The Bank of Mom & Dad
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Bank of Mom & Dad 1234 5678 9876 5432 Exp: 12/99 MILLENNIAL |
Times have changed when it comes to buying that first home. Salaries have just not kept pace with rising real estate costs, and Sudbury is no exception to this trend. In fact, our city has a healthier sale price for homes than in Toronto or Vancouver as they have experienced a reduction due to the overbuild of condominiums. This problem of high housing prices is responsible for the rising number of families seeking help from Mom and Dad, or Grandma and Grandpa. Historically, family financing assistance for houses was 4% in 2004, and the statistics from the Bank of Canda and TransUnion show it is now up to 11% as 74% of children do not qualify for a mortgage. |
When Mom, Dad, Grandparents and other family members become co-signers and/or puts up the funds for the downpayment, kids looking for their first home can qualify for a mortgage at the bank.
However, what is often happening is that now those kids (with the addition of their families’ financial support) increase their purchasing power and are able to buy a higher value home. It’s important to note that ‘everyone’ involved in a house that has family funded financing, is at risk.
Parents risk being in debt for many years and possibly stuck holding the mortgage totally if financial trouble arrives either through job reduction, losses, or a divorce. Children are at risk as their cash flow could be a challenge juggling all the higher payments and dealing with the unknowns of repairs or other life issues that disrupt their finances.
If a family loan funded a downpayment, a handshake or verbal promise to repay is a concern so, having a legal document drafted that identifies the loan amount, the names of all the people involved, a payment schedule and an end date are needed for true safety. Without such a document, your child who may be married or planning to marry, could go through a future break up, and then your money goes up in smoke. Now you have also given your child’s ex-partner your hard earned money, whether you like it or not.
Besides a loan document, having the proper details to protect your estate if you loaned or gifted money to your children is essential. The legal loan document allows the debt to remain for the partner of your child, and you can forgive the remaining portion to your child in your will, if you wish.
Even though it may seem unnecessary and too formal to have official documents between family members, when it comes to loans, gifts, money, and co-signing, it is the best way to maintain security and good family relations for years to come.
Home is where the heart is, until it comes to money!
Prosperity Planning
Today we are faced with rising prices and juggling to manage all those expenses against the income that is coming in. Old adages about pulling in your belt with a budgeting system have proven not to work for most people, especially with the negative thoughts of denying yourself something.
Don’t throw up your hands in defeat though! Take time to understand what the must pay key items are, the absolute essential needs, not simply what you may want.
Needs are the fixed expenses (ex. rent, mortgage, utilities, taxes, insurance, transportation costs & food), as well as key savings such as an emergency fund, plus a short-term savings account – yes, these are all needs to keep you out of the clutches of the credit card/finance companies. Paying high interest to financial institutions is not part of your family becoming more prosperous.
Once you have figured out this hard limit, you then know what you have left to spend on you and/or your family for fun, self care or treats. Using this process, eliminates the detailed tracking that is never kept up due to resentment. You can take that leftover amount and choose each pay or month if you go out to eat, buy that fancy coffee, spend on new clothes, golfing, fishing, or spoiled with a massage.
The other thorny problem is dealing with debt. It’s helpful to consolidate to reduce the number of payments, pay off the highest interest rate first and ideally only have one loan at a time to reduce the balancing act. Work towards a ‘pay as you go’ approach, not stashing cash that makes little if any interest and always ensure you make the minimum payments in the grace period.
Involve the whole family in the prosperity plan to get the most success and teach your kids too!
A Game of Marbles
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Sudbury’s own Roger Nash, the first Poet Laureate in our city, has once again put pen to paper and completed his latest book of poems. It has now been published, just in time for summer reading. You can check out his latest book called: "A Game of Marbles" on eBay |
Sudbury Secrets...
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In this issue we feature “Gloss Theory” beauty studio, locally owned and located at 1258 the Kingsway. They believe you deserve elevated self care, where everyone experiences a relaxing and positive atmosphere to unwind and leave feeling beautiful
Here, nail art is real art and the attention to detail is perfection! You may choose from manicures, pedicures, nail enhancements, hair treatments, lash lift & tints, lash extensions, brow threading & waxing, microblading, lamination, henna brows, face & body waxing (all genders)