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MortgagesHOW TO PICK A CONTRACTORIt pays to do yourresearch, M5

THURSDAY, APRIL 16, 2015 SECTION M ON ON1 V2

Just a few years out from retirement, Nancy Wolftook on a sizeable mortgage for a lovely Victorianhome in Toronto’s Riverdale neighbourhood.

“Some people would say I’m crazy,” says Wolf. Herace in the hole? She was able to divide the house intothree separate apartments.

Wolf took the upper two floors of the three-storeybuilding. With the $1,700 she gets for the one-bed-room main floor apartment and the $1,300 for thetwo-bedroom basement apartment, her mortgage ispaid. Wolf is not alone in her decision to become alandlord. All over the city, homeowners are using theproceeds from rental units to offset their plus-sizedmortgages.

“In some cases,” says Susan Asquith, an agent withBosley Real Estate Ltd., mortgage companies andbanks will include part of the rent — maybe 60 percent or so — in your income when deciding how muchmortgage you can get.

“You’re living in less space,” she concedes, “but hav-ing access to a bit of income is really helpful, especiallyto a first-time homeowner. Even a tiny little studioapartment will get you $650 a month.”

For her part, Wolf chose a home close to a park andright on the streetcar line, figuring those would beselling points for potential tenants. She also set aside$40,000 to upgrade the apartments in her home.

“I want to give my tenants what I would want andthat is no junky appliances, broken flooring or holespunched in walls,” she says.

Wolf put in new halogen lighting, good-quality lami-nate floors and stainless steel appliances.

“It’s probably going to be three years before I recoupwhat I spent and make money from the unit,” shesays. “You have to look at it as a long-term invest-ment.”

Play landlord to make ends meet

Homeowner and landlord Nancy Wolf upgraded her east end Toronto home to accommodate two apartments in addition to herown living space. She now rents the main floor and basement, collecting enough rent to cover her mortgage payments.

CAMILLA CORNELL SPECIAL TO THE STAR

TIM FRASER FOR THE TORONTO STAR

RENTING continued on M4

Consider making portion of homean apartment to help pay mortgage

> FOR RENT

When Mike Bayer purchased Seabreeze, his two-bedroom cottage on Lake Ontario in 2010, he was wellaware he might have to do some dancing to get financ-ing.

Bayer was in his 20s at the time, but as a rental agentand through his blog (cottageblogger.com), he’d beenin the vacation rental business for several years.

Bayer, now 34, knew from experience that lendersoften view recreational homes as inherently morerisky, which is why the down payment and interestrate for a vacation property can be higher than for apermanent residence.

As Janine Weis, a mortgage agent with MortgageIntelligence in London, Ont., explains it: “The feelingis, if borrowers get into some financial difficulties,they will place more importance on paying the mort-gage on their primary residence.”

In addition, Weis says, under slow market condi-tions, cottages can take longer to sell, so lenders mayfear that their interests aren’t protected.

If you’re considering buying a cottage, says MaureenReid, a branch manager with Meridian Credit Unionin Penetanguishene, Ont., you should probably visityour financial institution first to find out how muchyou can afford and get some pointers on what to lookfor.

“There are different types of financing based on thetype of cottage you’re going to purchase,” says Reid.

As do most lenders, for instance, Meridian differen-tiates between cottages that have plenty of amenitiesand are easily accessible, usable year-round and morecentrally located, often with other cottages around(Type A) and cottages that are more remote andrustic, perhaps only accessible by boat and usable onlyin the summer (Type B).

Since Type A properties have features similar to aresidential home, “folks might get the same rate theywould on their home mortgage,” says Reid.

Add a cottage to your real estate repertoire Consider the options and beware of the risks when seeking a mortgage on a recreational property

Mike Bayer and his wife, Andrea, purchased their cottage on Lake Ontario in 2010.The couple has been able to rent it out to generate extra income.

CAMILLA CORNELL SPECIAL TO THE STAR

COTTAGES continued on M4

> VACATION SPOT

While millennials are often depicted asslackers living in their parents’ base-ment, playing video games and takingselfies, first-time homebuyers are, in fact,making responsible financial decisionswhen entering Canada’s housing market,according to a new study released byGenworth Canada.

“We wanted to focus on the first-timebuyer because they really are the engineof growth in the economy,” said DavidMacDonald, group vice-president of fi-nancial services with Environics Re-search Group, which conducted the re-search on behalf of Genworth Canada.The findings were presented at a recentseminar in Toronto.

The study surveyed 1,800 first-timebuyers across Canada — 77 per cent ofwhom are millennials.

FIRST TIME continued on M4

> FINANCIAL FITNESS

Almost half of new homeowners saythey entered the real estate marketbecause it was a wise financial decision.

SHUTTERSTOCK

First-timehomebuyersprepped forownershipVAWN HIMMELSBACHSPECIAL TO THE STAR

M2⎮TORONTO STAR THURSDAY, APRIL 16, 2015 ON ON1

MORTGAGES

No one likes homework, but when itcomes to mortgage renewal, doing alittle research pays off.

“Not completing the proper leg-work will do a major disservice toyour wallet,” says Robert McLister,founder of RateSpy.com, an onlineCanadian mortgage comparison sitebased out of Mississauga. “The moreintelligence you can gather, the morelikely your chances are of finding thebest deal.”

In addition to taking time to com-pare rates from various financial in-stitutions, McLister recommendssearching for the right professionalto help guide you through the renew-al process.

