Going to School
Post-secondary education is expensive, and it's expected to get even more so. It's never too early to start saving for your child's education, so contact us and let us help you plan for your education.
Developing a Savings Plan
Investing in a Child's Future
It's never too early to start putting money aside for a child's education. Post-secondary education costs are estimated to go up drastically over the next eighteen years. Right now, a student living at home pays an average of $4,000 per school year. That amount is expected to reach $37,000 per year in less than two decades.
What Is an RESP?
Registered Education Savings Plans are set up through the Federal Government to help people save for their children's educations. By putting money away each year, you can ensure that your child will have money available for post-secondary school. A family can set up a plan in which one or more of their children are listed as beneficiaries. It's also important to note that anyone can contribute to an RESP, not just the parents of the child. Peace Hills Trust can help determine if this type of investment is right for you.
While they are not tax deductible like RRSPs, RESPs do offer some tax benefits. Interest earned on an RESP is tax-free, and when your child starts using the money for school only the accumulated interest is taxable as income.
What Is the CESG?
The biggest incentive to buy RESPs is the Canada Education Savings Grant. RESP investors receive an additional grant of 20% from the government on the first $2,000 of an annual investment. This means that the RESP can collect an extra $400 a year towards the child's education. This can mean a possible lifetime difference of up to $7,200.
The earlier you start putting money toward a child's RESP the more he or she will benefit from the annual grants and tax-free interest. And don't worry, in the event that the child listed as beneficiary does not choose to attend a post-secondary institution there are other ways to put that money to use.
Investments for Post-Secondary Education
Post-secondary education is expensive, and it's expected to become even more so in the future. The sooner you start to save, the more you can do with the money you have. There are many different types of investments that can help you save for your or your child's, post-secondary education. Peace Hills Trust can get you started.
Registered Education Savings Plans are set up by the government to help people save for their children's educations. By putting money away each year, you can ensure that your child will have money available to attend post-secondary school.
This type of investment guarantees you a set return on your money over a fixed period of time, which can be very beneficial when saving for a specific date in the future. There are short and long-term deposits. Short-term deposits usually require a higher investment than long-term deposits, and often have a slightly lower rate of return. Term deposits pay out interest monthly on any term longer than 90 days.
This type of investment is a bit more complicated than a term deposit. The potential exists to make more money; however, a return is never guaranteed. Even with a mutual fund that invests in guaranteed government bonds there is an element of risk. There are usually fees involved in purchasing or selling funds, and there are often management fees involved. The important thing is to investigate before you invest. Contact Peace Hills Trust and let us help you create a mutual fund portfolio that matches your future investment goals.
Remember that the key to investing toward a post-secondary education is to start as early as possible and make sure that your investment will help you achieve your specific final objective.
The Cost of Education
As costs continue to rise, more and more students find it necessary to borrow money to pay for their education. At Peace Hills Trust, we believe that the last thing you should be worried about the night before a big exam is whether or not you can afford to enroll for another term. Fortunately, from government student loans to credit lines designed to meet the needs of students, there are a number of financial solutions available to you.
How Much Should You Borrow?
Before applying for a loan, you will need to make a budget. First, calculate your expenses for the upcoming school year including tuition, books, transportation and the costs of living. Next, determine how much money you already have to contribute and how much you expect to make over the course of the year. The difference between the two figures is the amount you'll need to borrow.
Also consider your repayment strategy. Are the terms of the loan acceptable? Will you be able to handle the monthly payments? If not, you'll need to look for alternate ways to finance your education, or reduce your total costs.
In most cases, government student loans offer the best terms. There are no payments due and no interest until after graduation. Further, if you qualify for loan remission, you may only have to pay back a portion of the loan.
If you are not eligible for a government loan, another option is a student credit line. A credit line can go a long way toward covering your expenses while in school. Although the terms are not as good as those of a government loan, they are usually better than the terms of other personal loans.
