16 Aug

The Two Most Costly Words in Personal Finance

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Posted by: Jennifer Koop

The Two Most Costly Words in Personal Finance.

Most of us have experienced how YOLO (You Only Live Once) is the one word that often leads to a pile of unpaid credit card bills and more than a few regrets down the road. However, YOLO has a contender for the world’s most expensive word, and that word is procrastination.

Enriched Academy are huge believers in education, fact finding, and analysis before making any important financial decisions, but at some point, you have to act. Whether it’s opening an online brokerage account, meeting with a financial coach, or simply inputting your monthly household expenditures into a spreadsheet, you need to get moving.

There are lots of reasons why we kick financial matters down the road — not enough time? lack of knowledge? low motivation? Regardless of the reason, if you need a little inspiration, here are five examples that clearly demonstrate the cost of procrastination when it comes to managing your money.

Attacking your debt problem

If you have credit card debt, car loans, or a line of credit that you are in no hurry to eliminate, you need to look at how much it is costing you. Credit card debt has always topped the list and even the so-called “low interest” credit cards are around 10% (most charge double that rate). Paying the minimum 3% will get you nowhere fast — at the usual credit card rate of 20%, a $1000 balance will take 11 years to eliminate and cost you another $1000 in interest.

Starting your retirement planning

Too little, too late is the story for many Canadians when it comes to funding their retirement. CPP and OAS aren’t enough to save you. Did you know you have to pay into CPP for 39 years to claim the maximum amount and that the average monthly payment is currently $811? If you don’t know where to start, open a TFSA and focus on putting in as much as you can each year. Your annual contribution limit is $6500 but it carries over from year to year and you may find you have a lot of unused contribution room. Make sure to invest your TFSA funds and don’t let it sit in cash.

Analyzing expenses and budgeting

Next month is not the time to start figuring out where your money goes every month and where you could/should/need to cut back on spending. The time to get started is today, and it has never been easier with hundreds of online applications and spreadsheet software, or you can go old school with pen, paper and calculator.

Getting started with investing

Getting a late start makes it very difficult to catch up because you seriously reduce the effect of compound investment returns. Investing $500 monthly at 5% starting at age 25 versus age 35 will cost you an extra $60K, but it will add over $325K to your retirement fund by age 65. You don’t need to be an investing genius to get going, there are lots of low-cost, low-maintenance and relatively simple ways to manage your own investing these days.

Creating an emergency cash reserve and a will

If the pandemic taught us anything, it was to prepare for the worst. Your income could unexpectedly and very easily disappear for a number of reasons, so you need to have enough cash on hand to tide you over for a few months. As for a will, they are lots of options (including online) these days and there isn’t any valid excuse for not having one, especially compared to the mess it leaves behind for your loved ones if you die without one.

A YOLO attitude and procrastination sound harmless enough, but they can seriously derail your finances. Make sure to keep them at bay or your financial goals will continue to be elusive.

Published by DLC Marketing Team

Contact Jennifer Koop, your Cottage Country Mortgage Agent, today for all your mortgage needs, 705-349-0502

15 Aug

Second Mortgages: What You Need to Know

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Posted by: Jennifer Koop

Second Mortgages: What You Need to Know.

One of the biggest benefits to purchasing your own home is the ability to build equity in your property. This equity can come in handy down the line for refinancing, renovations, or taking out additional loans – such as a second mortgage.

What is a second mortgage?

First things first, a second mortgage refers to an additional or secondary loan taken out on a property for which you already have a mortgage. This is not the same as purchasing a second home or property and taking out a separate mortgage for that. A second mortgage is a very different product from a traditional mortgage as you are using your existing home equity to qualify for the loan and put up in case of default. Similar to a traditional mortgage, a second mortgage will also come with its own interest rate, monthly payments, set terms, closing costs and more.

Second mortgages versus refinancing

As both refinancing your existing mortgage and taking out a second mortgage can take advantage of existing home equity, it is a good idea to look at the differences between them. Firstly, a refinance is typically only done when you’re at the end of your current mortgage term so as to avoid any penalties with refinancing the mortgage.

The purpose of refinancing is often to take advantage of a lower interest rate, change your mortgage terms or, in some cases, borrow against your home equity.

When you get a second mortgage, you are able to borrow a lump sum against the equity in your current home and can use that money for whatever purpose you see fit. You can even choose to borrow in installments through a credit line and refinance your second mortgage in the future.

What are the advantages of a second mortgage?

There are several advantages when it comes to taking out a second mortgage, including:

  • The ability to access a large loan sum (in some cases, up to 90% of your home equity) which is more than you can typically borrow on other traditional loans.
  • Better interest rate than a credit card as they are a ‘secured’ form of debt.
  • You can use the money however you see fit without any caveats.

What are the disadvantages of a second mortgage?

As always, when it comes to taking out an additional loan, there are a few things to consider:

  • Interest rates tend to be higher on a second mortgage than refinancing your mortgage.
  • Additional financial pressure from carrying a second loan and another set of monthly bills.