For one thing, he points out, mort-gage products are not one-size-fits-

all. For example, many deep-dis-count products have terms and con-ditions that could prevent borrowersfrom acquiring a future line of creditor limit pre-payment privileges.

David Fleming, a Toronto-basedsales representative with Bosley RealEstate, says consumers should alsoknow that just because a product hasa low rate doesn’t mean it offers thebest deal over the long term.

He also advises knowing whetheryour mortgage is portable or what, ifany, break fees you would have topay. “Not properly examining thesesmall details could be financiallycrippling to consumers, taking outtheir entire return,” he says.

With the recent announcementthat Bank of Montreal and TD Bankare lowering their five-year fixedmortgage rate to 2.79 per cent, Flem-ing believes consumers should con-sider locking in now.

“Don’t get greedy,” he cautions. “Itis ludicrous how low the rates areright now. Still, there are some con-

sumers who are sticking to a variablemortgage rate because they thinkthere is still money to be made.That’s a big gamble.”

Given the current low-interest en-vironment, Jim Murphy, presidentand chief operating officer for theCanadian Association of AccreditedMortgage Professionals (CAAMP),says Canadians should see this peri-od as an opportunity to pay downtheir mortgage more quickly, ratherthan to take on a larger mortgagethat puts an unnecessary strain onhousehold finances.

“Consumers should always bemindful of their own personal finan-

cial situation,” says Murphy. “Over-all, we believe that Canadians arebehaving prudently.”

Alyssa Richard, the Toronto-basedfounder of online comparison toolRateHub.ca, says homeowners withexisting mortgages need to askthemselves, as well as their mortgageprovider, some tough questions.

Such as? Richard suggests youthink about whether you plan onstaying in the same house for severaldecades or will you want to sell in theshorter term?

Also, she says when renewing amortgage, clients should ask theirprovider to compare and contrastdifferent policies they have compiledduring their research.

One of your key questions shouldbe, “These are the rates I’m seeingonline, how is what you are quotingme different?”

Richard is also a strong proponentof doing your homework before sign-ing anything. In her experience, toomany clients take a laissez-faire atti-

tude to their mortgage and assumetheir current financial institution isoffering up the best deal.

A 2011survey by Manulife backs herup. The study revealed two out ofthree Canadians surveyed simplystay with their current mortgageprovider and do not try to negotiate abetter deal when up for renewal.

“Go out and get multiple quotes,”advises Richard. “Don’t just auto-matically sign the renewal letter.”

> RENEWAL

Alyssa Richard, left, Toronto-based founder of the online comparison tool RateHub.ca, advises homeowners to do their research comparing options from various mortgage lenders.PEYMAN SOHEILI FOR THE TORONTO STAR

Hedge your bets when it’s time to renew Ask tough questions, comparerates and read the fine printbefore signing new mortgage

BRENT JOLLYSPECIAL TO THE STAR

á Do your homework and compare rates.á Consult a mortgage profession-al for help. á Read the fine print — knowabout hidden fees.á Find the product that fits yourlifestyle.á Ask yourself the right questions.á Don’t just sign — negotiate.

> TOP TIPS“The more intelligence you can

gather, the more likely yourchances are of finding the best deal.”ROBERT MCLISTERRATESPY.COM

A $1-million home is the new normalin Toronto — and that means theprospect of buying a house can bedaunting, to say the least, for first-time buyers.

The average price of a detachedhome has crossed the seven-figurethreshold, reaching $1,040,018, ac-cording to the Toronto Real EstateBoard. And housing prices are expec-ted to increase an additional 4 percent this year, according to ReMax’sannual Housing Market Outlook Re-port.

That could be why we’re starting tosee less-conventional approaches tobuying property.

According to a 2014 survey by TD,four in 10 Canadians believe buying ahouse with friends or family mem-bers is a good way to get into thehousing market, whether buying aprimary residence or vacation home.

“It’s actually becoming more andmore common,” says Michelle Snow,associate vice-president of retailproducts at TD.

Snow also knows this from person-al experience: She bought her firsthome with a friend, since they bothfelt owning a home was more eco-nomical than renting. They hired alawyer and came up with a legalagreement that covered how longthey would own the house together

and what would happen if one per-son wanted to sell and the otherdidn’t.

“It sparked those conversations,”said Snow. “It makes you approach itmore like a business than an emo-tional decision.”

They each came to the table with 50per cent of the down payment andcommitted to paying 50 per cent ofthe mortgage.

“We took it even further andopened up a joint account and man-aged our expenses out of that jointaccount,” explains Snow. That en-sured one person wouldn’t feel asthough she was contributing more tohousehold expenses, even if it wasjust $10 on paper towels.

They had agreed to own the housetogether for five years, but her frienddecided to sell her half after threeyears, since she needed the equity topay for her MBA.

“So she carried the weight of find-ing somebody else to take her half ofthe mortgage,” says Snow.

“Your mortgage specialist can helpnavigate some of those conversa-tions,” she adds. This is particularlyimportant if you’re not splitting thecosts 50/50; that makes things morecomplicated, especially when it

comes time to sell and equity hasbeen built.

Jeff Cody, a mortgage broker andspokesman for the IndependentMortgage Brokers Association ofOntario, says he often sees parentshelp out an adult child with a downpayment or mortgage. They mightsplit the mortgage, “gift” the child adown payment or rent out part of thehouse to help cover costs.

