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Wednesday, March 10, 2004

Is Zero Down Payment Right For You?

by PJ Wade

Canadians who have been madly saving for the minimum five percent down payment required to buy a new home and qualify for mortgage loan insurance can now forget about it. Down payments have just gone to zero.

Our federal housing agency, Canada Mortgage and Housing Corporation (CMHC), has expanded eligible down payment sources to enable many Canadians to realize their home ownership dream sooner than what would otherwise be possible.

As of March 1, 2004, the down payment may come from any source including lender incentives and borrowed funds. Previously, would-be homeowners were required to provide the down payment from their own or immediate family resources. However, borrowers will still have to prove their ability to meet their debt commitments in order to qualify for mortgage insurance.

CMHC experts predict that Mortgage lenders will be offering Canadians a variety of mortgage product offerings under this new program, including mortgages with terms as low as six months and fixed, adjustable and capped interest rate loans.

CMHC has long acknowledged that for most people, the hardest part of buying a home, especially the first one, is saving the necessary down payment. The original minimum down payment of 25 percent of the purchase price meant that home ownership was not possible for a large segment of the population. As a result CMHC introduced Mortgage Loan Insurance to lenders. Through this program, CMHC enabled Canadians to finance up to 95 percent of the purchase price of a home. This meant, for example, that someone wanting to buy a home for $125,000 would need just $6,250 or 5 percent of the purchase price as a down payment. At 25 percent of the purchase price they would have needed $31,250.

Mortgage Loan Insurance, which is purchased through the lender at the time the mortgage is arranged, protects the lender against payment default. This insurance should not be confused with Mortgage Life Insurance which is personal insurance designed to pay off the mortgage should the borrower die with debt outstanding. Along this line, there is also available mortgage insurance which will make mortgage payments in cases of job loss or health problems that keep you from earning.

Mortgage eligibility will still include conditions like the following:

The home which is to be occupied as your principal residence is located in Canada.

You can demonstrate that you have a down payment, that is, the difference between cash and mortgage principal.

Your home-related expenses do not exceed 32 percent of your gross household income based on Gross Debt Service (GDS) calculations.

Your total monthly debt load does not exceed 40 percent of your gross monthly household income according to Total Debt Service (TDS) calculations.
While saving a down payment may no longer be essential to home buying, it may or may not make home ownership more affordable in the long run. Although appealing at first glance, examine your situation from all angles before making commitments on paper.

Published: March 9, 2004

Related Articles:

Canadians Who Keep More Achieve 2004 Real Estate Goals

Mortgage Interest Tax Break Hotly Debated In Ontario Election

Canadians: Five Percent Will Buy You a Home!

"The Canadian Connection"

PJ Wade, The Improvement Coach, is a business strategist and an internationally recognized authority on retirement and the Maturing Marketplace (= baby boomers and seniors). PJ's firm, The Catalyst, provides strategic communication and educational services to the financial, healthcare and housing sectors - and the clients they serve.Author of 6 books and over 850 published articles, PJ's current books are Have Your Home and Money Too, "the owner's manual for your home," (Wiley, ISBN 0-471-64400-5) and Caring for Your Aging Parents (Coles, ISBN 0-7740-0613-7). PJ is a widely-known and often-quoted financial commentator and a popular strategic speaker. For more, visit http://www.thecatalyst.com.

Copyright © 2004 Realty Times. All Rights Reserved.

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Make Storage, Organization A Priority In The Kitchen

by Michele Dawson

When it comes to our kitchens, storage and organization are becoming essential ingredients.

Indeed, some 85 percent of new-home buyers surveyed say a walk-in pantry is desirable or essential and 60 percent said special use storage areas are priorities, according to the 2003 National Association of Home Builders Consumer Preference Survey.

And storage and organization are key goals for kitchen remodelers and those simply wanting to make a few simple and cost-efficient changes.

"You don't have to be an organized person to have an organized kitchen," said Kate Schwartz, editor of kitchens.com, a consumer website. "The right cabinet interiors, space planning, and kitchen accessories can do most of the work for you."

Lowe's, meanwhile, says the first step involves taking everything out of your cabinets and sorting into groups according to where the items are used.

"While you are sorting, ask yourself, 'Have I used this in the past two years?' Lowe's advises website visitors. "If you have not, then move it out of your way. You do not have to toss it in the trash. Give it to someone, store it in a less accessible area or in a different room."

Schwartz offers the following suggestions:

If you're getting new cabinetry, see if you can increase the size. Standard dimensions are becoming less and less, so see if your designer or cabinetmaker can add 6 inches of storage to your base cabinets by making them 30 inches instead of the standard 24 inches deep. Or see about making upper cabinets a foot taller and adding 3 or 4 inches to the standard 12- or 13-inch depth.

Don't forget about aesthetics. To avoid turning your kitchen into an overwhelming collection of floor-to-ceiling cabinetry, add contrast. Screened or frosted cabinet doors can hide clutter while breaking up the monotony of the wood. Mix it up with some open shelving.

Get that extra storage space by adding 4-inch-to-10-inch wide slide-in shelves that look like posts when they're pushed in.

Think about open shelving. It's easy to put the plates away, and you can add some instant color and personality to the kitchen. And, because upper cabinet open shelving tends to be more recessed than low-hanging boxes, you'll end up with more open workspace.

Think about appliances that now come as drawer units -- including refrigerators, wine chillers, and dishwashers.

Place your cooktop on your island to free up wall space formerly taken up by the ventilation unit.

Alphabetize your spices for easy retrieval.
In addition, Lowe's recommends building a pot rack to clear away a good chunk of storage space.

