Canadians spending more on fixing homes than buying new ones as renovations top $68 billion

Posted by Richard Kitts on Wed, Jul 15, 2015 @11:28 AM

While renovations are often a very sound investment decision in both quality of life and increased value of your home, the quality of the financing is also a facture in the renovation costs over time.

Your savings is always the best way to pay for renovations, however, quite often the ability to save this sort of money is often out of reach for most consumers.  Instead, Home owners use their credit including Credit cards, Unsecured Lines of Credit, Renovation Loans and Secured lines of Credit to finance the project.  I would not recommend the use of unsecured credit,  unless you have a plan to pay it off very quickly or convert it into secured Credit at lower rates.   

While secured lines of credit seem to be the best choice, if you do not have the cash flow to pay it off quickly, not only does your quality of life diminish, but your investment starts costing you much more.

Secured lines are being pushed by The Banks as an add on to the mortgage, low  interest only payments, pay off anytime without penalty and lower rates. All sounds great, but unfortunately consumers are drawn into these Secured Lines without a plan to pay them off quickly or maybe over invest in renovations because the payments are so low. 

If you compare the lowest variable rate mortgage to the fully open secured variable line of credit, your cost will be 1.25% more on every payment. That’s 36% more in interest costs, so you better be paying this off very quickly!!!  

There is also the collateral charge issue, Banks control over your credit and the consumers ability to shop the Mortgage / Secured line of credit. That’s another discussion.  

Please contact us anytime and make us part of your renovation project!

Richard Kitts, AMP

President/Mortgage Broker | Tristar Funding Corporation o/a The Mortgage Centre

Licence Number: M08002010

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Maybe it’s the influence of all those home renovation shows or perhaps it’s the cost of moving, but Canadians are increasingly spending more money to update their houses than to purchase new ones.

renovation

A new survey shows renovation spending reached $68 billion in 2014, $20 billion more than was spent on new homes last year.

Some of it is the so-called “HGTV effect,” according to Altus Group, but Peter Norman, chief economist with the real estate research company, said it’s also because the housing stock in Canada just keeps getting older.

“There are a number of homes out there that are more 50 years old and they require a lot of work all the time,” he said, adding that low interest rates have probably helped the renovation sector more than the new home sector. “Every person who renews their mortgage from five years ago renews it at a lower rate. To a lot of people that frees up cash they’ll put back into their house.”

Altus expects the spending on renovations to continue to grow by three per cent annually in 2015 and 2016, which would leave renovation outperforming the general economy.

Renovation spending is now such an important part of the overall Canadian economy that it accounted for 3.4 per cent of gross domestic product in 2014.

Most of the spending, three out of every four dollars, is going toward alterations or improvements. The rest of the spending is primarily going towards repairs.

Gregory Klump, chief economist for the Canadian Real Estate Association, said strong real estate sales ultimately lead to renovation spending. The average amount of money spent on renovations following a real estate sale was $9,535 in 2013.

“Often it can make a lot of economic sense to renovate instead of moving,” Klump said.

From the 2000s up to the recession, renovation spending grew by 8.7 per cent annually. Post-recession it grew by 2.6 per cent annually.

Phil Soper, chief economist with Royal LePage Real Estate, said the biggest reason for the uptick in renovation spending might be the cost of homes.

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http://business.financialpost.com/personal-finance/mortgages-real-estate/canadians-spending-more-on-fixing-homes-than-buying-new-ones-as-renovations-top-68-billion

 

 

Tags: Kitchener-Waterloo Mortgage, mortgage broker, economy, real estate, renovations

KITCHENER WATERLOO BECOMING MORTGAGE FREE SOONER PLAN TIP #5

Posted by Melanie Cota on Wed, Jan 02, 2013 @12:30 PM

Make a lump sum anniversary payment

Most mortgages allow you to make extra payments each year, which is applied directly to the principle.  Take advantage of this by making a lump sum payment each year on your mortgage anniversary date.  Even if the amount is a small $100 – every little bit counts.  Did you know most mortgages allow this prepayment to be spread over the entire year with a minimum payment amount on any payment date?  This can sometimes be an excellent tool for budgeting as you can increase and decrease this payment substantially leaving you the flexibility to pay quickly without the worry of being stuck with large payments.  This is the key privilege to our Mortgage Free Sooner Plan.

