Fall Market Update

General Lyndsay Gavrilovic 28 Sep

As you may have heard, The Bank of Canada opted to maintain its policy rate at 5% as of September. The recent rate hikes over the spring and summer have slowed the housing and mortgage markets as potential buyers were unsurprisingly spooked by the rise in mortgage rates. More recently, fixed-rate loans have become more expensive because of the rise in longer-term interest rates. As a result, housing affordability became a bigger hurdle and led to a slight decrease in home prices by 6% in major markets over the summer.

With The Bank of Canada currently maintaining the 5% policy rate, many hope this will be the peak in overnight rate changes. If so, homeowners and potential buyers will be granted some breathing room. We will find out more with their upcoming announcement on October 25th.

As we turn the corner into Fall and start looking ahead to the coming year, analysts are forecasting stronger housing markets. The expectation is that The Bank of Canada will gradually cut interest rates by mid-year, allowing potential buyers to better navigate their affordability.

As the supply shortage continues, new listings are likely to rise and provide much-need inventory. As we move into 2024 and start to see interest rates decrease, motivated sellers will move off the sidelines and housing demand is expected to be resilient.

For anyone who is thinking about purchasing this season, it is important to get pre-approved to guarantee your interest rate for 90-120 days while you shop the market. This way, you will avoid being impacted by potential rate changes and can properly estimate your budget for mortgage costs. Plus, pre-approval will indicate to the seller that you will not have issues obtaining financing (assuming nothing changes between now and the purchase with your job, savings, etc.), which is key during the current economic landscape.

To help you make the best decision possible, download the My Mortgage Toolbox app to determine what you can afford, and what your mortgage would look like at various interest rate levels.

You can also reach out to me a DLC Mortgage Expert today for unbiased advice if you have any concerns, questions or just want to get started on your pre-approval!

-Written by DLC Marketing Team

Avoiding a Fall Financial Storm!

General Lyndsay Gavrilovic 22 Sep

A July 7 report from Statistics Canada on the financial state of Canadians says that, “Middle-income earners were affected most by inflationary pressures over the last year, as they spent an average of $1,306 more than they earned in income in the first quarter of 2023, while they had positive net saving of $521 in the first quarter of 2022.”

2022 was financially difficult for many of us… but the data indicates that a financial disaster may be on the way!

If you need some food for thought about how to handle a potential coming financial storm….. here are three things keep in mind.

RECONSIDER YOUR BIG THREE:

The “big 3” expenses for Canadians are housing, transportation, and food. Adjusting your lifestyle can save you huge money in these areas. For example, having a roommate isn’t for everyone and you may have grown to like your independence, but it could instantly cut your expenses in half. If you are a homeowner, the demand for rental housing is surging and you may be able to rent a room to a student or even do some short-term Airbnb rentals to help with the mortgage.

Cars are another money pit for Canadians with the average price of a new ride now at $66,000 and financing rates hovering around 7%. The average car payment has gone from $577 in June of 2019 to $797 in June of 2023. Add that to the average Canadian gas prices of $1.68/litre and much higher prices for everything car-related from snow tires to an oil change. It’s easy to see how driving is taking a much bigger bite out of your paycheque these days. Going without a car might not be an option, but the inconvenience caused by going from a two-car family to a one-car family or to a cheaper/smaller/more fuel-efficient car might be looking a lot more tolerable given the savings.

Groceries are expected to run about $16,000 annually in 2023 for a family of four, so food is definitely an area that deserves attention. The news is full of tips and tricks for cutting back, so just start using a few that work for you. It could be searching the flyers and loading up on specials, clipping coupons, buying no-name, sticking to the shopping list, or a combination of these. There is almost always a cheaper food option and you have to balance your menu with your budget… do you buy Starbucks beans or a jumbo can of Folgers ground?

STAY CALM AND LEARN TO DISMISS THE HYPE:

Constantly being worried about “what could happen” only leads to unnecessary anxiety. We are constantly bombarded by cable TV news, you-tubers, internet experts, naysayers, pundits, social media influencers & fin-fluencers… and it can really pile on the stress. It can also lead to a lot of illogical decisions. Nobody can predict the future and we sometimes forget that fact when we are bombarded by hyped-up news reports day after day. Financial market “experts” are a great example. There is always a steady stream of them predicting a huge stock crash and occasionally, they do get it right. However, the truth is that most of these predictions are flat-out wrong, and you would be much better off to ignore them and simply ride out any market downturns.

