We didn’t do our first home legwork

Tina Di Vito heads the Bank of Montreal's Retirement Institute.

Supplied photo

By Tina DiVito | Mon Jun 20 2011

In my 20s, my husband and I purchased our first house in Pickering. It was an exciting time. Thinking back, housing prices were on the decline but interest rates were hovering around 10 per cent. We were young, but we really wanted to own our own home and start to build a financial foundation.

While we had saved the required 25 per cent for a down payment, the minimum mortgage payment seemed huge. But I was working as a chartered accountant and my prospects were good; my husband also had a good job. It just made sense to pay ourselves rather than a landlord.

We quickly found out that the carrying the costs of home ownership were a lot bigger than we had thought. We needed furniture and new appliances, including a stove, fridge and washer and dryer. We hadn’t factored in unexpected things like a new fence, or monthly bills like heat, electricity, water and property taxes, not to mention the extra transportation costs to take us into downtown Toronto where we both worked. When the first mortgage statement showed up in the mail, we were shocked that most of each payment was interest and just a tiny part was the principal.

We quickly realized our mistake. The only costs we’d really considered were the down payment and monthly mortgage payment. We hadn’t done the legwork to find out how much money it could take to cover all the other responsibilities of owning a home.

Over the next few years we were house poor. We didn’t have anything extra to contribute to savings like an RSP; we couldn’t afford to travel, and we had to minimize extras like restaurant meals. It was not quite the lifestyle two young professionals expected to live! The house – or in fact, paying the mortgage – became our sole focus.

In the end, it turned out to be the right decision – mostly because we maintained a strict budget. Also, interest rates began to fall, meaning we were able to renew the mortgage at a lower rate. As a result, we were able to continue investing in our home and moved up to a larger one a few years later.

But we were lucky – it might not have turned out that way. If one, or both of us, had lost our job or we’d been faced with a major repair, things could have been different.

It brings home the importance of developing a financial plan that takes into account all aspects of your finances before you take the big step of buying a home. It should include such things as:

 • Saving for as large a down payment as you can afford;

 • Keeping some money aside in an emergency fund;

 • Creating a family budget and sticking to it! Know how much you are spending and where you can reduce costs;

 • In addition to a down payment, always set aside some money for those “extras” such as buying furniture, appliances, lighting fixtures – and don’t forget the lawn mower;

 • Saving as much as possible to make extra payments to pay off your mortgage faster;

 • Making sure that your total housing costs, including mortgage payments, property taxes and heating costs do not exceed one-third of your household income.

You may well find out, in the end, that you’re not ready to buy a house. That might be depressing, especially with all the voices out there that say you should, but if you can’t really afford it, it’s the right choice.

For all your mortgage needs call: Eduarda (Eddie) Pita - 416-920-9931

Courtesy of: http://www.moneyville.ca/article/1011806--we-didn-t-do-our-first-home-legwork

Letting your savings work for you. By Eduarda Pita - Toronto Mortgage Broker

Eduarda (Eddie) Pita – www.eddiemac.ca - (416) 920-9931


Letting your savings work for you. By Eduarda Pita - Toronto Mortgage Broker

Let’s face it. You’ve worked hard and saved when and where you could. To most Canadians, this is a part of everyday life. Well now finally, let some of the money you have worked for do some work for you.
In 1992, the Canadian Customs and Revenue Agency (CCRA) introduced the Home Buyers’ Plan (HBP). The HBP plan allows for Canadian consumers to withdraw up to $20,000 from their RRSP, to use in assistance of purchasing their first home. In the case of a couple if they are both eligible, the number is doubled up to a total of $40,000.
Most people use this RRSP withdrawal to add to any down payment they have already amassed to put down against the purchase price of their home, to either lower the amount of mortgage they will require, or increase the amount of the mortgage they can carry.
Sound too good to be true? Not exactly. Any amount that you may have deducted must be repaid back into your RRSP account in annual payments. You have 15 years to repay this amount, or if you don’t it will be added to your taxable income for the year and you will be taxed accordingly.
By using these funds, if you have them invested in RRSPs, you get the money working for you in a tax free and efficient way. What happens if you don’t have any RRSPs? The following strategy may be right for you. If you have the room under your RRSP cap, you can borrow funds from your bank and purchase RRSPs to later contribute to your down payment. Not only are you helping yourself today, but building a nest egg for your future.
To find out if you have room under your RRSP cap to contribute look in your Notice Of Assessment (NOA). The government will give you a figure, which is usually a percentage of your reported income annually. If you haven’t used the RRSP for that year, either partially or in full, the balance gets carried forward and added to the next year’s total. If you don’t keep your NOA’s, you can get your latest one by calling the CCRA at 1-800-959-8281.
A couple of words of caution: plan early. If you think that this may make sense for you and your financial position, take the steps you need to commence and start today. In an interest rate environment such as the one we face today, where rates are on the rise, make your decisions early. It could save you hundreds if not thousands of dollars.
Keep in mind, an RRSP is an investment into your future, so in case you can’t afford to pay your mortgage or have no income for a while and are forced to sell your home, you may lose your down payment, along with it your future savings.
For more information contact me and I will give you guidance, and help you decide what’s right for your situation.