Another good idea is to apply for a student credit card, but keep in mind that credit card interest rates are very high. A credit card should only be used for small, unexpected expenses, and money available to you through a credit card should not be included in your budget.
Used responsibly, a credit card will improve your credit rating, making you a better candidate for loan approval should you need to borrow on a larger scale next year.
Purchasing Property During College
Is now the time to buy a house? It's a fair question. Buying a house is possibly the biggest purchase of your life. Is it a good idea to buy while you are attending school? There are some questions to ask yourself before you can come up with the right answer.
Can I Afford It?
The primary consideration is whether or not you have the capital, or the resources, to make the necessary down payment. If you do, it's possible that you can live rent-free, and establish a great credit rating, while attending a post-secondary institution.
If you buy a house with extra bedrooms and enough living space, you can pay off the mortgage by getting renters to live with you. The rent you charge can cover your mortgage payment each month. Remember to take into account house insurance and applicable taxes.
What are the Benefits?
Instead of paying rent, which goes toward somebody else's mortgage, you will be paying your own mortgage, and building equity. If you choose to move somewhere else after you finish school, you can sell the house and gain liquidity. You can use this to put a down payment on another home, or invest it.
Sometimes a post-secondary education takes longer than you imagined. A four-year degree can take five years. An undergraduate degree can become a Masters, or even a Ph.D., and the longer you stay in your house, the more you will be able to pay toward the mortgage.
But all of these things are just the financial benefits. There is also the pride in ownership, the satisfaction of being a stable part of the community. You can choose the type of house and the sort of neighbourhood that you want to live in. There is more living space in a house than there is in the usual student dormitories. You can even have your own yard...Think of the possibilities.
Taking a Vacation
Time to Get Away
The hectic pace of everyday life can start to wear on all of us at some point. It's nice to have a break, a change of scenery. Load the kids into the van and hit the road to family fun. Explore the the Hawaiian Islands world famous beaches. Enjoy a familiy-packed gateaway to a destination theme park resort. Peace Hills Trust can help you save and plan for that special getaway.
Buying a Car
Buying a car is a major financial investment and we understand that it's also an important personal decision. The first thing to figure out is how much you can afford to spend; this amount should not exceed 20% of your net income. The second decision you need to make is what kind of car will best suit your needs. Are you single or a family of five? Will you use it to commute every day or drive only on the weekends? Look at all the options and decide what is right for you.
New or Used
Perhaps you realize that the only way to afford the vehicle of your dreams is to buy second-hand from a dealer or individual. Be cautious in either case. There are many consumer awareness books available. Do your homework. Shop around and take your time. Most of us aren't mechanically inclined, so once you've test-driven the vehicle take it to a licensed mechanic for a final inspection.
Lease or Finance
That new car smell can be intoxicating and knowing you won't have any large mechanic bills for a while can be comforting, but most people don't have enough spare money lying around to buy a new car with cash. The next decision to ponder is whether to lease or finance.
The advantage of leasing is that you will be driving a new car while making relatively low monthly payments. The disadvantage is that you may never own that car and there are many restrictions and penalties that come with a lease that you may find unacceptable for your driving style. Read the lease agreement carefully before you commit to anything.
Depending on the size of the down payment, financing usually means a higher monthly payment that you may simply not be able to afford. But the fact is, when you finance a car you have the pleasure of knowing that, one day, it will belong to you.
Whichever method you choose, think about all costs involved in driving and maintaining a vehicle. Make sure you choose something that meets as many of your needs as possible, while still being something you can afford and enjoy
Buying a Home
Buying vs. Renting your Home
Buying vs Renting
The decision to buy a home is probably the biggest financial decision you will make in your lifetime. At Peace Hills Trust, we feel that finalizing the details of a mortgage is really the last step in a complex decision process. The differences between renting and owning are enormous, but the question of which is better for you is a highly personal one.