“The other thing I’ve seen is wherea couple of friends buy a duplex soeach person has their own unit,” saysCody. But, if they’re splitting themortgage and one person doesn’tpay his half, the bank can go after theother person for payment. That’swhy it’s important to draw up a legalagreement separate from the pur-chase agreement, he said.

Jennifer Fazari, a sales rep withRoyal Lepage, says she’s noticedmore people who are not close familylooking to invest jointly.

“I don’t think most of them coulddo it on their own,” she says. “Pur-chasing a detached home with park-ing is too expensive for people justgetting into the market in the city.”

A lawyer can help with the tech-nicalities of the joint purchase.

Although splitting a mortgage canget complicated, it’s an option forthose who can’t afford to purchaseproperty on their own — especially ifthey have to come up with a 20-per-cent down payment.

“First-time buyers are having ahard time getting into the market,”said Cody. “It’s very hard to do it onyour own.”

Michelle Snow, of TD’s retail products, bought a house with a friend. Sherecommends a legal agreement to make it “more like a business than anemotional decision.”

AARON HARRIS FOR THE TORONTO STAR

If you’re looking to buy propertywith a friend or family member,there are a few things to keep inmind before signing your name onthe dotted line. TD’s Michelle Snow recommends:• Decide on a budget and howmuch you’re willing to put toward adown payment.• Discuss how monthly mortgagepayments will be made after thepurchase.• Come to an agreement on thekey characteristics you’re looking

for in a property, which will usuallyinvolve some compromise.• Decide how taxes, insurance,utilities, repairs and maintenancefees fit into the overall budget.Consider opening a joint account.• Decide how long you will own theproperty together (it probablywon’t be forever) and what willhappen if one person wants to selland the other doesn’t.• Hire a lawyer and make surethese points are covered in a legal-ly binding contract.

> JOINT VENTURE TIPS AND TACTICS

“Purchasing a detached home . . .is too expensive for people justgetting into the market . . . ”JENNIFER FAZARIROYAL LEPAGE

> JOINT VENTURE

Team up as a first-time buyerReal estate partnerships offeran unconventional approachfor getting into the market

VAWN HIMMELSBACH SPECIAL TO THE STAR

ON ON1 THURSDAY, APRIL 16, 2015 TORONTO STAR⎮M3

MORTGAGES

My husband and I paid off our 25-year mortgage in about half the time.

I know what you’re thinking — no,we’re not rich. In fact, we’re bothself-employed (as a journalist and asoftware developer). But the fearthat comes with not being able to relyon a steady paycheque was definitelya motivator. And we had one highlysuccessful technique: We took ad-vantage of the opportunity to putdown an extra lump sum on ourmortgage of up to 10 per cent a year.

The beauty of making lump-sumprepayments is that you’re not wed-ded to a steady mortgage paymentthat is higher than you may be able tohandle. As freelancers, my husbandand I didn’t want to risk getting be-hind in our payments. Instead, wemade minimum payments and thenslapped down as much or as littlemoney as we managed to put asideduring the year.

For some, this is the main disadvan-tage of lump-sum prepayments: Ifyou’re not locked into those addi-tional savings, somehow that moneyjust seems to melt away. In fact, ac-cording to a Canadian Mortgage andHousing Corporation (CMHC) sur-vey a few years back, about 75 percent of recent homebuyers fully in-tend to pay their mortgage off soon-er, but only about a third of themever make a lump-sum payment.

The first step in ensuring you’re oneof the successful ones is to askwhether your mortgage gives you theoption. Most will let you make annu-al prepayments of up to 10 or 20 percent of the principal without charg-ing extra fees. But some no-frillsmortgages limit the option to pay offyour debt early.

The next (and most difficult) step:free up cash. Here are a few tips tohelp you get there:

Do it yourselfUnless you’re buying a brand-newhome, there’s a good chance it willneed some work — in fact, theCMHC found 55 per cent of newhomeowners were likely to under-take major repairs or improvementsto their house costing $5,000 ormore within the first five years afterpurchase.

Hubby and I took on a range oftasks ourselves, from removing awhopping seven layers of wallpaperfrom our walls, to painting, decorat-ing and even installing the dishwash-er. Sample savings: $5,000-plus forpainting a 1,600-square-foot home;$150-plus to install a dishwasher.

Put it off until you can afford itHit up parents, grandparents andfriends for hand-me-down must-haves like beds, couches and chairs.And hold off purchasing the rest un-til you can buy what you want. Ourdining room was sans table andchairs for a good eight years. Samplesavings: $10,000 or more.

Take a strategic approach to grocery shoppingAt the risk of stating the obvious —you’re a homeowner now and youneed to watch your pennies. My ap-proach to grocery shopping is to pe-ruse the flyers, come up with a menuplan based on the specials, and thenpick up everything I need to preparedinners for the week (so I’m not pop-ping into expensive conveniencestores in a pinch). Double the quanti-ty and stick a second portion in thefreezer. Instead of buying expensiveconvenience food or (worse) eatingout, you’ll have your own frozen pre-pared meals that are cheaper andhealthier. Sample savings: $60 perweek or almost $3,000 per year.

Get to the pointsI’ve never been a coupon clipper —too much organization required. ButI love grocery and pharmacy rewardsplans that allow you to accumulatepoints and use them for everydaypurchases you’d likely make anyway.Just make sure you’re buying onlythings you need and you get them onsale. Sample savings: Conservatively$500-plus per year.

