What to do with your TFSA?

 

What to do with your TFSA

For you savvy investors out there — or those planning on investing this year– now is a great time to think about your TFSA contribution for 2015. As of January 1, eligible Canadians (residents over 18) can contribute an additional $5,500 to their TFSAs. That brings the total contribution room to $36,500.

The Tax Free Savings Account (TFSA) is a fantastic way to save to achieve your financial goals in the future. However, only 19% of Canadians are aware of TFSA contribution limits, and only 11% of Canadians could correctly identify the investment types eligible to be held in a TFSA.

A Simple Introduction To Tax Free Savings Accounts
The TFSA was created in 2009 as another investment vehicle to help Canadians save. The money you deposit into the account allows you to earn interest, dividends, and capital gains tax free! That’s huge because taxes can quickly eat up your hard earned investment returns.

Let’s highlight a few key rules…

  • Unlike a RRSP, TFSA contributions are not tax-deductible but the contributions and the investment earnings are exempt from tax upon withdrawal.
  • Do not over contribute! You are liable to a tax of 1% on your highest excess TFSA amount in that month. That cost can quickly get expensive, so be prudent when depositing. You can have more than one TFSA account at two different financial institutions, but be sure to not go over the total limit.
  • If you withdraw money, you must wait until the following calendar year to recontribute.
  • You never lose your contribution room if you miss a year. So for those of you who haven’t opened one yet and have been living in Canada, start making those deposits!
  • Remember to declare a beneficiary to avoid estate issues at death.

What is the difference between a TFSA and RRSP?

  • An RRSP is primarily intended for retirement savings. Tax assistance provided by a TFSA complements that provided through RRSPs.
  • RRSP contributions are tax-deductible while RRSP withdrawals are added to income and taxed at regular rates.
  • Unlike an RRSP, which must be converted to a retirement income vehicle at age 71, a TFSA does not have any minimum withdrawal requirement.
  • There is no TFSA spousal plan. Individuals can provide funds to their spouse or common-law partner to invest in their TFSA, up to the spouse’s or common-law partner’s available room, and the income earned on the contributed amount is generally not attributed back to the spouse or partner who provided the funds.

So, what can you do with your TFSA?

  • Use it to trade
    If you keep your TFSA in a high interest savings account (HISA), your returns will be anemic. To energize your TFSA, you need a more pro-active strategy – like trading.
  • Use it as a retirement fund
    We’re not saying to pull everything out of your RRSP—it’s still a great way to save for retirement. But TFSAs are becoming serious competition. They are especially important once you turn 71 when mandatory RRIF withdrawals kick in. If you’re over the $71,000 income threshold, you’ll possibly lose government income benefits.
    Since TFSA withdrawals are not taxed, you can use them to supplement your income without adding to your taxable income numbers.
  • Use it as your emergency fund
    Say your roof caves in or your car starts making that funny noise again, you’re going to need some access to cash. TFSAs are the best umbrella for the proverbial rainy day. You can withdraw as much or as little as you need to keep your budget balanced. And in the following year, you’ll be able to put any withdrawals back in. [Remember, the money in your TFSA is as liquid as the investments you hold. If you want to withdraw, you’ll have to factor in settlement time for the cash to appear in your account.]
  • Use it to pass on wealth
    TFSA beneficiary are two words your loved ones want you to know. Straight from the CRA’s rulebook: any money passed down to a beneficiary does not need to go through your estate. That means your family won’t get dinged on probate taxes from capital gains. If you can’t remember whether you designated a beneficiary when you opened your TFSA, check your account documentation.
  • Use it as collateral
    It’s nice to see a big number at the bottom of your statement but that money can do more than look pretty. Put it to work. Your TFSA can be used as collateral when you’re trying to secure a loan, like a mortgage. Better yet, you can build up your savings for the down payment of your home. Then build it up again to make larger payments on your mortgage.

Whatever you decide to use your TFSA towards, we can direct you to our network of Financial Advisors.

Devin Cristo & Wes Will are Trusted Saskatoon Mortgage Associates of YourMortgageNow.ca

Investment Property Purchasing With Rental Income in Mind

SHOPPING FOR AN INVESTMENT PROPERTY?

Purchasing With Rental Income in Mind

investment property

The purchase of your first home is a large investment and one that involves a significant financial commitment. Homes with legal suites are a great option for the first-time homebuyer seeking a home to both live in and build equity from, plus gain some revenue from a basement suite renter.

