Fall 2010 Issue PDF

FALL 2010
Front Cover
Financial
FITNESS
BOOTCAMP
FIXED or
VARIABLE
RATE?
ENJOY SAVINGS ON
HOMEOWNERSHIP
EXPENSES
Buying for the first time?
Do your homework first.
Buying for the first time?
Do your homework first.
Understanding mortgage
mortgage options,
options, the
the impact
impact of
of rising
rising interest
interest rates
rates and
andmonthly
monthlypayments,
payments,
Understanding
will help you make an informed decision. Knowing all the various costs of buying and owning a
will help you make an informed decision. Knowing all the various costs of buying a home
home and purchasing within your means are the keys to homeownership. For easy to understand
and
purchasing
within your
means
are the
keys to homeownership.
For easy to understand
homebuyer
information
about
purchasing
responsibly,
visit us at www.Homeownership.ca
homebuyer information about purchasing responsibly visit us at www.Homeownership.ca
© 2010 Genworth Financial
Contents
Featured articles
Published by
Genworth Financial Canada
2060 Winston Park Drive, Suite 300
Oakville, Ontario L6H 5R7
www.genworth.ca
Genworth Financial
Canada
Blake Atkinson
Mike Friskney
Simon Moon
Emily Moon
Angela Wong
Kamran Shafi
5 mortgage default insurance
It all depends on the down payment.
Editor
Creative Director
Contributing Writer
Senior Editor
Editorial Associate
Art Directors
Designed by
6
Fixed or Variable rate?
What’s the difference?
9 financial fitness bootcamp
Homeownership helps Canadians be fiscally fit.
139 Main Street, Suite 202
Unionville, Ontario L3R 2G6
www.pebble.net
Tel: 647-427-5782
Printed by
Sterling Editions
Jim Sterling
Sterling Editions
436 Stinson Ave.
Burlington, Ontario L7R-2W9
Tel: 905-333-2700
A Better Way to Home Ownership is published
semi-annually by Genworth Financial Mortgage
Insurance Company Canada (“Genworth Financial
Canada”). A Better Way to HomeOwnership
is protected by copyright and nothing may be
reprinted wholly or in part without permission
from Genworth Financial Canada. In compiling
this publication, Genworth Financial Canada relies
upon information supplied by a number of external
sources. The publication was created on the belief
of Genworth Financial Canada that all information
in it was correct at the time of printing.
All ideas, opinions, and/or forecasts, expressed
or implied herein, are for informational purposes
only and should not be construed as the
recommendation of Genworth Financial Canada.
This publication has been prepared without regard
to any particular investment objectives, financial
situation, and needs. Genworth Financial Canada
and related parties disclaim any and all liability and
are not responsible in any way for the actions taken
or results achieved by any person or organization in
reliance on the information, stories or contributions
in this publication. Accordingly, individuals should
not act on any information within this publication
without obtaining specific advice from their
mortgage or investment advisors or from other
professional advisors.
10
test you homebuyer IQ
Prepare yourself for homeownership.
Additions
working with a broker
12
Saving you time and money.
renovate and add value
Add the personal touch and increase the value.
14
know what you want
Find a home that truly reflects your
personal needs.
18
IS YOUR INCOME AT RISK?
Your home doesn’t have to be.
22
HomeOwnership FALL 2010
|
3
insurance
Mortgage default
insurance
Mortgage default
6 | FALL 2010
HomeOwnership
e
Mortgage
Default Insurance
It all depends on your down payment.
Mortgage default insurance provides the lender with the
flexibility to offer you the same competitive interest rates
available to homebuyers with a larger down payment.
T
he amount of money you save
for your down payment will
determine whether you will
require mortgage default insurance.
If your down payment equals 20% or
more of the price of your home, you will
qualify for a conventional mortgage. If
your down payment is less than 20% of
the price of your home, you may need
to take a high-ratio mortgage which will
include mortgage default insurance.
What is mortgage default
insurance?
