Summer is here, and homeowners are busy cleaning up their yards, painting their decks and de-cluttering their homes. Many are also decorating their front lawns with for sale signs.
That’s right, it’s real estate season. And while some of your clients may be first-time homebuyers, don’t forget about those repeat buyers looking for their second or third home.
They’ll not only face challenges when buying another house, but also when trying to sell their current property, says Stacy Cabral, personal account manager at Envision Financial. And you can help them take advantage of some lesser-known financial opportunities in the process.
“Some homeowners will have profit to re-invest after selling their first home,” says Cabral. “While it’s common to shift all of the profit into your second or third home, there’s also the option of starting a new investment strategy or putting money away for your children’s education.”
She adds, “Even shifting a small percentage of the profits into investments can make a big difference in the long run.”
Some alternative mortgage vehicles can even help new homebuyers convert bad debt into good debt, and write off the tax.
“Interest paid on a traditional mortgage is not tax deductible in Canada,” says Cabral. “This is called bad debt.” But, she suggests you help clients research other options, such as mortgages that act more like a line of credit and offer atypical interest options.
Also, don’t forget CMHC fees. They’re often a surprise to first-time owners but don’t have to be for repeat buyers.
“To avoid the fee, purchasers need at least a 20% down-payment, so factor in what that would be and stick within that price range,” says Cabral.
Other fees of homeownership include: real estate fees, property transfer tax, appraisals and legal fees and inspections. There’s also home insurance and mortgage protection insurance, or life insurance to consider. Urge clients to compare services and providers before they make commitment.
Selling a property often results in mortgage penalties as well. Cabral says there are ways to avoid a costly bill.
“Port the mortgage instead of paying it off and applying for a new one,” she says. “If you do decide to break your contract, many financial institutions will refund the fee within a certain time frame if you agree to stay a customer.”