are highlighted.

Let’s use the example of a home that will sell for $1,000,000 which is the approximate average cost of a detached home in Toronto. The home still carries a $200,000 mortgage, which would equate to a net amount of $800,000. However, there are costs that you must deduct from the total sale that can eat into your lump sum.
• Realtor commission (between 1%-7% depending on where you live in the country and what you are able to negotiate). In Toronto, the standard realtor rate is 5%. In this example of a $1,000,000 home, you would need to pay the realtor $50,000.
• Closing costs and legal fees – Approximately $1,500
• Miscellaneous costs – $1000
• This leaves you with approximately $747,500
• And an approximate cost of selling your home at $52,500

In addition to these reasons, these are some other costs that are associated with downsizing:

• The cost to fix up your home for the sale – Fresh coat of paint, minor repairs, kitchen/bathroom renovations, roof repairs and maybe even the cost to stage the home.
• The cost to part with old furniture – When you downsize, you typically have to get rid of furniture, books and other items that take up space. You may even decide to keep the items in a storage unit, which can cost money monthly (a typical 50 square foot unit can range from $125-$200/month plus HST, a mandatory monthly insurance premium and a set-up fee or refundable deposit)

Costs to buy your downsized home

There are also costs associated with buying your new downsized home. If you intend to purchase a smaller home (semi-detached, townhouse or condo), most of the money you earn from the sale of your home will go towards the purchase of your new downsized home. Here is an example of the expenses you may incur when you purchase your downsized home:

Let’s use the example of a condo with a cost of $500,000 which is the average cost of a condo in Toronto.
• Land transfer tax in Ontario for a $500,000 property is $6,475. Find out the land transfer tax in your province by visiting your local government website on land transfer taxes. For Ontario, visit the Government of Ontario land transfer tax page.
• There may be a Municipal Land Transfer Tax (MLTT) in addition to the provincial land transfer tax. For instance, in Toronto, the MLTT for a $500,000 condo would be $5,725. Visit your local municipality website to find out the calculation for your MLTT.
• Title insurance and legal fees – Approximately $1,500
• Moving costs – Approximately $2,000
• There may be a property tax adjustment – This would depend on when the seller paid the property taxes and when the buyer takes possession of the condo. In most cases, the buyer will have to pay the seller the difference depending on when they took possession of the property. If the seller is behind on payments, then the municipality requires that the seller pays off the taxes from the proceeds of the sale.
• Purchase of new furniture to fit smaller condo – Approximately $10,000 – $15,000
• Monthly maintenance fee for condo living – Approximately $500/month or $6,000/year
• This leaves you with approximately $221,800 from the sale of your $1,000,000 home before you deduct the cost of condo maintenance fees at $6,000/year.
• And the additional cost to purchase your downsized home at $25,700
• The total cost of downsizing from a $1 million home to a $500,000 condo would cost approximately $84,200 in your first year alone.

Although you sold your $1,000,000 home and downsized to a $500,000 condo, with all of the added expenses, you would only take home just over $215,800 after your first-year maintenance fees. This is the reality of downsizing. It isn’t as clear cut as the selling value of your home minus the buying cost of your downsized home. Although there is a return, the process of buying and selling has the added costs that can make or break your decision to move.

If you are downsizing because you need extra cash to help you with your retirement, an alternative is the CHIP Reverse Mortgage. With a reverse mortgage, you can stay in your home and still have the extra cash to help you with your retirement. To find out how much money you can get with a reverse mortgage, talk to your Dominion Lending Centre mortgage specialist today or if you decide to downsize, talk to your mortgage broker or a lawyer to find out your true cost of downsizing before making the final decision.

YVONNE ZIOMECKI
HomEquity Bank – Senior Vice President, Marketing and Sales

Congratulations – you are moving into your new home! Whether you are starting with a plain new build or an older resale home, there’s no better way to make it yours than by putting your stamp on it. Invest a weekend or two into warming up a featureless space or refreshing someone else’s old homestead. It’s easy with our 10 steps to home sweet home.

Step 1: Change the locks
Secure your home by changing the locks as soon as you take possession.
Even DIY beginners can change a deadbolt lock. A replacement deadbolt set can be installed in place of the current lock – no drilling required.

Another alternative is to rekey the lock. Purchase a rekeying set from the same manufacturer as the existing door lock, and reset it for a new key.

Step 2: Get a professional deep cleaning
Hire professional cleaners to deep-clean and detail your home before you move your possessions in. Without any furniture to work around, they’ll have access to every nook and cranny. Yes, you’ll have to clean again after moving day, but the heavy lifting (scouring, scrubbing and scraping) will have already been done!

