First-Time Home Buyer Guide

The road to buying your first home and current mortgage rates can feel overwhelming. With many things to consider throughout the process and lots of decisions to make, it’s sometimes hard to know where to start. This guide will help you understand the steps and things to consider as a first-time home buyer.    

Navigating the complex process of owning your first home can be challenging and a time-consuming process with no prior experience. Mainstreet advisors are here to provide you with up-to-date information and step-by-step help to get you on your path to home ownership. 

  1. How much can you afford?
  2. Down Payment
  3. Closing Costs
  4. Pre Approval / Pre-Qualified
  5. House Hunting and Approval

How much can you afford?  

One of the first things to understand when buying a home is how much you’re able to afford. Having this information not only helps you plan and save, but it will help you when you begin the search for your home. The amount you can afford is determined by several factors including your household income, current debts, fixed and variable expenses and the amount of down payment you have. These factors are used to create a Gross Debt Service Ratio (GDS) and a Total Debt Service Ratio (TDS) that help lenders determine the amount of mortgage you can qualify for without overextending yourself.   

Although it can sound complicated, it doesn’t have to be! You can reach out to one of our Mainstreet Advisors who can help you get a full picture of where you are currently, what your goals are and can help create a plan to help you achieve your goals of home ownership. At your appointment you will review your financial background, and credit history. This will determine the best price range for your income and budget. We will also discuss what current mortgage rates are available to help you understand which mortgage product is right for you. 

Alternatively, you can use our Mortgage Affordability Calculator to give you a sense of the price range you are in. This will help give you a starting point as you begin your planning. 

Down Payment

The down payment is a key part of the home buying process. In Canada, your down payment must be at least 5% of the home’s total purchase price. If a house is more than $500,000 a 5% down payment is required for the first $500,000 then a 10% deposit is required for the remaining portion. Any down-payment under 20% is a high-ratio mortgage and is subject to mortgage protection insurance. Premiums are based on both the size of the down payment and the value of the mortgage. You can use the Mainstreet mortgage calculator to understand how your down payment could affect your payments. 

There are several ways to effectively save for a down payment and help you achieve your goals sooner. Let’s explore those below.

First Home Savings Accounts (FHSA)

This new account is great for a first-time home buyer. Canadian citizens 18 years and older can now save up for their first home with the new FHSA. Like a Registered Retirement Savings Plan (RRSP) contributions are tax deductible, while like a Tax-Free Savings Account (TFSA) any income made on an FHSA is tax-free. Learn more about our FHSA here. 

The Home Buyers Plan (HBP) 

The Home Buyers Plan (HBP) allows you to access funds from your Registered Retirement Savings Plan (RRSP) to put towards the purchase of your first home. Each person can withdraw up to $60,000 interest free from their own RRSP account to contribute towards the down payment of the home. Funds withdrawn from your RRSP are tax free provided they are paid back within 15 years of the home purchase and repayments must start no more than five years from the withdrawal date. 

High Interest Savings Account (HISA)

Another great way to save for your down payment is within a High Interest Savings account. You can open a savings account online in a couple of minutes and start on your journey towards home ownership. Automating deposits is a great, hands-off way to save for your down payment. Here you will earn a set interest rate with no risk to your funds. This account allows you to jointly save with your partner or spouse and is a great solution for those who have saved the maximum amount in their FHSA.

Cash Gifts

If you are lucky enough to have a down payment as a gift or inheritance from family. It is important to show how those funds we acquired. As part of the process, your advisor will review these documents and ensure that the appropriate information has been collected.

Closing Costs

Closing costs are not a factor that initially comes to mind as a first-time home buyer. These costs are expenses that are required as part of finalizing the purchase of a property. These include legal fees paid to your lawyer, title insurance, land transfer taxes, home inspections, and appraisals. Typically closing costs are between 2%-4% of the price of your home so don’t forget to include this in your savings plan. 

Pre-Approval / Pre-Qualified

When you are ready to begin looking for your home, booking an appointment with a Mainstreet Advisor is a great way to prepare. At this final milestone, you can work with your advisor to gather all the relevant paperwork and cover the last details to ensure you are ready to make the offer when you find that dream home. A Mainstreet advisor will review your supporting documents, review current mortgage rates and can pre-qualify you to make sure that when you find “the one”, the process moves quickly and goes smoothly.   

House Hunting and Approval

After your pre-approval appointment, happy house hunting! Your Mainstreet advisor is here to assist the entire way. Once you have an offer accepted on your dream home, send us the paperwork and we will take care of the rest! 