FOCUS ON WHAT YOU CAN CONTROL:

No matter how much you read or talk about inflation, recession, financial markets, or interest rates, all of these issues are way out of your control. There is no point trying to second-guess what the Bank of Canada may do to interest rates, or which way stock markets will move. If you are going to stress over your finances, focus on the things you can control — like reducing your spending, increasing your income, or learning to better manage and invest your money.

Financial storms come and go and this won’t be the last. Keep you core expenses in check and your mindset calm and you will get through it!

-Written by DLC Marketing Team

How do you Measure Your Financial Growth?

General Lyndsay Gavrilovic 11 Sep

If you are reading this you probably have a keen interest in improving your financial situation — but how are you going to measure your progress?

The easiest way is by setting and achieving a goal. This could be short-term and focused, like wiping out a credit card debt. On the other hand, it could be a long-term goal like burning the mortgage five years ahead of time after twenty years of scrimping and saving.

Achieving either of these goals is a great accomplishment, but they may not tell the whole story. The problem with both of them is they are independent from all of the other factors that affect your financial standing. What if the value of the house you just paid off has dropped 20% over the last year, or you eliminated one credit card balance only to see another card or line of credit head in the opposite direction?

No single metric tells the whole story of your financial progress. Paying yourself first and diligently putting $300 from every paycheque into your RRSP will definitely help you hit your retirement goals. However, you also need to monitor the growth from investing your RRSP as well as any other assets that are contributing to your retirement fund and ensure the total value is steadily tracking towards your goal.

Cash flow is another common measure of financial progress. Tracking your income and expenses helps you understand how much money you have available after covering your costs. Positive cash flow is a surplus that can be used for saving, investing, or paying down debt — but it doesn’t measure how effective you were at putting that cash surplus to work. You may think you are making progress, but if you let the cash sit in a bank savings account instead of a GIC in your TFSA, then you actually made comparatively poor progress.

If you want to keep it simple and look at only one metric to get a holistic view of your financial health, measuring your net worth can provide you with valuable insights. It’s an easy-to-understand concept that will help you analyze your financial health and overall progress towards your financial goals.

Calculating your net worth isn’t all that difficult and although it represents only a snapshot in time, the main advantage is that it provides a comprehensive snapshot. It takes into account all of your assets (such as cash, investments, real estate, and valuable possessions) and subtracts your liabilities (such as debts and loans). Monitoring your net worth forces you to be aware of all your financial accounts and can help you make more informed decisions about your spending, saving, and investing habits.

As you work to increase your assets and reduce your liabilities, your net worth should show positive growth. This signifies that you’re making smart financial decisions and accumulating wealth over time. Seeing your net worth increase can be motivating and reinforce positive financial behaviors. On the flip side, if you notice a decline, it can signal that you need to reevaluate your financial decisions and make necessary adjustments.

Monitoring your net worth helps you understand how effectively you’re building wealth. Although the market value of assets such as stocks or real estate fluctuate, comparing your net worth to previous periods can still help you evaluate the effectiveness of different financial strategies you’ve implemented. This allows you to refine your approach and make changes as needed.

Your net worth is an essential factor in assessing your retirement readiness. It helps you determine if you’re on track to maintain your desired lifestyle during retirement and whether you need to adjust your savings and investment strategies. It can also influence your estate planning decisions. It’s important for determining how you want your assets distributed after your passing and for considering strategies to minimize potential estate taxes.

There are lots of ways to measure financial growth and no one method is perfect, but keeping an eye on your net worth is a relatively easy task that will do wonders for your motivation — why not give it a try?

-Written by DLC Marketing Team

Converting Your Basement to an Income Suite

General Lyndsay Gavrilovic 6 Sep

With the current interest rates and economic scenarios, many Canadians may be looking for ways to bring in some extra cash. One option for this is to put your home equity to work and consider renovating your basement into a legal income suite! You can do this by using a secured credit line (home equity line of credit or HELOC) to help fund the upfront cash to make changes to your home.

A few things to consider before you invest in renovating to create an income suite include:

Zoning: Before looking into doing anything with an income suite, always double-check if you are zoned accordingly for a smooth renovation. If your zoning does not allow for secondary suites, see if you can rezone.