Talk to your service providersregularlyHere’s a little secret: Your Internetand cellphone providers can give youa discount. But they’re not going todo it unless you push for it. They’lloffer you a great rate to sign up andthen adjust that rate higher overtime. They see you as a captive audi-ence; and it’s your job to disabusethem of that notion. Hubby and Ibundle services to give us more bar-

gaining power and we never lock infor a certain term. Then we call everyfew months with the latest offer froma competitor in hand.

“Give me a reason not to leave you,”is my husband’s classic line. Oftenthe overall bill comes down by asmuch as a third. Sample savings: $60per month or $700-plus per year.

Opt for a staycationBy the time you factor in accommo-dation, dining out and potentiallyairfare, vacations cost a bundle. Andwe already live in a world-class city.When’s the last time you explored it?Stay home and take advantage of allthe free things Toronto has to offer,from the High Park zoo to the Toron-to Islands, the Beach’s breezy board-walk, the tempting stalls of the St.Lawrence Market and a host of sum-mer festivals (the Busker Festival isone of my faves). You can even treatyourself to a couple of nice dinnersout and still pocket plenty of cash.Sample savings: $1,500 minimum fora week’s vacation.

Sock it awayThere’s no point getting in the sav-ings habit if you’re immediately go-ing to spend that money on some-thing else. Stick it in a special accountdedicated to mortgage prepayment.

> TACKLE DEBT

Helpful hints to take sting out of a mortgageDaily ways for homeownersto save their pennies andmake lump-sum prepayments

CAMILLA CORNELLSPECIAL TO THE STAR

As a homeowner, taking on DIY projects can save you money that can be put toward paying down your mortgage. SHUTTERSTOCK

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M4⎮TORONTO STAR THURSDAY, APRIL 16, 2015 ON ON1

MORTGAGES

Asquith agrees with this approach. “The more beautiful the space

you’re creating, the more rent you’llget and the higher the quality of ten-ant you’ll attract,” she says. “That’sparticularly important when you’reliving in the house with them.”

A nice kitchen and bathroom help,she says. And applying a fresh coat ofpaint and adding little touches suchas new lighting, drawer pulls andhardware is a good use of your hard-earned dollars.

When seeking a home with rentalpotential, Asquith suggests lookingfor good bones. “If it’s a basementapartment — and many of them arein the city — it should have decentceiling height,” she says.

“If you have to dig down, that’s go-

ing to cost you $50,000-plus.” Windows are important too, since

no one wants to live in a dark anddingy space. And a separate entranceis a definite money-saver.

“If you have to put that in yourself,you’re looking at $12,000 to $15,000,”Asquith says. Finally, if you’re able tooffer tenants laundry facilities or aparking spot, you’ll get more rentalincome, and a main-floor apartmentwill generally net more than a base-ment.

Apart from accessibility to publictransit, Asquith suggests seeking ahome within walking distance ofshops and restaurants.

“You can rent something for hugemoney right on Queen St. in theBeach,” she says, “or close to theDanforth or Queen St. W.”

If you can find a legal apartment

that’s a bonus, says Asquith, butthey’re rare in Toronto. “Honestly,other than highrise rental buildings,I think I’ve only seen two in the 35years I’ve been a real estate agent,”she says.

“It involves getting the apartmentchecked over by the fire departmentand Toronto Hydro. The regulationsare really stiff and most people don’tbother.”

Instead, the vast number of base-ment rental units fall under the cate-gory of “legal non-conforming.” As-quith admits if you have a problemtenant that can get you in trouble,“but the city isn’t really on the huntfor illegal apartments since most ofthem are.”

Despite the benefits, being a land-lord isn’t for everybody. Your tenantcould fall on hard times and you’llhave difficulty collecting rent. Yourtenant may use too much hydro be-cause they don’t really care about thebills.

“I think you have to treat it like abusiness and not get into their per-sonal lives too much,” says Asquith.Alternatively, move your friends in,she suggests.

“If you really know them well,” shepoints out, “they’re not going to take

advantage of you.”As for Wolf, she fully understands

there are pitfalls associated withrenting out part of her property —she has already had a run-in with atenant over hydro bills. And whileher tenants’ apartments are alreadyrenovated, she’s still waiting to reno-vate her own space.

But, she says, once she has re-couped the cost of redoing her ten-ants’ space she can proceed to redoher own. And in the long run, theincome she generates from herhome will supplement her pensionin retirement.

“I’ll have a beautiful space to live inand I won’t be so stressed financiallythat I won’t be able to travel and dothe things I want to do,” she says. “It’sa means to an end, as opposed tobeing house poor.”

When looking for real estate, homeowner and landlord Nancy Wolf settled on a house close to transit and a park, knowing these would be selling points to potential renters.TIM FRASER FOR THE TORONTO STAR

Invest in renovations to attract rentersRENTING from M1

“The more beautiful the spaceyou’re creating, the more rentyou’ll get and the higher thequality of tenant you’ll attract.”SUSAN ASQUITHBOSLEY REAL ESTATE LTD.

Type B properties would require awhole different kind of financing.

“Then you need to get a personalloan with open terms and loan rates,”Reid says. “So the interest rates arehigher — at 5 per cent and above.”

What’s more, she says, while as arule of thumb you’d require 20-per-cent down to buy a Type A property,the guidelines on a remote propertywould require you to put down morelike 35 per cent.

