Month: February 2013

When is the best time to sell or buy a new home?

People begin putting their homes on the market early in the year, though peak home purchasing occurs around June once school has ended, the weather warms up, and vacations begin. In mid summer people begin to have more time to house hunt. Income tax refunds can also increase payments, adding to the increase of volume.

While buying is steady in the summer, it begins to taper off in early fall, with another spike in mid-Autumn when overly optimistic home sellers in Spring, begin to lower their prices.

Like investing in the stock market it pays to be a patient house hunter. Though there are more Springtime homes to choose from, sellers hold their prices to the ceiling because of demand. During the late fall and early winter between Thanksgiving and New Years Day sellers can be more motivated to except a lower offer (people want to limit the time to sell during these holiday seasons when they are busy with families).

Large layoffs or announcements of a planned corporate headquarters moving out of a neighbourhood can result in more homes on the market for the short term with lower pricing by motivated sellers. Conversely, a corporation coming into an area can result in increased home prices.

Homes can sell for 3-5 percent more than the annual average in May through June; closer to the average annual price in very early Spring and Autumn; dropping to 3-5 percent below the average annual price prior to winter in December and January.

Sellers generally have a larger buying market during May through August during which time nearly half of the annual sales close. Bear in mind, that while deed transfers peak between May and August, most of those sales began one to three months earlier (it takes time to close home transactions).

Don’t be too stubborn. A home priced unreasonably high (up to 15% above market value) may be difficult to sell at any time, especially in a buyer’s market (in most cases is in early Spring). A “buyer’s market” in a city means more inventory is available, whereas a “seller’s market” means fewer homes are for sale.

Where possible, place your home for sale far in advance of buying the new one. This removes the possible need to juggle two mortgage payments in addition to the other complications of home selling. You will have more time; as well as more choices if you start during your new region’s peak inventory season.

Movers book up solid in the summer so plan this well in advance once you know your closing date. Shop around and call for an estimate. Book tentative dates until you know for sure adjusting your strategies as you go along.

The Internet offers virtual tours, and neighbourhood data, to help the decision-making process. With the advent of commission free websites, some sellers are listing their homes on sites such as comFree.com without the traditional real estate agent or fees. However it is important to get listed on MLS, and few people know the intricacies of bringing an offer to the status of a concluded deal.

What types of permanent life insurance are available?

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There are several different types of permanent insurance some of which policies are similar.

Whole Life, also called “ordinary life insurance”.

This traditional permanent life insurance will cover the insured for his/her entire (whole) life. The premium payments generally remain the same for the life of the insured.

Variable Life. This permanent life insurance policy offers a fixed premium payment schedule (like whole life), while it accumulates a cash value account offering other non-guaranteed accounts which invest in securities, with the associated risk of the stock market (portfolio performance can fluctuate either positively of negatively).

Universal Life (UL). This plan offers more flexibility than traditional whole life insurance. Universal life insurance allows the policy owner increased flexibility to pay premiums on a flexible basis, versus a fixed schedule. However, a certain level of premiums must be paid into the policy to cover the costs associated with the insurance coverage. Failing to do so may cause the insurance policy to lapse. Flexible tax-deferred interest rates on the policy’s cash value (some have guaranteed interest rates) add to the appeal of a Universal Life policy.

Indexed Universal Life Insurance. This coverage provides a death benefit, with tax-deferred growth on your cash value account which is indexed to one or more stock market indices. Many allow for a guaranteed minimum interest rate to protect the policy owner against the odds of a market downturn.

Variable Universal Life (VUL). Blending the premium payment flexibility benefits of universal life insurance with an invested portfolio with the upside market potential of variable life, many VUL policies feature tax-deferred earnings. Allowed policy withdrawals and loans from the policy cash value (which will reduce the cash value and death benefit) are subject to interest charges. Like variable life insurance, VUL policies are designed to invest primarily in securities with the upside potential to grow the policy’s cash value, with the associated market risk of losing money. Purchasing the right life insurance is an important strategic decision as you aim for financial independence.