First-time homebuyers can request their real estate agent to do a search for properties that possess a ready-built suite or have the potential in which to build one. A property that already has a separate entry and two separate kitchens, or water hook-ups in an area where appliances could be installed, would be optimal. Kitchens are one of the more expensive rooms of a house to finish oneself.

Alternatively, first-time home buyers may seek out newer homes with unfinished basements at a lesser home cost, and attain a mortgage that allows cash for improvements, a home renovation loan or line of credit secured on the home to finish the basement into a suite. Simply request to seek properties with walk-out basements or homes wherein a separate entrance could be developed easily.

Income from a basement apartment can help first-time buyers carry the costs of their home. But it’s not as simple as placing an online ad; homeowners must take due diligence to ensure their basement apartment is legal and that their tenants are trustworthy.

The legalities of basement apartments

If the apartment doesn’t comply with local zoning bylaws and fire codes, the apartment isn’t legal.

You need to check with the City of Saskatoon to see if your basement apartment is registered as a second unit. If it is, then it is legal and compliant with the fire code. If it’s not registered, then you have to conduct further research. A city’s zoning bylaw will tell you if your area permits a basement apartment.

If you want to apply for a new unit, you will need a building permit that satisfies the provisions of the fire code in your province.

When looking at a property, if the basement apartment is being advertised as a “nanny suite” or “in-law apartment,” be wary — this unit is most likely illegal. If a neighbour complains about your unit to the city and an inspection occurs, you will be required to pay to upgrade your unit to proper standards.

You must advise your insurance company if you intend to rent out your basement apartment. By not disclosing this information, it may refuse to pay a claim if, for example, a fire occurs later.

Finding a good tenant

Besides advertising in a local newspaper, consider posting a listing on Kijii.ca or Craigslist.ca.

You must be very careful when interviewing any potential tenant that you do not inadvertently violate any sections of the Human Rights Code by asking any inappropriate questions.

You are permitted to ask prospective tenants on a rental application if they smoke, whether they have pets and how many people will be living with them in the apartment. You can also ask for references and their rental history. You cannot ask about their ethnic background, religious or sexual preference, or marital status.

It’s important to conduct the proper research in advance before renting your basement to a residential tenant. Be sure to ask for a current pay stub from where they work and call previous landlords for references.

Basement apartments, if created and rented out properly, can give you peace of mind and additional income to assist you in carrying the costs of your home and increasing its long-term value.

Apply for a mortgage pre-approval and make use of the free and easy online mortgage calculator to formulate your budget and know what you truly can afford.

Devin Cristo Mortgage Broker Wes Will Mortgage Broker

Devin Cristo & Wes Will are Trusted Saskatoon Mortgage Associates of YourMortgageNow.ca

Things to Consider When Buying a Cottage

 

Finding the Perfect Country Home Requires a Bit of Research…
 
There’s something cathartic about packing up a cooler, an overnight bag and the kids and getting out of the city, even if it is only for a weekend.
Surrounded by tall trees, clean air and natural beauty, a home in the country can be an ideal escape. It can also be a nightmare if you don’t ask the right questions when shopping around.
Financing
The question you should ask yourself is: can you afford a second home? Financial institutions offer several methods to pay for the cottage, such as increasing the mortgage on your city home or creating a second mortgage, but you have to have the income to make the payments.
Be aware your physical condition can play a factor in your approval. If you’re pregnant, you may not fit into the formula when they calculate your finances.
 
Location
Once you’ve determined the amount you can comfortably spend, you have decide upon a location you can afford and will enjoy. Most people only want to drive a maximum of two and a half to three hours.
Identify property attributes important to you and your family. Do you want to be by the lake or by a ski hill? Do you want neighbours near or far? Are you partial to sun exposure or do you prefer a heavily wooded lot?
Home Inspection
Not only do you need to consider the number of bedrooms, the structure of the house and the condition of the electrical wiring in a cottage, you also have to find out where your water comes from and whether you can enjoy your home away from home in the winter.
Things to Consider
• Is the road to your cottage open and maintained year-round?
• Does the cabin pump water from a lake or a well?
• If from the lake, is this same water used for recreational or industrial purposes?
• If from a well, is it on higher ground than the sewage system and has it ever dried out?
• Does the sewage system – usually a septic tank or tile bed – work and is it far enough away from trees to protect it from being blocked by roots?
• Will the sewage system eventually need to be connected, at a cost of thousands, to a town sewer supply?
• Will you be able to renovate or build additions to the cottage?
• What are the laws regarding water exclusivity, as well as hunters, cross-country skiers and others crossing your land?