“But if we have a strong applicant

there may be exceptions,” Reid ex-plains.

“We look at the big picture, andwhat it really comes down to is theapplicant’s net-worth statement.What can they afford?”

Reid suggests seeking financing inthe area you intend to buy a cottage,noting local lenders are more likelyto understand the market and maybe more amenable to offering thecash you need.

Bayer’s solution was to call a mort-gage broker because they have accessto a wide range of lenders.

“She worked wonders to get us areally great rate,” he says, “as well as arelatively low down payment.”

Bayer always saw the cottage as away to generate rental income. But,in the five years since he and his wifebought, they’ve become victims oftheir own success.

“It’s so totally booked now that ev-ery time we use it, it costs us $1,700for the week, even in September,”says Bayer. The consequence: Withtwo toddlers underfoot, the Bayersalmost never take a week at theirown cottage.

The Bayers hardly ever take a week at their cottage near Lake Ontario because it’s usually booked by renters.

Interest rates higher on rec realtyCOTTAGES from M1

“Just as boomers before themchanged every facet of the market-place, millennials are doing the samething,” MacDonald said.

The typical first-time buyer is welleducated and employed, and typical-ly consults with a mortgage profes-sional to purchase a home withinfinancial reach, according to theGenworth study.

First-time buyers tend to havehigher incomes than the generalpopulation (31 per cent have house-hold incomes above $100,000). Andthey tend to work full time, havepost-secondary education and aremarried or in a relationship.

About half of first-time buyers saythey were motivated to buy a homebecause they believe it’s a wise fi-nancial decision. Three in 10 say theydisliked renting or wanted to buybefore prices increase further.

The typical first-time buyer is alsoconscious of the need to managetheir debt burden. Fifty-seven percent say they’ve avoided taking onadditional debt since buying theirhome, while 36 per cent have dou-bled-up or increased their bi-weeklymortgage payments, or made a larg-er, one-time lump sum payment.

But it’s not all good news, said Mac-Donald.

Nine per cent of first-time buyerssay they’ve had to delay or suspendmortgage payments since buyingtheir home, and 11 per cent saythey’ve had to delay or default onother bill payments.

Four in 10 are concerned aboutmaking ends meet month to month,

with worries about the loss of a job,rising interest rates or unexpectedhousehold repairs.

The key takeaway, though, is thatmost millennials are confident abouttheir financial fitness, said MacDon-ald. They’re taking steps to pay offtheir mortgage more quickly, andhalf of the survey respondents saythat, not only are they able to paytheir bills, but they’re also able tosave money.

“First-time buyers who’ve gonethrough the process are feeling veryconfident,” he said, “and this bodeswell for the real estate market inCanada.”

First-timers see home as a good investmentFIRST TIME from M1

Although the median price paidnationally is $293,000, there aresignificant regional variationsacross Canada. This amount is highest in Toronto($425,000) and Vancouver($420,000), and lowest in theAtlantic region ($185,000).These price variances explain thehigher proportion of condo andtownhome purchases in Toronto,Vancouver and Montreal, wherethese properties are the mostaffordable way to enter homeownership, according to the Gen-worth study. Condos are the mostpopular option in Vancouver(47%), Montreal (40%) andToronto (39%), while in AtlanticCanada, fully detached homesaccount for 71 per cent of all first-time home purchases.

> BY THE NUMBERS

ON ON1 V2 THURSDAY, APRIL 16, 2015 TORONTO STAR⎮M5

MORTGAGES

On the field, former CFL player Se-bastian Clovis was a defensive backwho won a Grey Cup with his team.Off the field, he is an independentcontractor who has also helped Do-It-Yourself homeowners in distresson HGTV’s Tackle My Reno.

“My role is to revive their excite-ment about the project and helpthem get the work done by providingcoaching and guidance,” he explains.

Here are Clovis’s tips for findingand hiring a reputable contractor foryour own reno project.

How do you recommend that a homeowner search for a reputable contractor?Your first instinct might be to go toGoogle and type in “contractors,” butthe best contractors rely on theirreputation and word-of-mouth re-ferrals. Ask your friends and family.Your real estate agent and home in-spector can often give you a nod inthe right direction, as well.

A home renovation is one of thebiggest investments you’ll evermake, so you absolutely need to getquotes from as many contractors asyou can.

What are some questions youshould ask a contractor?When looking for a contractor, youshould ask for a portfolio, which dis-plays a licence, insurance, photos ofwork done and a list of references.You should also ask questions, suchas: how long have you been in thebusiness? What do you specialize in?Have you done this particular type ofrenovation before?

Should you interview a contractor in person?Always, always interview them inperson. As much as a portfoliospeaks volumes about a contractor,you also need to get a sense of whothey are and whether or not they aresomeone that you can work with.

Any red flags one should watchout for?You want to look out for contractorswho ask for large sums of money upfront — good contractors never askfor more than 10 per cent. If someoneasks for half up front, I don’t carewhich way you turn, just turn aroundand run.

How do you know what type of contractor should be hired for a job?You want a contractor who dealswith home renovations as opposedto new builds.

In new home construction, youhave to understand the home fromtop to bottom and work from a cleanpalette. With renovations, you haveto understand the home from top tobottom and be skilled enough to tiein new work to an already existingframe.

Do you have tips for negotiating acontract?Once a contractor locks in the price,it’s because he has worked throughthe project and the price will be firm.By arguing the price, you will eitherdrive that renovator away, or he willstart slashing away at quality of prod-uct and workmanship to make up forit.