Mortgage default insurance provides
your lender with the flexibility to offer
you the same competitive interest rates
lenders offer to homebuyers with a larger
down payment. It’s insurance, which
guarantees the mortgage by protecting
the lender should the homeowner be
unable to continue their payments.
Who provides it?
There are currently two main
mortgage default insurance providers in
Canada: Genworth Financial Canada and
Canada Mortgage Housing Corporation,
a government agency. Genworth Financial
Canada, known as The Homeownership
Company, is the largest private mortgage
insurer in Canada.
What happens if I am unable to
pay my mortgage?
If you have a Genworth insured
mortgage, you can take advantage of their
Homeowner Assistance Program at no
extra cost. The program enables you to
work with your lender and Genworth to
explore alternate arrangements if you’re
faced with temporary financial difficulties
that put your mortgage at risk. See article
on page 22 for more information on the
Homeowner Assistance Program.
For more information on Mortgage Default Insurance and the Homeowner
Assistance Program please visit www.genworth.ca
HomeOwnership FALL 2010
|
5
FIXED or
Variable rate?
what’s the difference?
Once you have qualified for a mortgage, you will then need
to decide if you want a fixed or variable interest rate. Here
are some things to consider.
Fixed interest rate:
• A predetermined interest rate that
will not change during the mortgage
term thereby protecting you from
increases in market interest rate.
• A fixed interest rate is often higher
than a variable rate.
Variable interest rate:
• The interest rate will fluctuate with
the market’s interest lending rates,
which usually follow the trend of the
Bankof Canada posted rate.
• When interest rates go down a greater
portion of your monthly mortgage
payment will be allocated to the
principal rather than to interest.
• A variable interest rate is less
expensive than a fixed interest rate
mortgage, usually about 1-2%
lower, but there is a risk that the
interest rate can increase at any time.
Keep in mind:
• If you are a first-time homebuyer
with a high-ratio mortgage and you
are looking to take a variable interest
rate mortgage, you will need to qualify
at the 5-year rate as posted by the
6 | FALL 2010
HomeOwnership
Bank of Canada interest rate. This
means that you must have the financial
tolerance to afford the monthly
payments as if you were applying for a
5-year fixed interest rate mortgage.
• This recent mortgage change
was initiated by the federal government
to help ensure that first-time
homebuyers are capable of managing
increased monthly mortgage payments
in the event that interest rates were to
rise considerably.
Which one should you choose?
• If you’re a person who would lose sleep
wondering how your monthly budget
and mortgage payments would be
impacted if interest rates went up by a
percentage or two, then having a fixed
interest rate mortgage is probably for
you.
• If you’re a person who can cope with a
little unpredictability and believe that
over the long term you’ll come out
ahead, a variable interest rate mortgage
may be the right choice
for you.
Be sure you speak with a mortgage
professional about which option is best
for your personal financial situation.
variable
rates
fixed or variable
variabl
rates
fixed or variable
HomeOwnership FALL 2010
|
7
boot camp
ncial
financial
boot camp
FINANCIAL
FITNESS BOOTCAMP
Homeownership helps canadians
to be fiscally fit.
Owning a home means more than just a place to eat, sleep
and raise your family. It can also be an important step to
financial security.
A
recent study* shows that
homeowners are in good
shape when it comes to
financial fitness in Canada – 65% of
homeowners pay off their credit card
balances each month (vs. 48% of
non-homeowners) and a quarter of
those with mortgages have managed
to make a lump sum payment or
accelerate their mortgage payments
within the past year.
“Homeownership helps
Canadians focus on getting their
financial situation in order,” said
Peter Vukanovich, President and
Chief Operating Officer of
Genworth Financial Canada.
The survey also revealed that
almost half (44%) of homeowners
were able to pay all of their bills
and save some money in the past
year suggesting a strong correlation
between homeownership and
p
financial fitness. Henrietta Ross, Chief
Executive Officer of CACCS is impressed
with the results but believes more work
needs to be done.