KITCHENER WATERLOO BECOMING MORTGAGE FREE SOONER TIP # 4

Posted by Melanie Cota on Wed, Jan 02, 2013 @12:22 PM

Contribute to your RRSP’s

By contributing regularly to your RRSP’s, not only are you able to save for your future, but you can also take the tax refund you receive and put it directly towards your mortgage.  The best of both worlds!

Check out this RRSP Tax Savings Calculator to see how much your tax return would be by contributing into your RRSP.  For instance, if you contributed $2,000 and your Income Tax range is between,   $35,501 - $62,500, you would receive a refund of $ 624.80 on your initial $2,000 investment.  By applying $624.80 annually towards your mortgage, you would save thousands of dollars in interest over the life time of the mortgage. 

Tags: rrsp, lump sum

KITCHENER WATERLOO BECOMING MORTGAGE FREE SOONER PLAN TIP #3

Posted by Melanie Cota on Wed, Nov 14, 2012 @04:11 PM

Increase Your Mortgage Payments

Many mortgage clients wait until they are well into their mortgage term before they consider increasing their payment, and by then a lot of interest has already been paid. The best time to tackle interest charges and receive huge returns is always at the beginning of any mortgage or loan. 

Most lenders will allow you to increase your payment by a certain percentage amount. For example: If you have a mortgage of $200,000 with monthly PI payments of $1,000, and you were allowed 15% increase in payment, then you could increase your payment to $1,150. Of course, not everyone can afford to do this. If you consider even a small increase of $50/month starting from your first payment, your amortization would drop almost 2 years and save $22,000 in interest charges

The quicker you can pay off your loan, the more you will save in interest. Another painless way to make your mortgage disappear faster is to roundup your mortgage payments. So, if your accelerated bi-weekly mortgage payments are $543, consider rounding up to $600 instead. The extra $57 will do wonders for your mortgage, and chances are you will barely notice a difference in your monthly budget.

As a safety net, if you increase your payment, you can always decrease it back to the original amount. 


KITCHENER WATERLOO BECOMING MORTGAGE FREE SOONER PLAN TIP #2

Posted by Melanie Cota on Wed, Nov 14, 2012 @04:08 PM

Put Found Money Towards The Mortgage

Unexpected sources of money are “found” money, and can easily be applied to the mortgage amount without any impact to your budget, because it wasn’t planned money.  This can be anything from a bonus, to birthday money.  What an excellent way to save money and get a guaranteed rate of return! Many times, these gifts or bonuses are spent on frivolous things that feel great at the moment, but soon lose their lustre when there is nothing to show for it.   By placing it in your mortgage it becomes an “out of sight, out of mind” savings with huge returns and future benefits.

KITCHENER-WATERLOO BECOMING MORTGAGE FREE SOONER TIP #1

Posted by Melanie Cota on Mon, Aug 27, 2012 @12:06 PM

canadian money

ACCELERATED MORTGAGE PAYMENTS

This is the most popular way to pay off a mortgage faster, and there are 2 ways to go about doing this; both will save you some money along the way but one more so than the other.

OPTION #1:

Twice a month (or whatever frequency works best for you) the total you would normally pay on a monthly payment plan.  For example, if your monthly mortgage payment is $1000, you can opt to make two payments a month of $500 each.  You’re not paying any more than you have to each month, although you will save a bit on interest by making part of your monthly total payment early.

OPTION #2 (Mortgage Fighter’s saving option)

Pay weekly or bi-weekly accelerate payments instead of one monthly payment.  Why does this save you money?  Well, not only will you save money on interest like you would with the first option, but it’s also a way you might not notice that you actually are making a couple extra payments each year.  Let’s say for example, your monthly mortgage payment is $1000 for a total of $12,000 per year.  If instead you decide to pay $500 every two weeks, you’ll actually end up putting $13,000 a year against your mortgage.

Tags: Kitchener, KW, Guelph, Mortgage Free Sooner Plan, mortgage, Debt free, Waterloo, mortgages, best interest rate, rates