Step 3: Clean the guts of your home
Years of dust, pet dander and detritus collect in the mechanicals of any home. One of the most effective ways to refresh a resale home is to get right into the guts of it: the mechanicals. Have your ducts, furnace and air conditioning unit professionally cleaned. Change the filters as required to maintain that clean, fresh air.

Step 4: Apply a fresh coat of paint
Painting provides the most bang for your home improvement buck. Whether the walls of your home are dingy or you’re simply not feeling the magic of “beige,” it takes just hours to repaint your space with a colour that makes your heart sing.

Step 5: Freshen up the floors
Worn out floors can put a damper on that new-home buzz.
If your hardwood has seen better days, hire pros to refinish it, or tackle the project yourself by renting a floor sander and varnishing over a weekend.

Steam-clean wall-to-wall carpet and clean laminate flooring with special laminate floor cleaners, although if either is too far gone, you may want to replace it.
Personalize your space while protecting your floors by adding area rugs and runners throughout your new home.

Step 6: Neutralize any odours
Resale homes, particularly fixer-uppers, can come with lingering smells. Steps 2, 3, 4 and 5 will dramatically reduce any unpleasant odours. Stubborn odours require spot treatments, such as the following:

• Put dishes of activated charcoal, also called activated carbon (available from aquarium stores), in musty, damp basements. Run a dehumidifier during the spring and summer.
• Place a sock filled with dry coffee grounds or baking soda in closets, refrigerators or freezers to absorb stale odours.
• Pour white vinegar down a stinky drain.

Step 7: Give your windows a new view
Dirty windows and screens can make rooms feel dingy. A thorough cleaning will have your windows shining, and your indoors will feel brighter and fresher, too.

If your home came with the previous owner’s window coverings, be sure to clean or launder them (it’ll remove allergens as well as reduce any lingering odours). Or consider replacements more specific to your design tastes.

Step 8: Brighten your lights
A well-lit home feels inviting and warm. If your rooms feel dim, replace the existing bulbs with bright, energy-saving CFL bulbs. Dated lighting fixtures can foil your redecorating efforts, so consider replacing them. You can donate them to a Habitat for Humanity ReStore shop – after all, your taste may be urban-contemporary, but someone else may be looking for the perfect retro pendant!

Step 9: Replace the switch plates
A screwdriver is all it takes to swap out lighting switch plates. This easy change gives an instant lift to any room. With a little DIY expertise, screwdrivers, pliers and a voltage tester, you can install energy-saving dimmer switches, instead.

Step 10: Display your art
Finally, dress up your walls with your favourite artwork and family photos. Get your kids’ kindergarten masterpieces onto the fridge, and deck out your mantel with family photos.

There’s a reason why we remove personal photos and mementos when selling a house: it’s so potential buyers see a clean slate. Now that you’re in your own home, go wild and make it yours! And if you have any questions, please contact your local Dominion Lending Centres mortgage specialist.

Marc Shendale
Genworth Canada – Vice President Business Development

Emotional Homebuyers Can Lose Out On the Best DealsBuying a home is financial decision, but also an emotional experience.

Before we’ve explored every room, we often start imagining our new lives there. Where our furniture will go. The parties we’ll host in the open-concept living-dining space. The mornings we’ll spend at the breakfast bar overlooking the garden or skyline… When a home speaks to us emotionally, the fear of missing out on it can set in fast.

That’s especially true in a real estate market where multiple offers and bidding wars are common, where a financing condition can put you at a disadvantage, and where prices are at all-time highs.

According to the 2017 Genworth Canada Homeownership Study, 60% of first-time buyers were worried they might miss out on the “perfect” house. That can lead emotional homebuyers to act against their own best interests by, for example, forgoing important conditions, or paying more than they had budgeted.

There’s no need to lose the dream — you will host those parties — but you’ve got to take emotion out of the deal, and these strategies will help.

Assemble your entire team before looking at any property.

That means: interview experienced real estate agents with expertise on your desired neighbourhoods; consult a financial advisor to help determine how homeownership fits into your other goals (a wedding, saving for a child’s education, retirement planning, etc.) and establish a budget including “what-if” scenarios, such as a layoff or maternity leave; find a DLC mortgage broker to help you secure a pre-approval, explain your options, and answer your questions here. You may be able to achieve homeownership sooner than you think. Find out how

Get the names of 3 home inspectors. Call and introduce yourself now.

Many emotional homebuyers forego the inspection process in an effort to make their bid more competitive. That’s a risk. With 3 recommended inspectors on speed dial, you should be able to get a qualified professional to visit a property the day you want to make an offer. Your real estate agent is one source of referrals, or check with the Canadian Association of Home and Property Inspectors.