In general, you should expect your monthly expenditures for your mortgage and related costs to be somewhat higher than rental payments. Of course, the exact percentage will vary depending on other debts you may be carrying. And keep in mind that aside from your mortgage payments, your monthly income must still allow you to maintain a comfortable standard of living. When taking on a mortgage, will you still be able to afford food and clothing, gas, car insurance and repairs? How about vacations or other leisure expenses? If you anticipate a monthly debt load approaching 40% of your gross income, including your mortgage, you are probably not financially prepared to take on a mortgage.
At Peace Hills Trust we know that buying a home isn't just about money. There are many personal factors to weigh before making the decision that's right for you.Are you looking for a stronger sense of place within your community?
Are you willing and able to maintain and repair your own property and home? Do you want the stability of home ownership as the foundation for starting a family? If so, then home ownership may be a natural next step.
On the other hand, maybe you prefer the freedom to move to a different neighbourhood or even a different city. Or maybe you're anticipating a promotion at work or planning a leap into an entirely new field or career. In cases such as these, renting is probably your best bet.
In the end, Peace Hills Trust is here to provide you with the options you need should you decide to buy your own home. But just as important to us is that you know you'll be content here. After all, Peace Hills Trust is a member of your community too, and we want all our neighbours to be happy.
Buying Your Home
Choosing the Right Home
Now that you've decided to buy a home, it's time to consider the many financial and personal decisions to be made before making a formal offer.
The important thing is that you make the decision that's right for you. The property you eventually buy is more than just an investment - it's going to be your home, your own piece of the neighbourhood. So don't rush into it. Take the time to investigate all the options.
We don't want you to settle for something that's merely 'good enough.' Let us help you with the many difficult decisions ahead so that when you sign your name to an offer it's with the confidence that you've made the best choice possible.
By looking at your current financial situation, you can determine the price range of homes available to you. You may want to consider applying for a pre-approved mortgage. Pre-approval will not only define the price range of homes you can look at, but will also save you from having to make conditional purchase offers to potential vendors.
When looking at potential homes, take the time to consider all of the factors that are important to you. It may be a good idea to make a list of 'must haves' as well as a list of things that would be nice if they were available.
Obviously you'll need to consider the physical layout and soundness of the structure and the property itself, but also consider things like the location and the neighbourhood. Make sure to investigate whether municipal or regional authorities are planning changes to civic code, zoning or by-laws that may affect the value or nature of the property in the future.
You may find it helpful at this stage to have a real estate agent keep you informed about these and other factors that might influence your decision. In any case, remember to take your time when buying a home. It's better to wait a little longer for the home you want, rather than end up with a mortgage for a home you aren't truly happy with.
Taking out a Mortgage
By looking at your current financial situation, you can determine the price range of homes available to you. You may want to consider applying for a pre-approved mortgage. Pre-approval will not only define the price range of homes you can look at, but will also give you an advantage over competing purchasers when you make offers to vendors, since it shows you are taking things seriously enough to have looked into financing.
Which kind of mortgage is right for you? Whether to take a fixed rate or variable rate mortgage may depend on the stability of your income and your comfort level if interest rates start to rise.
You also need to bear in mind that if you have a down payment of less than 25% of the purchase price of the home, you will require a high-ratio mortgage. These mortgages have to be approved by Canada Mortgage and Housing Corporation (CMHC) or Genworth Corporation (formerly GE) and mortgage insurance is required.
Protecting Your Investment
There are many different types of home renovations, and many different reasons to renovate. Maybe you need to reshingle the roof or make practical repairs. Maybe you want to retrofit your exterior with new siding, or improve your insulation or mechanical systems. Or maybe you want to add an extension or convert an unused basement to living space.
Whatever the plan, renovating not only improves the look and feel of your home and living space, it also protects your investment by adding value to your home.
As with any complex project, planning is the first and most important step. The adage 'measure twice, cut once' applies quite literally when it comes to renovations. To start, check with your municipal building department to determine if the renovations you're planning are allowed under current zoning and by-laws and that they conform to building code.