Have more questions?
Send it to mortgages@eddiemac.ca

Why Use Mortgage Brokers? by Eduarda Pita

Eduarda (Eddie) Pita – www.eddiemac.ca - (416) 920-9931

Why Use Mortgage Brokers? 
by Eduarda Pita

Mortgage Brokers are independent, trained professionals licensed to represent and provide you with the best advice for your mortgage needs. Mortgage Brokers primary expertise is locating funding for mortgage financing. They know where the best rates can be found. What's more, they have the knowledge required to present a proposal for financing to lenders in the best way possible to successfully obtain mortgage financing. They negotiate, place, assist in placement, find or offer to arrange mortgage loans on residential and commercial properties for you, the borrower.

Why deal with a Mortgage Broker?
Mortgage Brokers represent you, the customer, not the lender. Because they are not employees of a lending institution, Brokers are not limited in the product they can offer you. Brokers seek out the best lender package to suit your specific situation, whether it’s with a Chartered Bank, Trust or Insurance Company, or Private Funds.

Unlike the banks, Brokers don’t cross-sell their clients. They will not encourage you to bring over your savings, checking or credit cards to get their best rates. Brokers can find you the very best rates from multiple lenders nationwide…not just the rates of a single institution.

Brokers are also less concerned than banks about buyers who are self employed, recently divorced or have damaged credit histories including bankruptcies. The can easily originate loans for the self-employed and those preferring no documentation or low documentation loans. It’s also much easier to acquire financing for investment properties and vacation homes through a broker. Very importantly, Brokers are very wiling to work on YOUR TIME … not just during banking hours.

There is a wide assortment of options and features available to homebuyers today. Shopping around takes a lot of time and effort. The mortgage process within today's very competitive marketplace intimidates many Canadian homebuyers. It pays to work with a mortgage professional who will represent you and ensure the mortgage you get is the one best suited to your needs.
Since real estate tends to represent the single largest investment most of us ever make, it is vital to secure the best financing available. Every borrower has different needs, every property is unique and every lender has its own rules and programs.

Choosing the wrong mortgage can cost you thousands of extra dollars. Mortgage Brokers are trained professionals who can help you save on your mortgage dollar.

10 Reasons to use a Mortgage Broker

• Access to over 75 different lenders, banks, trust companies, investors and financial institutions.
• Fast credit and loan pre-approvals with no cost or obligation.
• Up-to-date on all the mortgage rates, terms and re-payment options available on the market.
• They only specialize in mortgages and are knowledgeable on current trends.
• They are experts at matching you with the best-suited mortgage.
• Get mortgage rates at wholesale, guaranteed up to 120 days.
• They work for YOU, not the bank.
• They increase competition in the market place, thus keeping rates low.
• They save you time and money!
• Brokers have vested interest in satisfying your needs since they rely on referrals and repeat business.

Have more questions? Send it to mortgages@eddiemac.ca

Is a 40- year Amortization Mortgage right for you? by Eduarda Pita

Eduarda (Eddie) Pita – www.eddiemac.ca - (416) 920-9931


Is a 40- year Amortization Mortgage right for you? 
by Eduarda Pita

Longer or shorter - your amortization affects how much your mortgage really costs.
Choosing the length of your amortization period, which means the number of years you will need to pay the full balance of your mortgage, is an important decision that can affect how much interest you pay over the life of your mortgage.
Historically, the banking industry’s standard amortization period has been 25 years, a standard that still applies today. It is the benchmark that is used by lenders when discussing mortgage offers, and it is usually the basis for mortgage calculators and payment tables. However, shorter or longer timeframes are available.
The main reason to opt for a shorter than standard amortization period is to become mortgage-free sooner. And since you are agreeing to pay off your mortgage in a shorter period of time, the interest you pay over the life of the mortgage is therefore greatly reduced. You also have the advantage of building home equity sooner.
Equity is the difference between any outstanding mortgage on your home and its market value. It represents the amount of money you can claim as your asset. If you choose, your equity can be used to secure lower interest cost financing for things such as home renovations, your children’s education or for second property investments, just to name a few.
While there are many good reasons to opt for a shorter amortization period, there are a couple of other factors to consider. Because you are reducing the actual number of mortgage payments you make to pay off your mortgage, your regular payments will be higher. If your income is irregular, or if you’re buying a home for the first time and will be carrying a large mortgage, a shorter amortization period that increases your regular payment amount and ties up your cash flow may not be the best option for you.
Lenders are quietly pushing 40-year amortizations as a way to help borrowers cope with the higher interest rates and with rapidly rising homes prices.
For a given amount, a 40-year amortization carries lowers monthly payments than a 25 -year. That means a 40 year amortization allows you to afford a slightly more expensive house. The longer amortization has disadvantages: You pay more interest and build equity slower. Of course, there’s no such thing as a free lunch. Any time a borrowers adds years to a mortgage term, the overall interest bill rises.
So who should do 40-year amortizations? People who have a big mortgages of $400,000 plus. People who are single moms or dads who live their children and family where they are dependent on the income of parents’ pension and children’s income. Lastly those who have substantial debt who need to refinance their debt onto their mortgage and need the longer amortization to help them get back up on their feet.
No matter how the amortization is structured, the benefit to the borrower remains the same: lower monthly payments.