Navigating Rising Interest Rates

Do you feel like we’ve been on an interest rate roller coaster? The low interest rates that we’ve all become accustomed to seem to have disappeared, and we’re now feeling the inflation pinch – from the grocery store to the gas pump. Unfortunately, if you’re amongst the many faced with renewing your mortgage in upcoming months, it’s highly likely that you’ll be navigating the rising interest rates on that too. You’re probably left with one question: “What can I do?”

First and foremost, we recommend that you start talking with a trusted Mainstreet advisor early. Any mortgage renewal is a big decision, now more than ever, that will impact your financial life for at least the next 1 to 5 years. You and your advisor will go over all your renewal options in detail so that you’re prepared to make the best decision possible for your situation. Starting the conversation early ensures that you’re not rushed into anything or having to make a quick decision right at the renewal date.

We like to discuss your short, mid, and long-term financial goals to determine what you can do now, to set yourself up for success in the long run. With that being said, paying off your mortgage as quickly as possible may be on hold, while keeping your mortgage payment manageable is top priority.

Below we have detailed a list of items that you can review and edit to reflect what you want out of an appointment with a Mainstreet advisor when discuss your upcoming mortgage renewal:

Fixed vs. variable rates

When renewing your mortgage, you’ll need to decide whether to go with a fixed or variable interest rate. Fixed rates offer predictability and stability, while variable rates can fluctuate based on market conditions. If you want to do some research before your meeting, you can find our mortgage rates here.

Structure

You’ll need to decide on the structure of your mortgage.  Discuss with your advisor about splitting your mortgage into chunks, with the current rate environment, renewing the full balance for a 5-year term, may not be the best solution for you.  For example, what does splitting the balance into a 1- and 3-year term look like for your budget.  No one has a crystal ball regarding what interest rates will do next, keeping options on the table will allow you to make changes along the way. 

Payment Frequency

You may want to consider changing your payment frequency to either increase or decrease your payments. For example, switching from monthly to accelerated bi-weekly payments can help you pay off your mortgage faster and save on interest costs.  Aligning payment dates with your pay date will help with budgeting.

Prepayment options

You may have the option to make prepayments on your mortgage, allowing you to pay down the principal faster in order to save on interest costs.

Your financial situation

It’s essential to consider your current financial situation and any changes that may have occurred since you first took out your mortgage. This includes any changes to your income, expenses, or credit score.

Review your budget

Consider things like cancelling monthly subscriptions that you no longer use or penciling out how much that daily latte actually costs per month to get a better view on your weekly/monthly expenditures. Remember, this isn’t to take the joy out of the life’s simple pleasures, but to put you at ease when it comes time to making the bigger financial decisions. If that latte makes your day, we’ll move onto the next item on the list! Our advisors are always here to help with creating a budget that works best for you.

Some of the ways that Mainstreet may be able to help:

Refinance your mortgage

This involves completing an application and providing income confirmation. When approved you may be able to consolidate your debts into your mortgage to lower your overall monthly payments freeing up cash flow.

Payment deferral

When approved this allows you to temporarily suspend or reduce your mortgage payment for a specified period of time. This can be useful if you are experiencing financial difficulties, such as a job loss or a medical emergency. Keep in mind that the payment deferral means that once you resume payments, your mortgage payment will increase for the remainder of the term.

Modifying payment terms

By changing the terms of your mortgage, it could lower your monthly mortgage payment obligation. Doing this may help relieve financial pressure. Please note that lowering payments or extending your amortization will increase your over all interest costs. When you get back on your feet, make sure to increase your payments.

Blend and extend

This is a type of renewal where you blend your existing interest rate with the interest rate currently offered at Mainstreet. This results in a new interest rate somewhere in between. In addition, your term will be extended by the length of the new term. This can be done to adjust your mortgage terms to better suit your financial situation.

If your mortgage payments seem overwhelming and you find yourself struggling to make ends meet, there are several options that you can consider, and we’re here to help you find them and put them in place. We know how hard it can be to have these, sometimes uncomfortable, conversations, but we want to assure you Mainstreet is here to help without judgement. We live in the same communities, shop at the same stores, are subject to the same inflation, and feel that same pinch. The only difference is that because of our job, we know some tools to make life a little easier, and we want to share them with you.

Learn more about Mainstreet’s mortgage options.

Book a meeting with a Mainstreet advisor.

Buying Commercial Property

Written by: Adele Mineau

So, you’ve decided to buy a commercial property…

You have funds to invest but the stock market makes you nervous and you like the idea of investing in property that is tangible. You have made an appointment to speak with a Commercial Account Manager and they have asked for a slew of paperwork.