Don’t visit properties outside your price range.

Best-case scenario, you’ll walk away deflated. Worst-case scenario? You’ll bid on something you can’t comfortably afford. Stick to your homeowner budget (likely to be higher than renting, since it includes property taxes/maintenance fees, utilities, etc.) and practice living on it for a few months before you decide to make a purchase.

Focus on the things you can’t see.

The efficiency of the heating and cooling systems, the age of the roof, the state of the electrical… these matter most when it comes to deciding if a home is a good financial deal. Hardwood floors, quartz counter tops, and stainless steel appliances can be seductive, but they shouldn’t be a priority.

Surprise repairs and upgrades to fundamentals — like a furnace on its last legs, plumbing that isn’t to code, or uninsurable knob-and-tube wiring — could sink your budget. And if problems have been covered up, you might just have to rip out those magazine-worthy finishes and details.

There is no disputing that buying a home is a massive financial decision as well as an emotional experience. But minimizing emotions throughout your homebuying experience is a heads-up move that will ultimately benefit you.

For more tips on what you should know before you purchase a home visit www.homeownership.ca.

Marc Shendale
Genworth Canada – Vice President Business Development
Apr 15th, 2015 | Posted in: Chief Economist, News.

Over the years, I have come across all sorts of people who have had no idea what their credit score is. Some of them have declared to me that they have great credit only to find that they had poor credit scores or a number of late payments. I have also had people tell me that they had lousy credit only to find that they had a very respectable credit score. People do not know anything about credit and need an expert to help them to build their credit.

When you ask the two major credit reporting agencies, Equifax and Trans Union how they score credit, they give you a vague idea but no idea on how to quickly up your score.

Perhaps you have seen this pie chart that shows how they score different activities I have found out recently that people have higher scores that they had previously and this is due to more emphasis on what you owe now as opposed to your payment history.

Here are some things I have observed over my 12 years of being a mortgage broker.

1- Credit card balance. If you have a credit limit of $1,500 and your balance is at $1,450 you are losing 25-30 points. Having a balance of $0 or using less than 50% of the limit adds points. If you pay the minimum balance you may go over your limit. If you are over your credit limit by $1 you will lose 35 points !

How do you quickly get your score up in this situation? Call your credit card company and tell them that you have a large purchase coming up. Ask them to increase your limit to $2,500. They won’t give you a decision over the phone but often within a week you will receive notification that your balance has been increased. You now have an extra 25 points with one phone call. You can also ask them to lower your interest rate so that you can pay your balance down quicker. Most people don’t realize that credit card companies will do this. You can also move your credit card balance over from a high interest department store card at 26% to a lower interest bank card at 9.95%.

2- Types of credit used – credit agencies want to see proper usage of revolving credit ( i.e.: credit cards) and installment credit (i.e. car loans) . They also want to see that you have over $2,500 in available credit. You probably have a credit card but you may not have an installment loan showing on your credit report. You don’t have to buy a car to get this showing on your report. Consider getting a $1,000 RRSP loan from your bank. Why? Well, $1,000 is a substantial loan. Your bank or credit union will be more willing to lend you money for an RRSP that you may buy from them than they would lending you the money for a gambling junket to Vegas.

The RRSP loan is a win/win for you. Besides increasing your credit score and thickening your credit file you will get a tax refund at the end of the year which can be used towards your down payment. 90 days after you open your RRSP you can use the money towards your down payment under the Home Buyers Program up to a maximum of $25,000.

Credit history – don’t close the old credit card you got in university just because you aren’t using it.

Chances are that this card is still reporting month after month that you have credit with them and that the balance for that month is $0. Finally this brings me to my best tip for building credit.

Payment History – Recently I had a young client who wanted to renew his mortgage. When I obtained his credit report I was surprised to see that he had a 900 credit score. This is the highest score possible and usually it is reserved for older people with 20+ years of credit history. When I asked him how he managed this he told me that the only thing he does differently is that he checks his credit card balance every week and pays it off to $0. I knew that people who paid bi-weekly often had higher scores from having more payments showing in their history but this was the first time I had ever heard of someone paying weekly. I am not certain if it’s the number of payments, the fact that the balance is $0 so many more times or a combination of the two factors.
Recently, using these techniques I was able to raise a client’s credit score by 60 points in one month.

If you want to buy a home and you suspect your credit is weak, your first call should be to a Dominion Lending Centres mortgage broker. They can check and make suggestions to get your credit score up and to get you into a home a lot sooner than you could do this on your own.

David Cooke
DAVID COOKE
Dominion Lending Centres – Accredited Mortgage Professional