Before looking into any additional loans, such as a secondary mortgage (or even refinancing), be sure to speak to Jennifer Koop, your DLC Mortgage Expert! Regardless of why you are considering a second mortgage, it is a good idea to get a review of your current financial situation and determine if this is the best solution before proceeding.

Contact us today for all your mortgage needs, 705-349-0202

Published by DLC Marketing Team

8 Aug

After You Buy – Closing Tips

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Posted by: Jennifer Koop

After You Buy – Closing Tips.

Now that you have finished signing your mortgage paperwork and getting the keys to your first home, there are a few things to keep in mind after you buy to protect your investment and ensure future financial success!

  1. Maintaining your home and protecting your investment: Becoming a homeowner is a major responsibility. It’s up to you to take care of your home and protect what is likely your biggest investment.
  2. Make your mortgage payments on time: There are many options when it comes to mortgage payment frequency. Whichever schedule you choose, always make your payments on time. Late or missed payments may result in charges or penalties, and they can negatively affect your credit rating. If you’re having trouble making payments, please contact your mortgage broker as soon as possible.
  3. Plan for the costs of operating a home: You will have several ongoing costs besides your mortgage, property taxes and insurance. Maintenance and repair costs are at the top of the list, along with expenses for security monitoring, snow removal and gardening. If you own a condominium, some of these costs may be included in your monthly fees.
  4. Live within your budget: Prepare a monthly budget and stick to it. Take a few minutes every month to check your spending and see if you’re meeting your financial goals. If you spend more than you earn, find new ways to earn more or spend less.
  5. Save for emergencies: Your home will need some major repairs as it ages. Set aside an emergency fund of about 5% of your income every year so you’ll be prepared to deal with unexpected expenses.

If you have any additional questions about closing, or your mortgage upkeep, please don’t hesitate to reach out to Jennifer Koop, your DLC Mortgage expert today! 705-349-0502

Published by DLC Marketing Team

2 Aug

In Search of Financial Wellness?

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Posted by: Jennifer Koop

In Search of Financial Wellness?

Financial wellness is fast becoming the latest buzzword as soaring inflation and interest rates pile the pressure on Canadians. There is a strong connection between mental health and financial health, and financial stress is taking a heavy toll. So, what exactly does it mean to be “financially well”?

Financial wellness is described as a state of well-being where an individual or a household has achieved financial stability and is able to meet their current and future financial obligations without undue stress. Financial wellness is not about being rich, having a certain amount of net worth, nor achieving a specific financial goal. Rather, it is about having a sense of security and confidence in your financial capability and being able to manage financial issues, challenges and opportunities as they arise over time.

Financial wellbeing is a function of many different factors. Income is obviously a critical element, but it also depends heavily on how well we are able to manage our money. These tasks include budgeting, managing debt, and investing and planning our retirement. The degree to which we are able to handle these tasks successfully depends on our level of personal financial literacy and our ability to make informed decisions, solve financial problems, and manage financial risk.

The heightened stress and anxiety cause by poor financial wellness has significant effects on many aspects of our life including poor job performance and relationship issues.

How do you measure financial wellness?

Financial wellness can be measured in a number of ways, but it is often a feeling rather than some sort of tangible number. A financial health assessment is a comprehensive evaluation that involves reviewing income, expenses, debt, savings, investments, insurance coverage, and other financial assets and liabilities. It identifies areas of strength and weakness and provide insights into how to improve overall financial well-being.

A financial stress tests involve evaluating an individual’s or household’s ability to withstand financial shocks or unexpected events, such as a job loss or medical emergency. Financial stress tests can help identify potential vulnerabilities in one’s financial situation and provide insights into how to build financial resilience.

Financial behavior analysis involves examining an individual’s or household’s financial behavior and decision-making processes. It can help identify patterns of behavior that may be contributing to financial stress or instability, such as overspending or not saving enough.

Overall, measuring financial wellness is a complex process that requires taking into account multiple factors and indicators. Different methods may be appropriate for different individuals or households, depending on their specific financial circumstances and goals.

How can I improve my financial wellness?

There are plenty of options for improving your financial wellness and most of them revolve around bettering your financial literacy skills to effectively tackle expenses, use credit wisely, manage debt, save money, and build long-term wealth and security through investing. Working with a financial coach or financial planner can also provide the knowledge and support needed to achieve your financial goals.

In addition to individual actions, there are also broader solutions that can support financial wellness at the societal level. These may include policies that promote income equality, affordable housing, and access to financial services, as well as financial education in schools and employee financial wellness programs.

2023 is shaping up to be another tough year financially for Canadians and financial wellness will continue to be elusive, especially if your financial literacy is lacking. The good news is there are a lot of resources available and many of them are free or low-cost. The largest hurdle for most of us is willpower and maintaining our motivation — achieving financial wellness is not a sprint. It can be a time-consuming, slow process and you may not see the results from your efforts until many months or many years down the road!

Published by DLC Marketing Team

Contact us today for all your mortgage needs 705-349-0502