Local Regulations: Depending on your location, there may be particular regulations that you need to follow or be aware of regarding your suite. A few examples of how the regulations can differ between provinces or cities include:

  • In Coquitlam, you cannot have a suite that is more than 40% of the main house floor plan. You are also required to offer a parking spot for tenants.
  • In Kelowna, you can only have one secondary suite and the home must have an “S” designation.
  • In Calgary, updated zoning legislation has now made it easier to add income suites.
  • Toronto has also proposed reforms that will make it easier to add suites.
  • In Montréal, anyone carrying out a project involving the addition of at least 1 dwelling and a residential area of ​​more than 450 m² (equivalent to approximately 5 dwellings) must enter into an agreement with the City of Montréal in order to contribute to the supply of social, affordable and family housing. It can be a new building, an extension, or the conversion of a building.Visit the official municipal websites or consult local building departments to obtain accurate and up-to-date information on the rules and requirements in your area BEFORE getting started.

    Insurance & Legal Considerations: Before adding your secondary suite, ensure that you have proper insurance coverage or the ability to add additional coverage to protect both the primary residence and suite. In addition, you will want to consult a lawyer and draw up a tenant or rental agreement for any potential tenants. Ontario has a mandatory standard lease agreement that all landlords must use.

    Unit Layout and Design: If the zoning and regulations in your area allow you to build an income suite, the next steps are to look at the suite layout and dimensions. Confirm any size restrictions or minimum ceiling height requirements as you are laying out the design for the unit. The unit should have, at minimum the following:

    • A separate parking space for the renter.
    • A separate entrance, kitchen, bathroom, and living/sleeping areas.
    • Ventilation and soundproofing measures to enhance livability.
    • Consideration of natural light.
    • Interlink smoke detectors for primary and secondary residences.
    • Separate, independently-controlled ventilation and heating system.
    • Proper drainage, sewage connections, and utility separations.
    • Outlets, circuits, and lighting that meet electrical code requirements.Ensure that however your income suite is designed, you are hiring the appropriate building, plumbing, and electrical experts to ensure your suite is up to code and avoid any potential disasters.

      Building & Trade Permits: Once you have confirmed that you are properly zoned and able to add an income suite and understand all the regulations for your area, you will want to draft your blueprints and submit a permit application, along with the fee, before you get started. For instance, in B.C. you are required to have a Building Permit for any suite to be considered legal.

      IMPORTANT: Even if you are not required to have a building permit, it is important to get these permits for other aspects including insurance coverage should anything happen. Having a building permit will help protect your investment.

      In addition to your building permits, you will need to get permits for any plumbing, electrical, and gas renovations prior to beginning your work.

      Inspections & License: Once you have your permits and have begun construction, make sure you understand what inspections are required throughout the process and you schedule them accordingly with local authorities to ensure compliance with building codes, fire safety standards, and health regulations.

      If the work meets all requirements, your suite will be approved. The last step is determining if you need a business licence. This is not required if your family (parents, children, etc.) will be living in the suite. In Vancouver, for example, if you intend to rent out your suite long-term, you DO need a license. Be sure to check any rules on this in your area.

      Incentives: Beyond the ability to earn extra income per month, there are a few additional government incentive programs when it comes to suites including:

    • First Nations: If you live on a First Nations reserve, you may be eligible for federal funding that will provide up to $60,000 to help you build an inexpensive secondary suite rental linked to your principal home. If you live in a northern or remote area, this amount is increased 25%. This is a 100% forgivable loan that is not required to be paid back assuming all guidelines are followed.
    • Residential Rehabilitation Assistance Program (RRAP) – Secondary and Garden Suites: This program is open to all First Nations or individual First Nation members, particularly those who own a family home that can be converted to include a self-contained suite for a senior or adult with disability.
    • Multigenerational Home Renovation Tax Credit: A credit for a renovation that creates a secondary unit within the dwelling to be occupied by the qualifying individual or a qualifying relation. The value of the credit is 15% of the lesser of qualifying expenditures and $50,000.
    • British Columbia: Beginning in early 2024, BC homeowners will be able to access a forgivable loan of 50% of the cost of renovations, up to a maximum of $40,000 over five years, for income suites.
    • Ontario: There are multiple secondary suite programs throughout Ontario, depending on your region. These loans provide $25,000 to $50,000 in funding and are forgivable assuming continuous ownership for 15 years.

While it is important to look online and do your research. Your best resource will be visiting local authorities at the “City of” to confirm that you completely understand the considerations before moving forward with implementing an income suite.

-Written by DLC Marketing Team