“A mortgage is easier to manage
when people have good personal finance
skills,” she said. “But there is room to
improve personal finance skills for
many Canadians. Our certified Credit
Counsellors and qualified Financial
Coaches can help people get on track
with their financial fitness so they can
reach important life goals, such as
homeownership.” Genworth Financial offers a number
of programs to help educate Canadians
about home buying so they are fully
prepared for the financial expectations.
As with regular exercise there is always
room for improvement. Homeowners
can still benefit from further education.
*Study conducted by Genworth Financial Canada
HomeOwnership FALL 2010
|
9
???
?
test
your
homebuyer iq
Thinking of purchasing your first home?
Be prepared by taking the online
Homebuyer 101 course from Genworth
Financial Canada. This interactive
course reviews all aspects of the
homeownership process. When you’re
done, you may test your knowledge with
a quick quiz and then print a certificate
of completion.
homebuyer 101 covers:
The steps in the home-buying
process.
• Everything you need to know –
from determining your budget to
choosing a realtor.
The costs of homeownership.
• Learn about all the costs that
are associated with buying, and
moving into your first home.
The basics of carrying a mortgage.
• Some quick tips to follow so
you don’t over-extend yourself
financially.
• The different mortgage options
and what’s the best one for you.
• Determine the best type and size
of mortgage for you.
• The different terminology you’ll
need to know and understand.
• Discover the difference between
term and amortization.
• The benefits of paying off your
mortgage sooner.
• Options available to you, if you
suffer loss of income.
The importance of maintaining a
good credit rating.
• Paying your monthly bills on time
will ensure your credit rating
remains in good standing.
Find out how paying just a little extra to your mortgage each year can make a big
difference over the long term.
Take the Homebuyer 101 Course and prepare now for your homeownership
journey. Visit www.homeownership.ca
10 | FALL 2010
HomeOwnership
WIN 1 OF 5 RONA GIFT CARDS
Take the Homebuyer 101 course and you will automatically be entered to WIN* 1 of 5 RONA
Gift cards for $500. Bring yourself up to speed on basic mortgage terminology and concepts.
Genworth Financial Canada’s Homebuyer 101 course, covers topics like; How does credit work?
Mortgage options – variable vs fixed and more. Visit Homeownership.ca to enter today.
*For full terms and conditions, please see www.homeownership.ca
No purchase required. ©Genworth Financial Canada
Working with
a mortgage broker
Helping save you time and money.
T
here are over four hundred mortgage
products on the market. Finding the
one that’s right for you can be an
overwhelming task. So how do you source,
assess and determine which mortgage is
right for you? That’s where a mortgage
broker can help.
A mortgage broker works on your
behalf to find you the best mortgage at the
best rate. They have no affiliation to any
particular bank or financial institution,
which means they are free to consider every
product on the market before making their
recommendation.
Working with your needs in mind, a
mortgage broker will shop the marketplace,
saving you time and effort. As well,
a mortgage broker will already have
relationships in place with a wide variety
of lenders making it easier to negotiate
favourable terms and competitive rates on
your behalf.
12 | FALL 2010
HomeOwnership
Your mortgage broker can also help
with arranging your property survey, legal
fees and closing paperwork while offering
advice on any additional costs you may
need more clarification on.
Best of all, working with a mortgage
broker costs you absolutely nothing.
It is the responsibility of the lender to
compensate the broker with a fee when
your mortgage is placed with them.
By investing a little time now and
working with a mortgage broker you
will save time, effort and money on your
mortgage in the long run.
For more information or to contact a
Dominion Lending Centres Mortgage
Professional in your area please
visit www.dominionlending.ca.
mortgag
working with a
mortg
working w
mortgage
working with a
HomeOwnership FALL 2010
|
9
renovate
and
add value to your home
Helping improve curb appeal.
R
enovating is a great way to add
a personal touch to your new
home while increasing its value.
Remember, your home is not only a place
to live, it’s a long-term investment, as well.
Here are a few renovations you may want
to consider that will add to your enjoyment
of the home as well as its resale value.