From painting to making minor repairs, there are many small projects you can handle yourself, but do you have the skills and tools to fully renovate a kitchen or bathroom? There may even be some tasks that must be performed by certified tradespeople in accordance with local by-laws.
Renovating is really a full time job, and trying to do it yourself can be time consuming and costly. For larger jobs, consider hiring a full-service renovator, who can take responsibility for the entire process from obtaining permits and drawing up plans to hiring a contractor and supervising the work being done.
Before undertaking any renovation project you will need to have a clear understanding of the costs involved. You should obtain at least three estimates for the work from qualified contractors. Anticipate spending an additional 10-15% for unexpected costs.
With a reliable figure in hand, you can look at your financing options. You may want to renegotiate your mortgage or apply for a personal loan. However you decide to finance your renovations, Peace Hills Trust wants to help you.
Refinancing Your Mortgage
Time to Refinance
There are many reasons why you might consider refinancing your mortgage. You might be looking for a shorter term, access to extra cash or a chance to take advantage of lower rates.
All of these are good reasons, but keep in mind that there are penalties when paying off a mortgage early. As a general rule, you shouldn't refinance your mortgage unless the new rate is two full percentage points lower than your current rate. Typically the two-point rule compensates for the hard costs associated with refinancing.
More Equity, Faster
Many people refinance to shorten the term of a mortgage. Often, first-time buyers are appropriately cautious and take out a long-term mortgage to ensure they can meet the monthly payments. By refinancing to a shorter term at a higher monthly payment, you can end up saving tens of thousands of dollars in interest over the years. Furthermore, you build up equity in your home much more quickly and, should you need it, you'll have all that additional equity to borrow against.
Refinancing for Capital
Another good reason to refinance is to gain access to some additional cash. This is an especially good option if you have outstanding debts at an interest rate that is higher than your new mortgage rate. By using the additional cash to pay off your other debts, you are effectively amalgamating your debt under one roof at one low rate.
Reducing Monthly Payments
Perhaps the best reason to refinance is to take advantage of lower rates that will reduce your monthly payments. After figuring all of the refinancing fees and penalties into the cost of your new mortgage, you might well be able to reduce your monthly payment by a couple of hundred dollars. That extra cash can go a long way toward other major purchases, or can add significantly to your RRSPs or other investments.
So if you're thinking about refinancing, contact Peace Hills Trust and ask us about your mortgage options.
Selling Your home
Your home isn't just a building and some land; it's a part of your life, a physical anchor to your memories, hopes and dreams. We understand how difficult it can be to put your home on the market. The selling process can be lengthy and emotional, and if you are also looking to buy a new home at the same time, it's easy to feel overwhelmed.
Real Estate Agents
The first thing to decide is whether you want to sell your house through a real estate agent. While an agent's sales commission is usually the single largest expenditure involved in selling a home, the expertise and experience it buys can be invaluable.
An agent will draft a listing agreement detailing the terms of the sale of your home and stipulating the obligations of both parties. As part of the listing agreement, you will need to come up with a listing price. This is largely determined by the size of your home, its condition and location, as well as the current state of the economy. A good agent will be of tremendous help in determining a fair listing price.
Preparing and Showing Your Home
Before showing your home to prospective buyers, you should do everything you can to make it presentable. Make any necessary repairs and thoroughly clean the entire home and property. Try to remember the things that attracted you to the home in the first place. Whatever it was that you loved when you bought the home might be what turns a prospective buyer into a future owner.
Negotiating and Accepting the Offer
A formal offer is a written bid for your property that includes any other conditions the buyer would like included in the sale. Upon receipt of an offer, you'll have to decide whether or not to accept it, or make a counter-offer to the buyer. Be aware that if you accept an offer you are legally bound to meet the terms.
When selling a home, it's best not to be in a hurry, otherwise you may find yourself accepting an offer for significantly less than your asking price. While the timing of the sale may be important, more important is that your decision will meet the financial needs of you and your family in the years to come.