Peace of Mind
The last thing you want is to cast that rod and have a canoeist pull up moments later to tell you fishing is forbidden. Ask the municipality about fishing, hunting and boating, particularly about motorized crafts.
With financing available, location decided upon, house chosen and pastimes permitted, all that’s left to do is breathe in the fresh air, enjoy your surroundings and wonder why you hadn’t bought a cottage sooner.
Do you have questions about a second mortgage?
Call Devin Cristo and Wes Will of Mortgage Link today (306) 244-7755 or email them at devinandwes@yourmortgagelink.ca.

 

Secondary Suites

The term “secondary suite” is generally used to describe a self-contained dwelling unit with its own kitchen and bathroom, which is separate from the principal dwelling in a house. It can be located either within the principal dwelling or in an accessory building on the same lot as the principal dwelling. These units are also known as “accessory apartments” and “in-law suites.” Basement apartments are the most common type. Aside from being affordable to renters, they also provide income and extra security for the home owner who has more space than is needed, and make entering the housing market easier for first-time buyers who may use the rental income to offset their mortgage costs.
Secondary suites are an affordable housing option that meets the needs of many people, including members of an extended family, singles, seniors and people with low or fixed incomes. Since they are usually constructed inside existing buildings, they help optimize the use of existing housing stock and infrastructure, and re-populate neighbourhoods with declining populations.
What Regulations Apply to Secondary Suites?
Whether you intend to renovate an existing secondary suite or add a new one, the secondary dwelling unit must conform to all zoning, building and fire code requirements.
Municipal Zoning by-laws
Most Canadian municipalities have zoning by-laws that regulate, among other things, the type, size and height of buildings, what they are used for, the location of parking and the number of spaces, the depth of the front, rear and side yards, and the portion of the property area that the building can occupy. Zoning determines where factories, businesses, shopping centres, schools, single-family houses and apartment buildings may be located. It also determines whether a house can contain a secondary suite.
Most cities contain several different residential zones, each permitting a maximum intensity or density of dwellings. For example, an R1 zone usually permits single-family residences; an R4 zone duplexes and semi-detached houses, row dwellings and apartments up to 4 storeys; and an R7 zone high-rise apartments. Unless expressly permitted, you would not be allowed to build a secondary suite in a zone that permits only single-family houses.
Canada Mortgage and Housing Corporation completed a study which identifies zoning regulations in municipalities and summarizes the provisions for secondary suites. The study noted that secondary suites are permitted in the entire urban area or in certain locations in 220 of 404 municipalities. The municipalities that allow secondary suites regulate them in the following ways:
Discretionary or conditional use — Secondary suites are subject to a specific approval process identified as discretionary or conditional. This means the secondary suite may be refused.
As of right use — Secondary suites are allowed if they comply with zoning and building code regulations.
In primary dwelling — Secondary suites are allowed within a principal dwelling.
In accessory building — Secondary suites are allowed in an accessory building such as a coach house, above a detached garage or in a portable building.
For a specific occupant — Secondary suites may only be occupied by a specific occupant such as a family member, a parent of a certain age or a person with special needs.
Municipal approval or agreement — Distinct from the normal permitting process, this means that the applicant must sign an agreement, sign a declaration as to the parental link, or obtain a special occupancy permit.
Architectural integration — This requires the building containing the secondary suite to respect the surrounding buildings or the single-detached character of the property.
Time limited — The zoning identifies the secondary suite as a temporary use, sets time limits for this use, and may require that the building be returned to its original condition when the accessory apartment has been vacant for a given period of time.
Size limited — The zoning limits the size of the secondary suite in relation to the primary building, limits the number of rooms, or determines a minimum lot size for a secondary suite to be permitted.
In a specific zone — Secondary suites are permitted in specific zones and prohibited in others.
In a specific building type — Secondary suites are permitted only in specific types of buildings such as single-detached residences.
In a specific zone and building type — Secondary suites are permitted only in a specific type of building in a specific zone.
If you are considering building or renovating a secondary suite in your house or on your property, you should first consult one of your city’s Development Information Officers. They will tell you whether a secondary suite is permitted on your property, whether additional parking is required, where the entrance and windows can be located, how large the apartment can be and how many bedrooms it may contain. Some municipalities only permit you to rent a secondary suite to a family member. Others may or may not allow the secondary suite doorway to be visible from the street. If you were to build a secondary suite in violation of your zoning requirements, you could be forced to make it comply or to remove it altogether.