On the other hand, if the contractoris willing to drop the price too easily,it’s a red flag that something is notright and you should walk away.

What does a good contract include?A contract should include the quotebroken down in absolute detail in-cluding the final cost, when pay-ments are due and, of course, thestart and finish date.

What is the most common prob-lem that you have had to fix forhomeowners who have gone theDIY route? It’s not a mistake, but very often DI-Yers start out with a ton of energyand vigour to do a project. As theywork through it and are presentedwith various problems, they losesteam and give up. So, very often, it’sabout me picking up where they’veleft off.

> EXPERTISE

What to expect when you’re renovating

When shopping for a contractor, experts recommend finding one who understands your home from top to bottom and is skilled enough to tie in the newwork with the existing framework. Be wary of contractors asking for too much money up front, though.

Is a reno part of your budget?Tips to find the bestcontractor for the job

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M6⎮TORONTO STAR THURSDAY, APRIL 16, 2015 ON ON1

MORTGAGES

For homebuyers looking to jump on-to Toronto’s pricey property ladder,deciding between white picket fenc-es or downtown convenience is allabout trade-offs.

The age-old suburb-versus-down-town dilemma involves weighing keyfactors — final sale price, commutetimes, access to amenities, space —and making a decision that fits yourlifestyle.

That’s according to Jeanhy Shim,president of Housing Lab Toronto,an independent housing researchcompany.

“With a budget of $400,000, youcan find a place to live anywhere inthe GTA, it just depends how smallyou are willing to go,” she says.

“You can find something bigger inEtobicoke or Mississauga, but if youwork in Toronto, then you need a carand will have to pay at least $1,000 amonth to service it,” Shim points out.“So, maybe you’re willing to take aplace that’s smaller downtown.Those are the trade-offs people needto think about.”

There’s no question that one of themost-pertinent elements of the deci-sion-making process is the time ittakes you to get to work.

Toronto’s commuting times —among the worst in North America— are driving more and more peopleto choose less space over the rat race.

A recent report by Pricewaterhou-seCoopers and the Urban Land In-stitute found that homeownerschoosing the convenience of city lifeover suburbia are fuelling the realestate market.

Frank Magliocco, a partner at Price-waterhouseCoopers Canada, saysamong the factors behind this trendis an increased awareness of the en-vironmental costs associated withurban sprawl, as well as the cost intime and money of lengthy com-mutes.

Apart from that, says Shaun Hilde-brand, senior vice-president of Ur-banation, what is keeping peopledowntown is the variety of amenitiessuburbs cannot offer, such as inde-pendently owned shops that counton a rotating clientele and stores thatopen past 6 p.m.

“We’re seeing a commendable setof civic-engagement strategieslaunched by chief planner JenniferKeesmaat’s office to make Toronto abetter place to live, work and play,”Hildebrand says. “Although the re-sults of these initiatives won’t be im-mediately realized, it’s catalyzingconversations about what makes thiscity great and how it can be greaterstill.”

This coveted downtown lifestyle —close to work and rapid transit —simply isn’t affordable for everyone,though.

Especially for those looking to buy ahouse rather than a condo.

Data from real estate research firmRealNet Canada shows the gap be-tween the price of a new house and anew condo in the GTA has soared toalmost $300,000.

So maybe the issue isn’t just down-town versus the suburbs, but condoversus house, suggests Shim.

“The house versus condo gap hasbeen growing,” she says. “A condo inthe city is in the $400,000 range; for adetached new house, the average isnow well over $700,000 to

$800,000.”As of last month, the average price

of a detached house in Toronto is arecord $1million.

As for outside Toronto? “Resale homes in the 905 area are

surprisingly higher than you’dthink,” says Shim. “I remember atime in Brampton when you couldbuy a house for $250,000, now it’s notunusual to see prices such as$700,000 to $800,000.

A report from the Pembina Insti-tute and RBC, published in January,speaks to the dilemmas buyers face.

Location Matters features four To-ronto-area homebuyers, showingthat families are often priced out ofpreferred neighbourhoods and in-

stead settle on car-dependent areaswhere they can afford a single-familyhome.

But, the study concluded that theseseemingly less-expensive homes canactually cost more when commutingexpenses are factored into the equa-tion.

So, where does all that leave a po-tential buyer seeking the best solu-tion at a reasonable price point?

Perhaps in the market for a com-promise. Maybe if you can’t live indowntown Toronto, there’s anothernearby “downtown” with the sameamenities, employment, criticalmass and transit.

“Even the 905 areas are realizingthe benefits of, and desire for, urbanliving,” says Hildebrand.

“The city of Vaughan has plans for adowntown being built centring itsanticipated TTC subway station andthe city of Markham is facilitatingthe development of higher, denserbuildings along Hwy. 7 to take fulladvantage of its bus rapid transitnearing completion.”

In the end, prospective buyersshould decide based on their individ-ual needs, Shim says.

“The younger generation puts val-ue on different things. They don’tneed a house or a yard,” she says.“Family attitudes are changing, too,more and more families are living incondos because they are puttingmore value on time and don’t want tobe stressed out after a long commutehome.

“We tend to commoditize real es-tate and forgot really, it’s about un-derstanding people and findingwhat’s right for them.”