What might they ask for and why?

ID, Personal Net Worth Statement, 2-3yrs Personal Income Tax Returns with the latest Notice of Assessment will be requested. If you have a corporation they will also asked for Articles of Incorporation, Shareholder/Director Registers, and 2-3yrs financials with Notice of Assessment. Most of this information is easily explainable, they want to know who you are, what assets and liabilities you have, and how much you make annually. For the corporation it is necessary to know where the corporation is located, the structure of the corporation, and what the corporation can do. The Registers verify the shareholders (owners) and the directors (people who can make decisions for the Corporation). Most of this information can be forwarded via email directly from your accountant and lawyer.

When you already have a property in mind, your account manager will want to know more about the property. Depending on where you are in the process and what kind of commercial property you are looking at, an account manager could request an MLS listing, 2-3yrs financials for the property, existing leases, rent roll, a Purchase & Sale Agreement, a business plan, an ACI appraisal, an Environmental Report, and a Building Condition Assessment. It could seem like a lot, but it is important to remember the primary purpose of acquiring this information is to assist making your decision by having all the information that could influence the profitability of the investment. Some of this information is obvious, MLS listing outlines the sale information, financials provide a look into revenue & expenses, leases and rent roll can provide an idea of tenant mix and what expenses tenants are responsible for, and the Purchase & Sale Agreement provides the address, seller, buyer, purchase amount, conditions, and important dates.

Let’s discuss the remaining information as not everyone has needed to deal with this information before. A business plan provides an outline of ambitions, how they will be achieved, and a timeline for those achievements. For example, are you going to raise the rent? Is that reasonable according to the market? Will you raise them gradually?

An ACI appraisal is completed by an appraiser who is designated by the Appraisal Institute of Canada to appraise residential, commercial, industrial, institutional agricultural, land and special use property types. They are best qualified to provide an approximate value on a commercial property as they take into consideration comparables (sale prices of similar properties), income results (based on real or potential revenue considering expenses and the market), and cost approach (land cost plus cost to rebuild).

An appraisal answers the question “Are you offering too much?”

An Environmental Report Phase I provides a visual and historical inspection to identify any potential current or past environmental issues. If issues are found a Phase II is required. Phase II includes environmental testing, sampling, and analysis.

An Environmental Assessment answers the question “Are there any potential dangers or remedial costs from former uses of the property?”

A Building Condition Assessment describes the structural components (roof, walls, etc.), interior components (plumbing, electrical, etc.), and exterior components of the building, identifies any issues or deficiencies, and projected costs of remedying them. A Building Condition Assessment answers the question “What are the hidden costs of this property going forward?”

Remember, not all of this information will be requested for every application, but if it is requested, you will know why and the importance of the information it provides. Happy property hunting!

What is an RRSP?

Written By: Aviso Wealth

What is an RRSP?

A registered retirement savings plan (RRSP) is a special kind of investment account designed to help you save for retirement. It is registered with the Government of Canada. You can contribute funds to an RRSP for yourself, and you can also contribute to an RRSP for your spouse or common-law partner. Your contributions to an RRSP are tax deductible and can be used to reduce your tax.
You can use the contributions to purchase investments, and the gains and income generated from those investments are not taxed as long as the funds remain in the plan. However, withdrawals from your RRSP are treated as taxable income

What is a self-directed RRSP?

With a self-directed RRSP, you have the freedom to oversee the investments in your RRSP. You can make all the decisions about which investments to buy or sell, and manage your account when it’s most convenient for you.

What types of investments can I hold in an RRSP?

You can hold a wide range of investments within an RRSP, including stocks, ETFs, mutual funds, bonds, GICs, and cash.

How much can I contribute?

There are limits to how much you can contribute each year to your RRSP or to your spouse’s RSP. The maximum allowable contribution for the 2024 taxation year is: $31,560. Your allowable contribution room is the lower of:
• 18% of the earned income reported on your tax return for the previous year
• The maximum annual contribution limit for the year, which is set by the government
• The remaining limit after any employer-sponsored pension plan contribution
• You can carry forward unused RRSP contribution room since 1991.


To find out the exact amount you can contribute this year, as well as your carry-forward contribution room, check your most recent Notice of Assessment from Canada Revenue Agency (CRA), or log in to your online account with CRA.

Is there an annual deadline to contribute?

In order to be eligible for an RRSP deduction in a specific taxation year, you can make contributions anytime during that year, or up to 60 days into the following year.

How long can I contribute?