"Organizer racks can be added to cabinets to store cookie trays and lids," Lowe's says. "Store pot lids by adding shallow bins to the back of the cabinet doors." And when it comes to organizing cabinet storage, Lowe's suggests under-the-sink organizers for cleaners and chemicals, lazy susans for access to corner spaces, step shelving in cabinets to organize canned goods, dishes and small appliances, and wire baskets on slides to make your deep cabinets more accessible.

Meanwhile, Sarah Susanka, an architect and author of several books, including Not So Big Solutions for Your Home (The Taunton Press, 2002), says the kitchen shouldn't fall victim to messy piles of mail and paperwork.

"The average household receives far more mail today than was typical even a decade ago, but we haven't accommodated this onslaught with a designated area in the house," Susanka says.

She recommends designing a mail-sorting place. This, she says, can be a kitchen island or peninsula. But to be a mail-sorting place -- as opposed to a dumping ground -- she says there must be places to put the sorted mail readily at hand.

A lower counter can have mail slots, or if there isn't enough space, a mail-slot area should be a few steps away.

"If you can get family members to comply, another system is to locate a desk space in a convenient spot adjacent to the kitchen where it can serve both as a mail-sorting place and as an organization center," Susanka says.

No matter what type of system you develop, Susanka says you should include a good-size trash can and recycling bin.

Published: March 9, 2004
Related Articles:

Selling Your Home? Focus on the Kitchen

Popularity of Kitchen Islands Continues to Surge

Tips for Remodeling Your Kitchen on a Tight Budget

Think Green In The Kitchen

Based in California, Michele Dawson has extensive experience as a reporter and editor and now specializes in housing and real estate matters.

Copyright © 2004 Realty Times. All Rights Reserved.

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College-Bound Students Change Real Estate Needs

by Peter G. Miller

In homes throughout the country the mail is being watched with great care. Letters from colleges are arriving each day, many bearing news of acceptance to one institution or another.

Parents, of course, are elated by such news -- at least until they see the tuition bills. No less important, in many households as children go off to college there is the real problem of too few residents and too much space: What is now a cozy nest will soon rival an airline terminal in terms of excess footage.

For years homes have been growing in terms of square area while the number of occupants per household has been shrinking. The result is more square feet per occupant, a luxury when a home is filled with people but a costly excess when children leave.

The unfolding issue for many households with college-bound children is this: Do you stay, sell or do something in-between?

In the short-term parents need not make a quick decision because the children will come home if only for the cooking and excellent laundry facilities. But you can see that not far down the road visits will be less frequent while the need to dust scads of excess space will continue.

The case for staying is strong: It's your home, it's where you raised the children, you're comfortable, you know the neighbors and the neighborhood and by staying you do not have to go through the physical and psychic trauma of moving. Moving to a new jurisdiction may impact the ability to obtain state awards and scholarships and to qualify for residential tuition rates. Also, by holding onto a larger home there will be room in the future for multi-generation living, an increasingly-common arrangement.

Alternatively, if you move you're likely to have profits Uncle Sam will not tax. A smaller property will have a lower monthly cost and less maintenance. If you move to a new home you'll also get a better use of space and more modern features than found in older houses.

Buried in the discussion of to sell or not to sell is another matter, one which is hard to ignore. The real estate market in many communities has been strong because the population keeps growing and the number of available building lots in desirable locations dwindles steadily.

The result is that many households have an asset which appreciates with some regularity each year. In fact, for many families a home is their greatest single financial asset.

"Households," says Federal Reserve Chairman Alan Greenspan, "own more than $14 trillion in real estate assets, almost twice the amount they own in mutual funds and directly hold in stocks. Over the past two years, significant increases in the value of real estate assets have, for some households, mitigated stock market losses and supported consumption."

It's somewhat strange to consider, but at the rate some areas are appreciating property values may increase in four years by enough dollars to cover all college costs. This is not guaranteed, of course, but in given communities it's also not unreasonable.

Thus the real conflict for the parents of college-bound children is excess space versus the potential for more appreciation.

What to do?

The way the tax rules are now constructed it may be worthwhile to consider a middle course: hold the property at least while the children are in college and then rent for two years. This way owners can benefit from the federal tax rule which says that in most cases to write off profits from the sale of a prime residence owners must have lived in the property for two of the past five years. For details, be sure to speak with a tax professional.

The attraction of this approach is that as much as $500,000 in profits from the sale of a prime residence can be sheltered from taxes for married couples, and up to $250,000 for individual owners.

But what happens if real estate prices stagnate or fall? Across the country, says the National Association of Realtors, home prices have increased on a cash basis each year since 1968, the first year records were kept. At the same time, it's also true that home prices have not increased equally in all locations and that in some areas prices have actually declined for given periods of time.

So if your children have been accepted to college, congratulations. Now please open your blue books and complete this question: Given your needs and preferences, is it better to stay, sell or rent? There is no "right" answer and you will not be timed. Begin now.

For more articles by Peter G. Miller, please press here.

Published: March 9, 2004

Related Articles:

Life Changes, Home Improvements Should Prompt Review Of Your Homeowners Insurance

Teens Would Enjoy Studying More If Their Study Areas Were More Personalized

California Yields Most High-Cost-Of-Living Markets

Boomers To Demand More Custom New Homes

Peter G. Miller, also known as OurBroker®, is the author of six real estate books -- including The Common-Sense Mortgage -- and is the original creator and host of America Online's Real Estate Center. Mr. Miller welcomes your questions, comments, and news releases via e-mail at peter@ourbroker.com.

Copyright © 2004 Realty Times. All Rights Reserved.

Columnist Peter G. Miller

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