What are the most common mistakes of fund investing

Here are several common mistakes that investors can make:

  • No clear investment goals. Determine what you want from your mutual fund portfolio. This will help you choose the right investments to realistically meet your future expectations.
  • Trying to time the market. Don’t get caught timing the market – when influenced by either of the two emotions – greed or fear. Greed compels people to buy when the stock market (and a fund’s unit value) is high. Conversely fear causes many to sell when the stock market’s value (and a fund’s unit value) is low. Make regular investments to benefit from dollar cost averaging (DCA) to level out the peaks and valleys of the market. It is time in the market, not timing, that counts.
  • Not selecting investments with a long-term track record. Don’t just look at a mutual fund’s most recent performance. For a long-term investment, it is important to check out performance over one, three, five and ten year periods.
  • Shopping for a specific mutual fund, not a family of funds. The fund you select today may not be the best one for tomorrow. By choosing a reputable family of funds, you ensure that you can switch in the future with minimal cost. A family of funds also allows you to move into a money market fund if the market is reacting in a state of fearful unrest such as prior to the debt crisis and the current continuation of the debt crisis in the Euro nations. Note: Fear is measured by a special volatility index called the VIX, which when above 40 can precipitate market sell-offs which can also affect a fund’s performance. It takes great skill to navigate the market (and fund investing) at these times.
  • Investing too conservatively. Even if you are in your 50s, you still have about 30 years of investing time ahead. Look at investing some of your money for growth by using equity funds while keeping some in bond funds and dividend funds, and/or balanced funds.
  • Not seeking financial advice. Making investment decisions can be confusing and intimidating. Unless you have exceptional knowledge of the market, your portfolio could be healthier with the help of a qualified financial advisor.

Mortgage planning to fit your financial strategy

As part of your overall financial strategy, consider your mortgage strategies to access financing, reduce risk, and protect your real estate investments.

A good mortgage plan helps you keep moving forward regardless of market volatility and allows you to weigh capital gains versus losses in your favour. When dealing with your largest single asset class, you need to prepare for the worst possible situations, such as family illness, job loss, or increasing interest rates.

Look at probable contingencies and ask:

  • Can I pay for the mortgage if other unexpected expenses arise?
  • Could I end up needing to sell my residence or investment property or cottage?
  • Can I weather a real estate market downturn that could reduce the value of my property by 5 or 10%?

Other important considerations:

  • Run amortization schedules 1, 2, and 3% higher than the current market rate to see if you can pay for a higher escalating monthly mortgage payment just in case the economy shifts.
  • Consider not locking in a mortgage (keeping it open or only using a line of credit with the freedom to govern principal payments). If you determine that your plan must allow you to take advantage of selling, you may avoid future penalties.
  • Assess risks associated with a property such as an old condo with a special assessment (offloading the expense to all the owners collectively).
  • If you are nearing retirement, where do you want to live? Ask questions relative to your lifestyle preferences: “Is shopping, a park, a library, or city-life within walking distance?” or “Is there a major hospital nearby, and access to an airport or major roads such as the 401?”

The financial arrangements for your real estate can be affected by external influences, such as interest rate movements, and personal factors, such as your income and your ability to gain loan approval. The bottom line is that you must service any mortgage debt and pay down the mortgage.

Let us help you assess your situation as we help plan your best mortgage fit to suit your circumstances.

How do I make a claim as an heir to an estate?

If you intend to have control over the distribution of your estate it is important to have a testamentary trust (a will) drawn up by your lawyer.

If you die without a will, the Provincial Court will appoint the estate’s trustee referred to as the Public Guardian and Trustee. Any person claiming a share of your estate will then have to prove that they are entitled to and will have a right to inherit. Your estate will be distributed as follows:

• The largest share goes to the spouse (initial amount differs per province);
• Then the remaining estate value goes equally to the spouse and children, shared according to specific figures;
• If no spouse, to the children and descendants of the deceased, if any;
• To the parents of the deceased if no spouse or descendants;
• If no surviving parents, to brothers and sisters, and children of the deceased brothers and sisters;
• If no brothers and sisters, then to living nieces and nephews;
• When more remote relatives are involved, special instructions may apply.

NOTE: Half-blood relatives share equally with whole-blood relatives. Children include those born outside marriage and adopted ones.
The above is based on Ontario law. The law differs according to your province of residence and current law.

How do I prove that I am an heir of an estate?
You will need evidence to submit to the Public Guardian and Trustee assigned by the Provincial Court. You will need:

• Two sworn statements or affidavits. The first statement must be made by a person claiming a share of the estate (called the claimant). The second corroborates the first and is made by someone who has personal knowledge of the family history, but no monetary interest in the estate.