You can contribute to your RRSP until December 31 of the year in which you turn 71. After that, you must withdraw the assets, convert them into a registered retirement income fund (RRIF) or purchase an annuity.

When can I start contributing?

There is no minimum contribution age, but you must have earned income reported to CRA. The sooner you start contributing to your RRSP, the better, in order to take advantage of the power of compounding.

Mutual funds are offered through Credential Asset Management Inc. and Qtrade Asset Management (a tradename of Credential Asset Management Inc). Mutual funds and other securities are offered through Qtrade Advisor and Credential Securities, a division of Credential Qtrade Securities Inc. Credential Securities is a registered mark owned by Aviso Wealth Inc.
Aviso Wealth Inc. (“Aviso Wealth”) is the parent company of Credential Qtrade Securities Inc. (“CQSI”), Credential Asset Management (“CAM”), Qtrade Asset Management (“QAM”) and Northwest & Ethical Investments L.P. (“NEI”). NEI Investments is a registered trademark of NEI. Any use by CQSI, CAM, QAM or NEI of an Aviso Wealth trade name or trademark is made with the consent and/or license of Aviso Wealth. Aviso Wealth is a wholly-owned subsidiary of Aviso Wealth Limited Partnership, which in turn is owned 50% by Desjardins Financial Holdings Inc. and 50% by a limited partnership owned by the five Provincial Credit Union Centrals and the CUMIS Group Limited.

What is an RDSP?

Written by: Delia Terpstra | Wealth Management Advisor | Strathroy Admin

An RDSP is a Registered Disability Savings Plan that is intended to help parents, guardians and qualifying participants save money for the welfare and financial well-being of someone with a disability. 

How does it work?

An RDSP is a tax-deferred savings vehicle that allows the holder to invest up to $200,000 over the lifetime of the plan. The federal government will match anywhere from 100%- 300% of your investment depending on the investor’s household income, or the income of the beneficiary if they are over 18 to a maximum yearly amount.

Simply opening an RDSP can help to qualify you for $1000 annually paid to your RDSP, depending on your income.

Who can open an RDSP?

To open and RDSP you must qualify for the disability tax credit (DTC).

Other requirements for eligibility include;

  • Canadian resident at the time the RDSP is open
  • Under the age of 60 (unless transferring from another RDSP)

Am I eligible to receive grants?

In order to be eligible to receive government grants you must meet the following criteria;

  • You must be under the age of 49
  • You must be a resident of Canada
  • You must have a social insurance number
  • You must be eligible for the Disability Tax Credit (DTC)
  • Up-to-date filing of your tax return. If under the age of 18, parents or guardians must file their income tax returns for the past 2 years and future years

How will an RDSP affect my Ontario Disability Support Program?

At this time the RDSP payments do not affect your eligibility or the amount of money you receive for income support from ODSP.

See website regarding this: Financial eligibility: Treatment of income (gov.on.ca)

How much grant money in available?

The maximum grant you can receive through Canadian Disabilities Service Grant (CDSG) is $70,000 up until the end of the year the beneficiary turns 49.

The maximum Canada Disability Savings Bond (CDSB) you can receive is $20,000.

For more RDSP information visit this website: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-disability-savings-plan-rdsp/canada-disability-savings-grant-canada-disability-savings-bond.html

How can I set up an RDSP?

To set up a RDSP, you can book an appointment with one of our knowledgeable Credential Asset Management Inc. Wealth Management Advisors at Mainstreet here.

Mutual funds are offered through Credential Asset Management Inc. The information contained in this article was obtained from sources believed to be reliable; however, we cannot guarantee that it is accurate or complete. This material is for informational and educational purposes and it is not intended to provide specific advice including, without limitation, investment, financial, tax or similar matters.

Top 10 Things to know about Mainstreet Online Banking

By: Jodi Ritzer | Member Experience Supervisor | Chatham

Get the most out of our online banking service with the following top 10 tips and tricks:

1. To be able to see the password you have entered, you can click on the ‘eyeball’ icon on the right side of the Personal Access Code field.

2. To set up a new debit card on your mobile banking app, open the app, click “log in” followed by “log into a different account” in the bottom left and fill in the account details. Be sure to check the remember me box for quicker access to this new log in. You can also delete any existing logins by selecting “manage login profiles” and clicking the trash can beside the account you wish to delete.

3. Did you know that you can deposit a cheque to your account by using our mobile banking app? Simply login to the app, touch Deposit on the home screen and follow the prompts. Note: Your cheque may be held for up to 5 business days after depositing. PRO TIP: write ‘deposited by phone’ and write the date on the back of the cheque so you don’t accidentally try to deposit it again.