Interior Painting and
Decorating
Refreshing your walls and ceiling with a
new coat of paint gives a fresh look to your
home and is one of the least expensive and
most impactful things you can do.
The Kitchen
The kitchen is the heart of the home.
Updating it will add instant value. If
you do, make sure it is welcoming and
inviting. Include well planned and ample
work space and ensure a clutter-free
environment by including plenty of
storage space. Remember, a well-planned,
functional kitchen will hold its value and
have lasting appeal.
The Bathroom
Updating your bathroom(s) is another
shrewd renovation to consider. By
completing a full bathroom renovation this
will not only transform this space but can
also provide you with a tranquil setting.
Even smaller-scale enhancements such as
14 | FALL 2010
HomeOwnership
updating the mirror, vanity and lighting
can make a dramatic difference.
Flooring
Worn or dated carpet and linoleum, or
scratched hardwood floors can detract from
your home’s appeal and value. Upgraded
flooring adds style and drama. It also creates
flow from room to room and can actually
make a smaller home feel more spacious
inside.
Closets
A home that has roomy, organized closets is
a convenience you will never grow tired of,
and will be a stand-out feature with future
buyers, should you ever decide to move.
Finished Basement
Whether it functions as a home theatre,
games room, or just a play zone for the kids,
a finished basement is an added feature that
turns what is often a messy storage area into
a vibrant living space.
Energy Upgrades
Adding or replacing a furnace, water
heater, central air conditioning system,
windows and/or a roof will give you
peace of mind and lower energy costs for
decades to come. It’s a wise investment
regardless of whether you plan on staying
in your home for the long term or selling
it in the near future.
continued on page 16
WANTS TO HELP YOU PERSONALIZE
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Exclusively for Genworth Financial
Homebuyer Privileges™ Customers,
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$
when you spend $500 before taxes on a RONA Installation Service.
For more information visit genworth.ca
• DECKS & FENCES
• DOORS & WINDOWS
• FLOORING
• KITCHENS
• BATHROOMS
• ROOFING
• HOT WATER TANKS
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RONAdvantages: Offer may end or may be changed without notice. Terms and conditions available in store or on www.ronadvantages.ca. This promotion is valid until December 31st, 2010 at all
RONA Home & Garden, RONA Lansing and select RONA Cashway stores only. Applicable before taxes on merchandise purchased in store and in one transaction. Only cash and carry purchases
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and
dd value
enovate
and
add value
Renovate
Deck and Landscaping
A backyard deck or patio extends your
living space to the outdoors, allowing
you to gain a place to relax and entertain
during the warmer months of the year. A
landscaped yard will enhance curb appeal
and transform an ordinary backyard into
your personal oasis.
enjoy savings on
homeownership expenses
That’s why Genworth created the
Homebuyer Privileges™ Program (HBP),
an exclusive online discount program for
commonly purchased household items
16 | FALL 2010
HomeOwnership
such as appliances, moving services and
rentals, home services, computers and
more.
When you’re approved for a
Genworth insured high-ratio mortgage
from a participating HBP lender, you’ll
receive a password enabling you to register
as a new member on the program. Your
membership will remain active for up to
two years, giving you ample opportunity to
save hundreds of dollars on many of your
homeownership costs.
For more details ask a participating
lender or visit www.genworth.ca
As a Homebuyer privileges member,
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A/c system is in Good Working Order.
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Our 29-point visual system inspection
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system during peak seasons. Plus, our
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Promo Code: 21889
KNOW
what you want
before you shop
the “must haves” and “nice to haves.”
Finding a home that truly reflects your personal needs is as
simple as creating a list of “must haves” and “nice to haves.”
This list will help focus your efforts and the efforts of
your real estate agent before you even begin your search.
