27 Jan

How Much Does Mortgage Rate Really Matter?

General

Posted by: Alisa Aragon

A great discounted rate on your mortgage is worth nothing if it’s going to cost you thousands in penalties down the line. As seen in REW.ca.

More often than not, borrowers are fixated on their mortgage rate because it’s the one aspect of their home financing they know to ask about. But it’s important to look beyond the mere rates and look into the bigger picture surrounding what is significant when it comes to your specific mortgage needs. It is important to compare apples with apples.

If we dollarize the difference between 2.99 per cent and 3.04 per cent, for instance, it works out to an additional $2.66 in your monthly payment per $100,000 of your mortgage. Over the course of a five-year term, this culminates into just $159.60 per $100,000.

While “no-frills” mortgage products typically offer a lower – or more discounted – interest rate (like the 2.99 per cent used in the example above), when compared with many other available products, the lower rate is really their only perk.

The biggest problem with looking at rate alone is that you may end up paying thousands of dollars in early payout penalties if you opt for a five-year fixed-rate mortgage, for instance, and then decide to move before the five years is up.

No-frills mortgage products won’t let you take your mortgage with you if you purchase another property before your mortgage term is up – for example, portability is not an option with this product. Portability is an important option that could save you money over the long term if the home of your dreams is within your reach before your mortgage term is up and rates have risen, which they have a tendency to do over a five-year period.

This type of product is only plausible for those who have minimal plans to take advantage of benefits that will help pay off your mortgage faster – such as pre-payment privileges including lump-sum payments and increase your mortgage payments between 15 and 20 per cent without penalties.

Other things to consider is whether you are getting into a collateral mortgage or a conventional mortgage. Unfortunately, many people don’t realize they have a collateral mortgage until it comes time to renew and they don’t have the flexibility they need.

It’s understandable why these products may seem appealing. After all, not everyone feels they have the extra cash to put down a huge lump-sum payment. And who needs a portable mortgage if you’re not planning on moving any time soon?

But it’s important to remember that a lot can change over the course of five years – or whatever term you choose for your mortgage. You could get transferred, find a bigger house, have children, change careers, separate from your spouse, etc. Five years is a long time to be anchored to something.

Many people won’t sign a cell phone contract for longer than two years that they can’t get out of, so why would they then sign a mortgage for five years that they can’t get out of?

The thing is, you can still obtain great mortgage savings without giving up the perks of traditional mortgages. For starters, many lenders are willing to offer significant discounts if you opt for a 30-day “quick close.”

And there are many other ways to save money. For instance, by switching to weekly or bi-weekly mortgage payments, or by obtaining a variable-rate mortgage but increasing your payments to match those of the going five-year fixed rate, you will be ahead of the typical discount of a no-frills product before you know it and you won’t have to give up on options.

Banks don’t give anything away for free – they are there to make money. That’s why it is essential to discuss the full details surrounding the small print behind the low rates. It’s also important to take into account your longer-term goals and ensure your mortgage meets your unique needs now and into the future. As mortgage experts will help you find that balance by finding the best mortgage for you.

7 Jan

Need to Fund Home Accessibility Renos? Here’s Help

General

Posted by: Alisa Aragon

Did you know that if you’re a senior or have a disability, you can get a tax credit for renovations to make your home accessible? As seen in REW.ca

The BC seniors home renovation tax credit assists individuals who are 65 years of age or older with the cost of certain permanent home renovations to improve accessibility or help the senior be more functional or mobile at home.

This program was introduced on April 1, 2012, therefore the renovation expenses must happen on or after this date. Any expenses incurred under an agreement entered prior to this date do not qualify.

When the BC government released its budget last month, it announced an amendment to the senior’s home renovation tax credit, extending the program to individuals that may be eligible to claim the disability tax credit and to the family members living with those individuals. (Learn about the eligibility to claim the disability tax credit here.)

In order to claim the credit for the year if on the last day of the tax year, the individual must be a resident of BC and a senior or a family member living with a senior.

The renovation must be completed to the applicant’s principal residence while the credit can be shared between eligible residents of the home to a maximum amount of the credit. The maximum amount of the credit is $1,000 per tax year and is calculated as 10 per cent of the qualified renovation expense to a maximum of $10,000 in expenses. This credit is a refundable tax credit, which means that if the credit is higher than the taxes the applicant owes, they will receive the difference as a refund.

The renovations or alterations that qualify must assist the senior with an impairment by improving access to the property; improving mobility and function within the property; or reduce the risk of harm within the property.

The following are some examples of renovations or alterations that qualify:

  • Lowering existing counters/cabinets or installing adjustable ones
  • Pull-out shelves under counter to enable work from a seated position
  • Doorways that are widened for passage, and swing-clear hinges on doors to widen doorways
  • Door locks that are easier to operate
  • Installing non-slip flooring or to allow the use of walkers
  • Turning bathtubs into walk-ins or showers into wheel-in
  • Grab bars and related reinforcements around the toilet, shower and tub
  • Hand rails in hallways
  • Light fixtures throughout the home and exterior entrances
  • Motion-activated lighting
  • Light switches and electrical outlets placed in accessible locations
  • Taps such as hands-free, relocation to front or side for easier access
  • Hand-held showers on adjustable rods or high-low mounting brackets
  • Lever handles on doors and taps, instead of knobs
  • Alterations of sinks to allow use from a seated position (and insulation of any hot-water pipes)
  • Increasing the height of the toilets
  • General renovation costs necessary to enable access for seniors to first floor or secondary suites
  • Wheelchair ramps, stair/wheelchair lifts and elevators

The following are some examples of renovations or alterations that don’t qualify:

  • All appliances, including those with front-located controls, side-swing ovens, etc.
  • Installation of regular flooring
  • General maintenance including plumbing and electrical repairs
  • Installation of heating or air-conditioning systems
  • Home medical monitoring equipment
  • Home security or any anti-burglary equipment
  • Roof repairs
  • Installation of windows
  • Any services to such as home care services, housekeeping services, outdoor maintenance and gardening services and security or medical monitoring services
  • Aesthetic enhancements such as landscaping or redecorating
  • Fire extinguishers, smoke alarms or carbon monoxide detectors
  • Home entertainment electronics
  • Insulation replacement
  • Vehicles adapted for people with mobility limitations
  • Walkers and wheelchairs

How to Claim the Credit?

The credit can be claimed when the applicant files their personal income tax return for 2012 and future years. Schedule BC(S12) must be completed on the tax return and put the amount that was spent on the eligible renovations beside box 6048 and form BC (479).

It is important to retain documentation to support the claim, including receipts from suppliers and contractors. If work has been performed by a family member, receipts for labour and materials must have a GST number.

If a receipt was received at the end of the calendar year and payed it in the following calendar year, the credit is to be claimed for the taxation year based on when the invoiced was received.