• A third sworn statement may also be needed from a resident who knew the deceased, stating his/her knowledge of the deceased’s reputation as to marital status and the existence of children born inside or outside marriage or adopted.

How can life insurance pay off my mortgage if I die?

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Homeowners typically insure their mortgage and/or credit line debt with the lending institution which sells creditor insurance. This ensures that the indebtedness would be paid off upon the death of the debtor. An alternative route is to purchase a life insurance policy when signing the mortgage papers. Evaluate the following questions when considering buying mortgage life insurance through a lending institution.

  • Are you limiting your life insurance death benefit coverage? The lending institution’s life insurance death benefit is generally limited to the amount left owing on the mortgage (according to its amortization schedule). Conversely, if healthy, most people can purchase an amount well over their home mortgage debt. An increased death benefit could cover multiple liabilities such as increased debt resulting from fluctuating lines of credit, credit cards, or home renovation loans with any creditor.
  • Can you establish or change the beneficiary? Owning your own distinct life insurance policy allows you to designate and/or change a beneficiary who would have the choice of using the money for an alternate purpose, as circumstances require. For example, a surviving spouse may simply desire to keep a low-interest mortgage. He or she would have the option to invest all the life insurance proceeds or pay off higher-interest debt. When using creditor insurance the mortgagee is the only recipient of all of the proceeds.
  • Is the death benefit creditor-proof? If you own the life insurance policy, the death benefit payment is generally creditor-proof. With creditor insurance only your financial institution collects the proceeds at death.
  • Who will own and control the life insurance coverage? You have no ownership or control over a life insurance policy bought only to pay off the debt of a mortgage with one financial institution. It terminates upon repayment of the mortgage; or when you rewrite your mortgage with a different financial institution; or if you sell your house, or foreclosure occurs.
  • How can I ensure the portability of my mortgage insurance? Many people like to shop around for lower interest rates and/or unique mortgages. An individual life insurance policy may be kept as long as you wish, for portability from mortgage to mortgage among different lending institutions, or for other life insurance needs; such as if you were eventually to have capital gains tax payable on your cottage or a second residence at death. This can also be pre-funded when you own your own more permanent policy.
  • Can mortgage insurance be cancelled? Personally owned life insurance policies cannot be cancelled by the insurer. However, the creditor insurance may be cancelled upon renewal of the mortgage, especially if one’s health deteriorates. Such cancellation may mean that you have become an “uninsurable risk” by the next time you renew your mortgage. It is precisely during a health problem that one might choose to increase the mortgage or associated debt (where the home is the collateral in a hybrid type of mortgage with lines of credit, etc.).
  • Can you customize your coverage? Unlike creditor insurance that is directed by the creditor to provide protection for the creditor, personally owned life policies allow individuals to tailor their coverage to their specific needs and requirements. Such flexibility could allow for the inclusion of policy provisions that would allow for the purchase of additional insurance regardless of health, the conversion of a term policy into permanent coverage, or a variety of other customizable options to meet individual needs.
  • Will a surviving joint-owner retain coverage? Creditor insurance may cover two parties who jointly mortgage their property. However, it pays only on the first death, even if the two were to die. When one spouse dies, creditor insurance no longer covers any survivors. In contrast, by owning your own insurance policy, two spouses or partners may each own separate life insurance death benefits. In the case where both parties die, double the benefit would be paid, thus adding increased value to the estate. If one survives, the coverage on that life continues.
  • Can you avoid future insurance medicals? If one is currently healthy it may pay to take the opportunity today to acquire a personally owned life insurance policy––or increase the coverage on an existing plan––and keep it over time. In this way, you may be able to sidestep the limited future functionality of mortgage insurance offered by creditors. Many group insurance plans and creditor plans offered by insurance companies are asking for full medicals before initiating the coverage.
  • What about group plans offered at work? Similarly, insurance offered by any group benefit plan, especially in light of plant closures, carries the risk that group insurance would be lost at some point. And any plan offered by a bank or a credit card is actually some form of a group plan offering no true ownership, portability, or guarantee of long-term continuance.

Note: Before cancelling or excluding the use of creditor insurance, make certain that you are properly protected with a life insurance policy benefit appropriate to your financial needs. In some cases, you may need to assign a life insurance policy for collateral at a financial institution. There may be disability insurance coverage included with your creditor insurance that may be important to acquire or retain. There may also be costs or fees associated with cancelling or replacing an existing policy.