Begin with the basics
Deciding on the location, or locations, where you will focus your search should
be your first priority. To determine potential locations, consider the following list of
options:
feature
NEED TO HAVE
new neighbourhood
established community
close to where I work
access to major highways
close to schools
close to parks & playgrounds
in the city
in the suburbs
18 | FALL 2010
HomeOwnership
NICE TO HAVE
NOT IMPORTANT
Style of home
Next, consider what style of home you would prefer: a single-family dwelling, a
townhouse, or a condo. Some neighbourhoods offer a good mix of each style while
others are more focused on just one type of home.
The exterior
First you need to decide what is important to you when it comes to the exterior
of your home. Below is a list to help you prioritize what you would like.
feature
NEED TO HAVE
NICE TO HAVE
NOT IMPORTANT
large lot
mature lot
landscaped yard
private yard
garage or carport
deck or patio
swimming pool
view
new windows
new garage doors
new roof
brick
siding
continued on page 20
HomeOwnership FALL 2010
|
19
The interior
You’ve decided on what your exterior needs are, now what about the interior?
Do you want a master bedroom with an ensuite? A main floor den? Would you be
most comfortable with a house that is in move-in condition, or would you be
willing to do a little bit of work on a fixer upper for a reduced price?
It’s important to make a list of everything you could possibly want, and then
determine how important each item is. Below is a suggested list to help you with
this task.
feature
NEED TO HAVE
NICE TO HAVE
NOT IMPORTANT
# OF BEDROOMS
# OF BATHROOMS
MASTER BEDROOM WITH ENSUITE
DINING ROOM
LIVING ROOM
MAIN FLOOR FAMILY ROOM
DEN/OFFICE
WOOD FLOORS
EAT-IN-KITCHEN
UPDATED KITCHEN
UPDATED BATHROOMS
IN-HOME GYM
FIREPLACE
UNFINISHED BASEMENT
FINISHED BASEMENT
INLAW SUITE
RENTAL SUITE
STORAGE SPACE
CENTRAL VAC
SECURITY SYSTEM
NEW furnace
UPDATED WIRING
UPDATED PLUMBING
Move-in condition
Be sure to ask a participating lender about the great savings offered through the
Homebuyer Privileges™ Program.
20 | FALL 2010
HomeOwnership
As a Homebuyer Privileges™ member you
will receive 20% off of our entire line!
Tunturi has been a trusted name in fitness equipment
since 1922. Welcome us into your home and enjoy the
benefits of achieving good health with sleek looking
and quality fitness equipment.
Visit www.genworth.ca to find out more
is your income at risk?
your home doesn’t have to be.
When life delivers an unexpected blow, like a serious
illness, a marital separation or loss of employment,
it can be difficult to stay on track.
S
ometimes, it can even put your ability
to make your mortgage payments at
serious risk. This scenario shouldn’t
mean that your home, and everything you’ve
worked so hard to achieve, be in jeopardy.
Often, there is help available if you know
where to look.
Many Canadian homeowners, particularly
first-time homebuyers carry mortgage
default insurance on their home, in fact over
45% do. These individuals may have access
to assistance programs to help modify their
loans should they experience a temporary
financial hardship.
For example, if you have a Genworth
insured mortgage, you can take advantage of
their Homeowner Assistance Program at no
extra cost. The program enables you to work
with Genworth and your lender to establish
alternative arrangements so you can stay
secure in your home when times get tough.
The Homeowner Assistance Program
is for Canadians facing a variety of difficult
situations, including:
22 | FALL 2010
HomeOwnership
✓ Work challenges, such as job loss, a strike,
or even reduced income
✓ Health issues, such as injury or illness
to yourself or a family member
✓ Life developments, such as marital
separations or a death in the family
You also have the ability to review
your options from the privacy of your own
home by using the Homeowner Assistance
Evaluator, a self-assessment tool that can
be accessed online. It helps concerned
homeowners better assess their financial
situation and provides potential solutions
to help you stay in your home.
With programs like this available to
homeowners, a little bit of education and
effort can make the difference between a
negative outcome, and finding help when
you need it the most.
To assess your own situation, visit
www.HomeownerAssistance.ca or
contact your lender.
© 2010 Genworth Financial