4. If you have to pay business taxes (i.e.: current source deductions, corporate income tax, etc.), expand the ‘Payments’ menu and select Pay Business Taxes. You can remit and pay all in one spot!

5. Protect your account! Set-up Alerts so you can monitor your account access! In online banking desktop, click on Messages and Alerts, and select Manage Alerts, and on the Mobile Banking App, swipe left on the home screen and touch Alerts and then touch Manage. You can set alerts so you are notified immediately if someone tries to login to your account, sets up a new e-transfer recipient, sets up a new payee to your bill payments, and more!

6. You can add a new payee to your bill payments listing. Under the Payments heading, select Add/Delete Payees, then select Add Payee. You can search the company by name, or enter the type of business for a list of suggestions.

7. If you need to view account transactions older than 6 months, you can do this by clicking on My Accounts, then selecting View e-Statements. Select the year and month of the statement you wish to view. The information is available for 7 years!

8. Tax Receipts. Are you tired of waiting for your tax receipts to come in the mail? They are available online! Click on My Accounts, then select View e-Documents and select the receipt you want to view and/or print.

9. You can re-name your accounts! Are you saving for a car, a wedding or something else. You can label your accounts so you know which one is which! Click on My Accounts, then Rename Account, select the account you want to Rename, and label it!

10. Downloading your transactions to a bookkeeping program is easy! Go to My Accounts, View Account Activity, select the account you wish to download, then go to Export to… on the right side of your screen and select from the drop-down list of programs.

11. BONUS!!! You can get your account information for direct deposit or pre-authorized debit online! Click on the account for which you wish to get the information, it will then show on the top right side of your screen under the heading Account Details and will include your transit number, institution number and account number!

If you are looking for more helpful tips and tricks, visit a branch or speak with the team at Mainstreet Credit Union. We are here to help!

How To Manage Your Side Hustle

Written by: Adele Mineau | Commercial and Agricultural Account Manager | Ailsa Craig & Parkhill branches

Side hustles have become a popular way of supplementing income from a full or part time job, and they’re only getting more common during the Covid-19 pandemic.

A good side hustle should be scalable, flexible, and well paying. Income can be used to pay-off debt, or put away more into savings, while doing something you love.

Some popular side hustle ideas are: tutoring or teaching a skill, renting out a property through Airbnb, selling arts or crafts, and podcasting or blogging.

When beginning your new business it’s best to think of it as its’ own entity:

Open a separate bank account that makes tracking the income and expenses easy for tax time.

Be sure to have a schedule. Are you going to devote an hour a day to your business, every Saturday, or is it seasonal?

Have a business plan with short-term and long-term goals with a timeline. How many students do you want to teach a day, how many crafts need to be for sale each month, how many days per week are you renting out the cottage?

Don’t spend money the buyer won’t see, only spend money where it improves the quality of your product or efficiency. Think about if you need supplies before you order them or can sell the extra items a new system would allow you to produce.

Keep administration and infrastructure simple. Can you get by with a spreadsheet and an invoice template?

Let Mainstreet know what kind of side hustle you are starting. We are interested in your ideas and can provide advice on how to begin, how to manage day to day, and how to grow.

Book a meeting with an advisor today to get started.

Student banking; we do that

Written by: Andrea Zapf | Financial Advisor | Ailsa Craig Branch

Whether you are just finishing high school, deciding to finally go back to school after an extended break, or maybe you are looking for a much-needed career change, Mainstreet has you covered. We offer a wide range of student services to help- from daily banking, student line of credit, and low-fee credit cards.

Did you know that if you are under the age of 26, you qualify for a choice between two different entirely free Mainstreet personal chequing accounts. Whether you primarily bank online or prefer to come see us in-person, we have accounts that would work best for whatever type of banking you prefer. 

A student line of credit is a great way to be able to pay for tuition, books, or just regular living expenses. Mainstreet can loan up to $10,000 per year, up to a maximum of $40,000.  With this line of credit, you only need to pay the interest while you are enrolled in school.

Once you are finished your schooling, you get 12 months of interest only payments to allow for you to get out into the workforce and establish yourself. After a year, your line of credit is converted to a loan. You can take up to 10 years to pay it off, or pay it off early with no penalty.

Mainstreet also offers low interest, no annual fee, credit cards. It’s very important to understand credit, especially when you are first venturing out on your own. By establishing good credit, you can set yourself up for your future. Having good credit will help if you are ever looking to buy a car or purchase a home. An easy way to establish credit is to use a credit card to make everyday purchases, groceries, gas, etc. and then pay it off every month when it’s due, or before the monthly deadline. By having a low-interest credit card, should you be unable to pay off the card in full each month, you won’t be paying so much in interest charges.