> LOCALE, LOCALE, LOCALE

Homebuyer dilemma: Urbs or the burbs?There are many factors toweigh when deciding uponsuburban or downtown living

JENNIFER BARRY SPECIAL TO THE STAR

Those choosing city life, residing in neighbourhoods such as Toronto’s Liberty Village, shown here, over suburbiaare fuelling the real estate market, according to a report by PricewaterhouseCoopers and the Urban Land Institute.

CARLOS OSORIO/TORONTO STAR

“. . . More and more families areliving in condos because theyare putting more value on timeand don’t want to be stressedout after a long commute home . . .”JEANHY SHIMHOUSING LAB TORONTO PRESIDENT

ON ON1 THURSDAY, APRIL 16, 2015 TORONTO STAR⎮M7

MORTGAGES

The antidote is to get preapprovedfor a mortgage from your lender — afinancial institution or mortgagebroker.

Also consider the ongoing costs in-cluding mortgage payments, proper-ty taxes, insurance, utility costs, stra-ta payments and maintenance. Re-search them all and do the math be-fore you commit.

Analyze your needs“A mistake a lot of people make isthey look at all the shiny pictures onthe Internet without thinking ofwhat’s truly important in a home,”Mcleod says.

This pitfall can waste a lot of timeand energy if you’re looking at homesthat don’t suit your lifestyle needs.

If you are reaching the cusp of fi-nancial stability and consideringbuying your first home — you maynot be through the woods yet.

Home buying can be rewarding, butthere are some necessary dos anddon’ts, and not all of them are obvi-ous, says Darcy Mcleod, president ofthe Real Estate Board of GreaterVancouver.

Here are some key steps and pitfallsto watch out for on the way to own-ing your first home.

Understand what you can affordFirst-time homebuyers will some-times go out looking at homes beforethey understand the total costs ofbuying and owning a home, saysMcleod.

“They’ll fall in love with somethingand find out that they can’t afford it,and then the places that they canafford just don’t measure up,” hesays.

“Make sure you have your financialducks in a row.”

Don’t be a starry-eyed idealistThe average first-time homebuyerstays in their home for about five toseven years — not for a lifetime.When you’re looking for a place, ifyou aim for the absolutely-perfect-forever home, you’re probably im-posing too many barriers on your-self, says Mcleod.

Don’t offend the seller with a lowball offer“The tendency to want to get a reallygood deal on something can some-times cause you to get less of a gooddeal,” Mcleod says.

“If you’re buying a resale home, youhave to understand the seller willhave some emotional attachment tothe home. Your realtor can help you

establish what a reasonable value forthe home is.”

What to expect when you’re inspectingBefore you make an offer, you needto know what costs could rear theirugly heads down the road. Get a goodhome inspector to help give you thedownlow. For a condo, that meansmaking sure whole-building compo-nents such as plumbing and heatingare in good condition.

Detached homes come with a Pan-dora’s box of issues to watch for —corroded oil tanks buried in the backyard, leaky poly-B plumbing pipes insome ’80s homes, incorrectly in-stalled aluminum wiring that canpose a fire hazard.

> WARNING SIGNS

Buying a house?Take noteSTEPHANIE ORFORDSPECIAL TO THE STAR Understanding what

you can afford andanalyzing yourneeds must beconsidered whenentering the market.

SHUTTERSTOCK

You meet someone, fall in love andbefore long, you’re talking property.

If you both own a home, you mayfind yourself asking: What should bedone with a spare house?

My husband and I faced this ques-tion when we decided to purchase ahome together.

I already owned a house I was emo-tionally attached to, though it didn’toffer the space we needed.

We debated pitching a “For Sale”sign on the lawn, but ultimatelyturned it into a rental.

Whether you wish to list or gener-ate extra income, both carry pros andcons, says sales rep Brendan Powellwith the Brel Team.

“If you can afford to hold the prop-erty and own your primary resi-dence, then you can potentially ben-efit from the gain in value over time,”says Powell.

“What better way to have controlover that part of your investmentsthan managing your own property?”

On the flip side, “selling your prop-erty locks in whatever return you’vemade since you bought and frees thatcash up for you to use somewhereelse.”

Certainly holding property soundsappealing, but managing it can getgritty. When Bowmanville-basedLesley Rodrigues met her husband,she was renting out her Pickeringtownhouse.

“When my tenant decided to leave,we moved into it together,” she re-calls. “After a while, we bought a big-ger place, so I rented the townhouseout again.”

Last year, a bad tenant promptedthem to sell. Cheques were bouncingand the house was getting ruined.

“The place just looked worse andworse,” says Rodrigues. “The dog haddestroyed the laminate flooring aswell as the front and back doors.”

Meanwhile, she had to refinish thedamaged bathrooms, install new car-pets and repaint.

Mathieu Yuill, a real estate investorsince 2004, believes the benefits out-weigh the risks.

“There is a lot you can do to in-crease the value of your property un-like other investments,” he says.

“Real estate allows you to buy anasset without paying the full price,via a mortgage,” says Yuill. “It’s hardto find that with other investments.”

Still, some might not anticipate thework involved, including unexpectedtenant and maintenance issues.

“Owning an income property is ajob,” says Powell. “Even the best ten-ants will eventually leave and it coststime and/or money to find newones.”

Yuill says a strong landlord-tenantrelationship is essential for success.

“A lot a lot of landlords think theycan ‘set it and forget it,’ ” he says.

“Your tenants are going to help youbuild cash flow, equity and value —you need to treat them well toachieve this.”

