Co-buying a home

Think of your siblings, or perhaps your closest friends. Could you buy a home with them? As in, have permanent, legal roommates?

 

This is a new trend, mostly among millennials who are finding themselves priced out of hot housing markets. In Toronto, for example, where the average house price is moving close to $800,000.00, many people are looking to alternate arrangements instead of settling for a condo. Co-buying allows them to afford a house, maybe even a detached house, when alone they wouldn’t have the income to support it.

 

There are some definite dangers to consider. First, how well do you know the finances of your co-buyer? How secure is their employment? How good are they at paying their bills? Some people with good incomes simply forget, or choose not to pay certain bills. If your co-buyer doesn’t pay their share of the mortgage, however, you could lose your house.

 

Most importantly: what happens if your relationship breaks down? This is not an investment partner; this is someone who will live with you in your house. Especially if you don’t have separate entrances, you will be seeing a lot of this person. Do they leave dirty dishes in the sink or dirty socks on the floor? Do they have a noisy pet, or a young child? Do you? What happens if one of you wants to sell and the other doesn’t?

 

Co-buying has the potential to help you into a really hot market, but there are a lot of possible issues. If you are thinking about it, you should definitely have a written contract with your co-buyer that sets out all of the possible issues and how they are to be resolved – and you should do this before you buy.

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Don’t set it and forget it

I have had multiple clients come to see me over the past several months because they need to update their wills. The wills were all at least 20 years old; they named family members as executors who had long since died or become incapacitated, they had complex trusts for children who were well into adulthood, or they named beneficiaries who were no longer in their lives.

It is so important to review your estate planning documents on a regular basis. I tell my clients to pull them out every two or three years; if it still fits your life, then put it away again, but if it doesn’t, you want to update it sooner rather than later.

An estate plan is a living thing. Having a will and powers of attorney is incredibly important; having them up-to-date is just as important.

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Happy holidays!

We’re taking a break from the office, so I’m taking a break from the blog. I wish you and your family a very happy holiday season, and we’ll see you in 2017.

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When it comes to real estate, pay attention to the details

There is a lot of fine print in the real estate industry. Purchase and sale agreements, mortgage commitments…there’s a lot there that most people don’t read too closely. Ultimately, you should, but if you’re not going to, you need to at least be aware of what could bite you so that you can ask a trusted advisor what applies in your situation.

When buying, always look at what you’re agreeing to assume in rentals. Is there a furnace rental, or a water softener? If so, do you want them, or would you rather have ones that you own? If you agree to take on a rental, you have to do so. Conversely, if you’re selling, be sure that you’ve at least addressed all of the rentals. It’s never pleasant to find out not long before closing that you have to buy out an expensive furnace because it didn’t get listed in the agreement. Sellers should always be aware of what they’re agreeing to provide for a survey, and make sure they have it before they sign. And if you’re buying or selling, always, always read the extra schedules so that you’re sure what you’re agreeing to do.

With mortgages, it’s important to look beyond the rate. Do you want to be able to pay it down aggressively? Have you talked about the length of the term and the amortization? It’s obviously important to get the best rate you can, but if you have other objectives, you want to ensure they’re being met.

As they say, the devil is in the details. And a devil is not what you want in your new home or mortgage.

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How (not) to sign a will

One of the easiest things to do wrong on a homemade will (one done through a kit) is in the signing. Signing your own name at the bottom is not the problem; getting witnesses is.

I was recently asked if a will was valid based on the fact that one of the beneficiaries had witnessed it. That situation is one of the most distressing for a beneficiary, because yes, the will is valid, but the gift completely fails. If you witness a will that you’re named in, you are going to get nothing. It’s a failsafe to ensure that you aren’t forcing someone to sign a will naming you as the beneficiary when there has to at least be someone else there to witness. It’s also a reason why having a lawyer help with your will makes your will that much better.

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Keep your proof that your house is where you live for when you sell it

A short time ago, the federal government introduced changes to reporting requirements for selling houses. These rules do not change the actual tax – there are still full exemptions most of the time if it’s your principal residence – but now you have to make a statement on your tax return about whether you sold a house in the prior year. The reason for this is to prevent people who are selling investment properties from avoiding capital gains taxes. When the time comes that you sell the house you live in, be prepared for what you will need to provide on your tax return the next year – this is a handy guide from MoneySense Magazine.

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What do you say instead of “died”?

map-of-americaI often hear that someone passed away or passed, or that someone is dearly departed, because “died” seems so harsh. But what is the most common way to hide that particular word? Here’s an interesting map of what the most common euphemism is for “died” in each part of the United States – note that in some states, bluntness rules.

I’m curious what the words would be in Canada.

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Buying under a power of sale

house-saleWhen the housing market shifts, whether from loss of value or from increased interest rates, an unfortunate consequence is often an increase in properties that are sold under power of sale, or sold by the mortgage lender in order to pay back the mortgage. This consequence can be an opportunity for the right buyer, but you should keep in mind that the person selling to you hasn’t been living there. They don’t know anything about the physical nature of the house, so they completely limit their liability for anything that could go wrong. This will be written right into the offer, so if something happens after closing, you will be out of luck. Do your due diligence up front. Get a home inspection, and get in inspectors for any specialized items on the property (well, septic system, wood stove or fireplace, fuel oil tank, etc.).

Buying under power of sale can give you a financial break. Be sure it doesn’t become a money pit.

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Keeping up to date

calendar-1I generally recommend that my clients look at their estate planning documents every few years to make sure they are still appropriate, and update about every 10 as the law will change. What is also important is to keep in mind that there are other documents that need changing too.

If you divorce, your will, from that point forward, will be treated as if your ex died before you. This is not the same for beneficiary designations. It would be a shock to your children if they found out that your life insurance, or work pension, was left to your ex-spouse, simply because you forgot to update the beneficiary designation. Similarly, your spouse would be upset if it was left to your parents because you didn’t update it after you got married.

When life changes, change your documents.

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Selling when you aren’t a Canadian resident

canada-1If you are not a Canadian resident, or will not be on the day of closing, budget for getting a lot less money on the day of closing. Tax laws in Canada may require that you pay capital gains tax, and so your lawyer could have to hold back up to 25% of the sale price to cover the possible taxes. There are some exemptions, and you can speak to an accountant about getting approved for one before closing, but you may need to pay it. Especially if you have a mortgage, or need to use those funds right away, you should look into this as soon as you have an offer to minimize the effect on you.

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