Mainstreet is a huge believer in supporting communities and investing in higher education. Right now, Mainstreet is offering an opportunity to win a $3000 scholarship
(applications for 2021 are due by July 31, 2021), as well as additional giveaways. 

As you can see, Mainstreet has a lot to offer students! Going to school can be daunting, so let us help you make it easier. Visit our Student Resources page to learn more. If you are wanting to speak with an advisor about student banking, book a meeting today!

Downsizing to the lifestyle, and home, you want today

Tricia Bouterse | Financial Advisor | Sarnia

Most homeowners come to a point in their life when they may want to downsize their home maybe because of their stage of life or becoming empty-nesters, wanting to retire in a new place, wanting less up-keep and space to maintain, wanting more financial freedom, and more.

It’s often a long and stressful process to prepare to downsize as you aren’t just downsizing your home, but all the items in it so they’ll fit in a smaller space. It might leave you wondering “how did we accumulate this much stuff in the first place?” Don’t fear, there is a light at the end of the tunnel and Mainstreet is here to help make your downsizing experience a positive one.

Create the life you want

The first step we recommend is stopping before your start. Stop, close your eyes, and imagine where you want to go in life and what your priorities are. Do you want more leisure time? Do you want to travel across the country in an RV? Do you want to spend time in your yard and tend to gardens or maybe some animals? Are you ready to make a subtle or drastic change? Take control of your downsizing journey and decide how you want your life to become. It is much easier to move from vision to reality when you know what you want to do and what will make you happy in your next chapter.

Let time be on your side

Be sure to give yourself enough time to plan and execute your downsizing project. This is not a weekend project. Taking time will alleviate stress and empower you in your choices.

As you start to simplify your life, pay attention to what you use on a regular basis and what you don’t. Do you really need to keep that mixer you never use? Are you going to use that treadmill for something other than hanging laundry? If you put items to the front of the closet or cupboards as you use them, the items you don’t use will fall to the back and be easier to identify when you downsize.

Also consider only keeping items that bring you joy. Make it a goal that in your new space you will have less, and what you do have will serve a necessary function (like a fridge to keep your food cold, or a washing machine to clean your clothes) and the rest, whether it is furniture, clothes, or accessories, will be items that spark joy and happiness for you and your family.

Plan your space. Will everything fit in your new home?

Plan out what you will need and if it will fit. If it doesn’t, there are lots of options such as: donating, selling or leaving items as an early legacy gift to your family and friends (bonus–you can enjoy watching them appreciate it!).

Whatever your reason for downsizing and your lifestyle change, have patience and persistence and you will create the new life you want. You are not alone, we are here to help you with your next chapter with financial tools, advice and guidance. Book a meeting with an experienced Mainstreet Financial Advisor today.

What is a Fixed Rate Mortgage?

Liz Oliver | Financial Advisor | Mount Brydges

Whether you are buying your first home, refinancing or renewing an existing mortgage, sometimes deciding whether to go with a fixed or variable rate mortgage can be confusing. I’d like to share some information that may be helpful when deciding if a fixed rate mortgage is right for you.

First off, what does a fixed rate mortgage even mean?

A fixed rate mortgage is a home loan product that has the same/consistent interest rate for entire length/term of the mortgage. Even if the markets and rates fluctuate your rate will remain the same as the day the mortgage began.

Locking into a fixed rate mortgage offers you the homeowner/borrower stability against any sudden or potential interest rate increases within that locked in term. You can budget accordingly and know that your weekly, bi-weekly or monthly mortgage payment that you set-up at the start will remain the same unless you decide to increase your payment amount.

The most popular fixed rate mortgage tends to be a 5 year fixed term where you lock in to that rate for 5 years, however Mainstreet and most financial providers and banks, offer terms from 6months to 5-10 years in length/duration. Rates offered are different depending on the length of term you pick.

On the flip side, there are a few things to keep in mind about a fixed-rate mortgage.

-They generally have a slightly higher interest rate, making the qualifying criteria a little more difficult.

-In case of an interest rate decrease in the markets, you the borrower will not be able to take advantage of that new lower rate as the mortgage would be locked-in for a certain length of time depending upon the term chosen. Breaking that contract will incur penalties, an unwanted extra cost to the borrower.

Regardless of your preference, it is important to understand and know all the details and fine print of your mortgage. Our goal is to offer our members knowledge and support in their home financing needs.  Book a meeting with a Mainstreet advisor today to learn more.