> INVESTMENT

There are pros and cons to considerbefore buying an investmentproperty and renting it out.

SHUTTERSTOCK

Rent or sell?Find outwhich isbest for youInvestment homes can begood source of extra cash

TANYA ENBERG SPECIAL TO THE STAR

“Real estate allows you to buy an asset without paying the fullprice, via a mortgage. It’s hardto find that with otherinvestments.”MATHIEU YUILLREAL ESTATE INVESTOR

Ensure a property is attractive torenters: Consider size, locationand supply and demandIncome properties accrue capitalgains: Any gain in value from thatday onward is taxable

> CONSIDER THIS

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M8⎮TORONTO STAR THURSDAY, APRIL 16, 2015 ON ON1

MORTGAGES

More Canadians are still paying offtheir mortgage when they retire orrelying on their home equity to fundthat retirement. That means chil-dren or grandchildren expecting aninheritance to help pay off their owndebts might be playing a dangerousgame.

More than half of Canadian home-owners plan to carry their mortgagedebt into their retirement years, ac-cording to a 2012 report from BMORetirement Institute.

And almost 20 per cent of home-owners anticipate having to leveragethe value of their home equity tosupplement their retirement in-come, according to a 2014 poll byManulife Bank of Canada.

That means they might not havemuch of a legacy to leave their chil-dren or grandchildren. And theymight be left with even more debt ifinterest rates go up or the value oftheir home falls (which is happeningin Alberta, thanks to plummeting oilprices).

There’s no harm in having an ex-pectation of an inheritance to fundthe achievement of certain financialgoals, whether that’s home owner-ship or retirement, said Chris Butti-gieg, senior manager of wealth plan-ning strategy at BMO.

But that should be built into a fi-nancial plan.

“You’ve also got to be prudent andplan for the other scenario,” he says.

We’re an aging society, but we’reliving a lot longer, Buttigieg pointsout. “If people are living longerthey’re going to need their savings tolast longer, so that’s going to impactthe size of an inheritance,” he says.

As people age, there’s also a higherprevalence of health issues, so un-foreseen expenditures such as long-term care could also impact the sizeof an inheritance.

In 2006, 1.5 million Canadians were

relying on an inheritance to fundtheir retirement, according to BMO.They expected to receive, on average,about $150,000 in cash and $150,000in non-cash assets, such as a proper-ty. In reality, they received around$56,000.

Buttigieg says relying on an inheri-tance is like buying a lottery ticket.

“With an inheritance, there are un-knowns, such as the timing of whenan inheritance may be received,” hesays. “And a bigger question mark isthe actual monetary value, whetherthere will be anything at all.”

There are several factors affectingthe size of an inheritance: market

volatility, interest rates, inflation andtaxes.

Say, for example, a couple bought acottage in Muskoka 50 years ago for$20,000 and it’s now worth$500,000. If the couple wants to passon that cottage to their children, theymay not realize their children will beresponsible for paying the tax on a$500,000 piece of property — whichmay substantially cut into the inheri-tance they were expecting.

Aside from market forces, differentgenerations have different ideas onhow they want to spend their retire-ment income — and how much of itthey want to pass on.

The “Great Generation” survivedthe Great Depression and two worldwars, so they’re used to hardship andtypically have been frugal with theirmoney, says Buttigieg. They’re morelikely to have a pension and morelikely to leave an inheritance to theirchildren.

But the boomers are different.They’re leaving their 9-to-5 careersto do some consulting, volunteeringor travelling. And they’re looking tospend at least some of that retire-ment money on their own pursuits —and the kids will get whatever is leftover.

Boomers are also loaded with debt,

says Les Kotzer, a Toronto-basedwills and estates lawyer, and authorof four books on the subject. And thegenerations after them are going tohave financial issues because they’realso spenders.

“This generation doesn’t cut cou-pons like their parents did, so thisgeneration has a lot of debt,” saysKotzer.

“There’s a lot of money comingdown, and as these parents pass, youstart to get these phone calls:‘Where’s my money?’ ”

Indeed, BMO found about one tril-lion dollars will change hands fromthe Great Generation to boomers inthe next two decades. More is atstake and that means we’re seeingmore inheritance squabbles end upin the courts.

Kotzer says some family membersare “waiters” in the sense they’rewaiting for their inheritance so theycan pay off their own debts. Butproblems can arise when they’re soreliant on an inheritance — or feelentitled to Mom and Dad’s money asif it’s their own — that it causes familyrifts.

“The fact is that some people viewinheritance as a mattress to fall backon,” says Kotzer.

Having an up-to-date will and ap-pointing a power of attorney are cru-cial. But it’s also important for par-ents to have an open dialogue withtheir children to avoid misgivingsand misunderstandings, says Butti-gieg.

“It’s one of those tough-to-talk-about conversations,” he says.

But when it comes to inheritances,there’s often a lot of assumptions andspeculation, so it’s better to get ev-erything out in the open and comeup with a solid financial game plan.

> RETIREMENT

Waiting on an inheritance may backfireMore Canadian homeownersare carrying mortgage debtinto their retirement years

VAWN HIMMELSBACHSPECIAL TO THE STAR

As people live longer, they require more savings, inevitably impacting the size of inheritance they have to pass onto their children or even their grandchildren.

SHUTTERSTOCK

“This generation doesn’t cutcoupons like their parents did,so this generation has a lot of debt.”LES KOTZERWILLS AND ESTATES LAWYER

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