Have more questions?
Send it to mortgages@eddiemac.ca

MAC Agent Vignettes - Eduarda Pita

Tips on how to reduce your mortgage

What Is The Bank Of Canada

9 Signs You Can't Afford Your Mortgage

Filed Under: Loans, Loans, Mortgages, Personal Finance, Real Estate

While plenty of individuals live from paycheck to paycheck, most consumers know they should be saving money and reducing debt. The recession has drummed that concept into everyone's head as people have watched their neighbors and friends lose jobs and sometimes their home. Many people say that money worries keep them awake at night, but that doesn't necessarily translate to imminent bankruptcy. How do you know when you are truly teetering on the edge of a financial disaster versus simply needing to do a little belt-tightening?

Here are nine signs that indicate you are heading for trouble and may be unable to pay your mortgage in upcoming months:

IN PICTURES: 5 Steps To Attaining A Mortgage

1. Late Fees
If you missed a payment or let your bill go past due because you didn't have the money to pay your mortgage or another bill on time, you need to reevaluate your budget. Not only does this indicate an imbalance between your income and expenditures, but it will also ruin your credit score, potentially causing your creditors to increase your interest rate.

2. You Can't Pay All of Your Bills
Every month, you must decide which bills to pay and which bills to ignore. A lot of people opt to pay their credit card bill to stop harassment from the credit card company and to make sure they have available credit. But it is far more important to pay the bills that protect your home first. Always pay your mortgage first so that you will have a place to live. Next, pay for your car so that you can get to work and keep your job.

3. Making Minimum Payments on Credit Cards
In your mind, paying the minimum due on each bill may mean you are keeping up with your financial commitments, but financial experts know that minimum-only payments are a key indicator of financial distress. While this may mean that you carry too much debt, this also means that all your income is barely covering your spending. Take a careful look at your mortgage payment, other debts and your income to get back on track. Paying only the minimum on credit cards will extend your debt for years and amass expensive interest payments.

4. No Emergency Savings
While amassing six to twelve months of funds to cover you expenses, as many financial planners now recommend, may be a monumental task, every homeowner should have at least one month's worth of expenses in the bank. At the very least, you need to have enough money in a savings account or a money market fund to pay your mortgage for one month if your income drops or disappears. If you cannot save that much money you need to seriously evaluate your overall household budget.

5. You Can't Afford Maintenance
Your home needs to be painted and your dishwasher broke two months ago. If you are ignoring basic maintenance because you cannot afford to buy paint or call a repairman, this is a significant indication that you are in financial trouble. Not only does this show that you don't have any emergency savings or a home maintenance budget, but this will also reduce the value of your home.

6. Reduced Income
Money is already tight and now your work hours have been reduced or you have been laid off. If meeting your monthly budget depends on every dime you earn, then even a small reduction in income can be a disaster. Search for a new job or a second job and, at the same time, start slashing your budget as much as you can.

7. Using Credit or Cash Advances to Pay Bills
You are using your credit cards or, even worse, cash advances on credit cards to pay other bills such as a utility bill or to buy groceries or just to have cash in your pocket. This is a strong indication that your spending is outpacing your income and it is extremely expensive. You need to put yourself on a debt management program or perhaps meet with a credit counselor to straighten out your finances.

8. Using Your Retirement Fund
You have borrowed money from your retirement account for your mortgage payment or other debt. This could seriously jeopardize your future financial security.

IN PICTURES: 5 Tax(ing) Retirement Mistakes

9. You're Maxed Out
One or more of your credit card balances has reached or, worse, gone over the limit. If you are transferring your balances to new accounts in order to avoid paying the debt, this is a sign of a financial imbalance. If you are applying for new credit cards because your other cards have reached their limit, you are in serious danger of a financial meltdown. While you may be making your mortgage payments just fine, if you cannot control your use of credit cards it can be an indication that housing payments are too high.

While these financial woes can mean that you cannot afford your home, they may also be a sign that your spending is out of control. For most people, the mortgage payment is the largest monthly bill, so they often assume that the size of their mortgage is the problem. If your housing payment fits into that budget but you are having difficulty making your payment, then the issue may be that you have taken on too much other debt. Whether the problem is your mortgage or your other debt, you need to find a way to reduce your spending and/or boost your income before the situation gets worse.

The Bottom Line
Handling financial problems is never easy, but the first step is always to know what you owe. Solutions can only become clear once you have every bill written down with the amount owed, the monthly payment and the interest rate you are being charged. Pencil and paper work just fine, or you can create a spreadsheet or invest in some personal finance software. The important thing is to know where you stand so you can create a plan that will get your money under control.

For the latest financial news, check out Water Cooler Finance: The Post-Stimulus Slump.

Michele Lerner Investopedia.com

FOR ALL YOUR MORTGAGE NEEDS CONTACT EDUARDA "EDDIE" PITA 
416-920-9931 - www.eddiemac.ca