Managing your Credit Card Debts and Payments

James Lounsbury | Branch Manager | Goderich

Are you having difficulty keeping up with multiple monthly credit card or loan payments?

Do you have multiple credit card bills or loans to keep track of and pay on different dates?

Does it feel like you’ll never be able to pay off what you owe?

Credit card debt can be expensive to pay down as most cards have high interest rates (10%-20%+) on any balance owing. If you only make the minimum monthly payment on a regular basis you will be paying a large amount of money in borrowing/interest costs and could take a long time to pay off the amount owed. If you have a smaller balance your minimum payment might be as low as $10.00 per month however if your balance is higher your payment is most likely a percentage of the outstanding balance which is generally 3%. Most credit card statements will detail out the number of years it will take you to pay the amount off using just the minimum payment and depending on the amount owed that could be over 20 years and thousands of dollars you’ll pay just in interest on top of what you owe.

Something that can help better manage the debt is a consolidation loan. Simply put, if you combine all your credit card debts into one low-rate loan, you can save a lot of interest and only have to worry about one loan payment vs. paying multiple credit card bills each month.

To demonstrate why a consolidation loan may be the ‘right’ choice for you here are two scenarios to think about:

credit card debt vs. consolidated loan

As you can see in the example above with the consolidation option, you save money overall in interest costs + would be paying $50.00 less each month! Mainstreet also offers additional insurance options you can add to loans that provide peace of mind by covering the debt of the loan if you suffer a death, critical illness, or a disability.

Here are a couple of very helpful calculators that can be used to demonstrate how you can benefit:

Mainstreet Credit Union – Loan Calculator (mainstreetcu.ca)
Credit Card Payment Calculator – Canada.ca (fcac-acfc.gc.ca)

Of course our staff can always help by working with you to review your borrowing – whether loans, credit cards, mortgage or more, to ensure you have the best financial plan and lowest rates possible to save you money. Book a meeting with a Mainstreet Financial Advisor to get started today.

Financing and Building Your Dream Home

Written by: Marina Kraft | Financial Advisor | Strathroy Branch

If you have been searching and searching and haven’t yet found your dream home, building one from the ground up might be the right solution for you.

A few things to consider if you are thinking of undertaking a home build:

  • You’ll need to secure a special construction/builder’s mortgage. Note: There can be additional financing costs for this mortgage type.
  • Do you currently own land, or will you have to purchase a property? Vacant land may require separate financing, or if you currently own a home, you may be able to secure a Home Equity Line of Credit (HELOC) to purchase the lot.
  • Be sure to do your research. Ensure you will be able to obtain permission to build from the municipality and/or conservation authority. Also research zoning, environmental, the availability of utilities, high-speed internet, etc. Should something need to be addressed, the cost of these items can be significant and will need to be addressed in the build budget.
  • Ensure you have a home builder/ general contractor you trust. This will ease much of the work around the build and managing the sub-trades. As well by Ontario law, a build contractor is required to provide a warranty (typically through Tarion). Be sure to carefully review what is covered under the policy. There is also the option if you have the background, expertise, and disposable time to manage the build yourself (“self-build”). Note that some financial institutions may charge higher fees for a “self-build”, as it poses more risk, and requires you to obtain an “all risk builder’s” insurance rider on your home insurance policy.

How does a construction mortgage work?

Funding for the build project will be advanced by the financial institution in stages, based on the completion of the build. There are generally two methods used to calculate how much is given in each stage:

  • Progress Draw Mortgage: A home inspector will be sent to the property to review the progress of the build to ensure it is going to plan. The inspector completes a report for the financial lender, and if all the components of the stage are completed, they will advance funds. Should the inspector indicate the project is not progressing on plan, the financial lender may hold back some of the scheduled funds until the construction is back on track. Each time the inspector visits the project, a fee is charged (typically to the borrower). Typical stages are: Foundation (excavation, foundation, backfill & framing); Shell (windows, doors, exterior finishes, and roof); Drywall (includes plumbing, electrical, HVAC, duct system and insulation); Finishing (drywall, painting, finished flooring, electrical fixtures, finished plumbing and carpentry).
  • Percent Completed Draw Mortgage: This method is a little more fluid. The inspector completes a report for the lender and indicates the percent of the project completed and that percentage will reflect how much of the total mortgage is funded to the borrower.

For both types, as part of the Construction Liens Act there is a required 10% holdback amount that is kept aside from each draw and accumulates to the end of the project. Once the build has been completed and you’ve received the official occupancy certificate from the local building inspector, there is a 60-day waiting period before the lender releases the accumulated holdbacks.

Separate to this, it is recommended that you have 10% or more of your home’s build cost set aside for unexpected and extra costs that can arise throughout the project.

Building a new home and acquiring a builder’s mortgage may not be for everyone; however, a well thought out and thorough financial and build plan will help to ensure a smoother path to creating your dream home.

Mainstreet and our advisors are here to help you build your dream home and apply for a builder’s mortgage/financing. Book a meeting online or call your nearest branch location.

Why you should get pre-approved when shopping for your first home

Written by: Aimee June | Assistant Branch Manager | Chatham Branch

Unless you have been hibernating all winter long, you’ve likely seen how hectic the real estate market has been already! The additional stress this is putting on home buyers has increased substantially but it is a particularly difficult situation for first time home buyers.

Competitive multiple offers (often with no conditions attached), restricted showings, rising prices, lack of inventory and COVID-19 restrictions have all made buying a home even more challenging. So, what is one thing you can do to make things easier and a little less stressful?

Get a pre-approval from your financial institution before you start house hunting.

Having a pre-approval in place does several things for a home buyer, especially a first-time home buyer:

1. It shows that you are a serious buyer

In this extremely competitive environment, having a pre-approval shows realtors and sellers that you are a serious buyer. Sellers are often reviewing multiple offers. While you may require an appraisal, or approval from Canada Mortgage and Housing Corporation (if you do not have 20% down), if you can show that you have a pre-approval in place for the mortgage from your Financial Institution the seller will likely be more apt to accept an offer they know is likely to stand. In today’s market, realtors prefer buyers to come to the market knowing they are pre-approved.

2. Eliminates possible disappointment

Getting pre-approved can eliminate possible disappointment. You don’t want to start house hunting, fall in love with a home, make an offer, only to find out you have been declined for the mortgage. Getting pre-approved will also correct any potential credit problems that may be hiding. First time home buyers often are not in-tune with their credit scores. They perhaps have not yet built a credit score or have a surprise late payment or collection item on their credit report they were not aware of. Starting the pre-approval process ahead of time will give you a chance to correct this before the house hunting gets serious.

3. See the true costs of buying a home

A pre-approval will help you to understand all the true costs of buying a home and home ownership before you make the commitment. It is great if you have a down-payment saved, but what about closing costs? Utility set-ups? Moving costs? Repairs that may need to be done? A financial advisor will be able to help you work through all these numbers and ensure that you have enough set aside for additional, sometimes unexpected, costs.

4. Plan your home payment

This is a great opportunity to discuss your budget and decide what type of mortgage payment is affordable for you when you consider additional monthly bills like property taxes, utility bills, and maintenance, with your financial advisor.

5. A pre-approval will guide you to your optimal purchase price.

The last thing you want is to be house poor. Buying a home, especially if you are a first-time home buyer can be complicated, especially in today’s market. Buying a home should be an exciting and joyous time in your life. Sitting down with a qualified financial advisor to review your personal situation and becoming pre-approved will help take some of the stress out of your buying journey.

If you are thinking of buying a home, connect with a Mainstreet Financial Advisor to start the conversation, you will be glad you did. Book a meeting today.

Contemplating Taking a Break?

Written by: Doreen Welsh | Commercial and Agricultural Account Manager | Goderich Branch

COVID-19, and the onset of the pandemic, brought fear and panic to many.

Job layoffs, business interruptions, and closures, along with the hesitancy to leave your house for fear of contracting the virus, forced us into unknown territory and left many wondering how to cope in this changing world, and how to continue to meet financial obligations.

At Mainstreet, we are very committed to assisting our members through difficult times, and we continue to work with each member to manage the effects of this pandemic.

Life happens, and we understand there may be times when it is necessary to take a break from a regular financial obligation, such as your mortgage.

Before making the difficult decision to skip your mortgage payment, we recommend that you take a few minutes to discuss with your Mainstreet advisor, the various options that best meet your needs, now, and for the future.

Together with your advisor, you can weigh in on the short, and long term effects of skipping payments, things like:

  • how much more interest will I need to pay
  • what happens to the missed principal portion -when payments resume, depending on the amount, rate, and amortization of the mortgage, it can take 4-5 months to catch up just the interest portion of the payment
  • if I need to add missed principle to the mortgage at maturity, how much time does this add to my mortgage
  • how can I catch up to reduce costs over the long term

If you need help to determine what is right for you, we encourage you to reach out to your Mainstreet advisor to help you make an informed decision.  Book a meeting with an advisor today.