4 COMMON FINANCIAL MISTAKES EVERY SMALL BUSINESS OWNER SHOULD AVOID

Every entrepreneur and business owner will make a few financial mistakes during their journey. Those who aren’t savvy in accounting often overlook the need to brush up on their financial IQ. Truth is, these little financial errors can lead to some serious cash flow problems if you aren’t careful. Here are four financial mistakes you can easily avoid so you can protect your bottom line.

Late payments
Nobody is fond of paying bills. We tend to put them off until the last minute for short-lived peace of mind. This applies to all business owners when it comes to both your account payables and receivables.
When billing your clients, it’s common to give them an extended window of time to make payments so you can foster more sales. While your clients may appreciate the flexibility this can seriously cripple your cash flow. I generally suggest giving your clients no longer than 14 days to pay an invoice. If you’re providing quality goods and services they should have no problem paying you within this time window.
When it comes to paying your own bills, it’s important to follow the same principles above. This is especially the case if you’re operating off borrowed money. Paying an invoice late may result in a few unhappy emails, but when it comes to paying off your debts you need to always be on time. Even one missed payment can severely harm your credit score.
The best way to stay on top of these is to use an online payments solution that offers online invoicing and accounting features. This way all of your bills are organized and can be accessed anywhere at anytime.

Forgetting to have an emergency fund
Every successful entrepreneur will probably tell you that hindsight is 20/20 and foresight is … well you just never know what’s going to happen. Every business will have to pivot and there will always be unexpected hurdles. That being said, it’s absolutely imperative that you have your contingency plan, especially when it comes to finances. I recommend that every business owner has a three-month emergency fund at least.
You should start putting money away into your emergency fund as soon as the cash comes in. No matter the size of your business you should learn the art of bootstrapping and staying lean. The more money you put away, the more you’ll force yourself to get by with what you have. The majority of startups fail due to the lack of or misuse of capital. Having an emergency fund gives you a bit more runway when disaster strikes.

Failing to separate business funds from personal funds
This is one of the most common and dangerous pitfalls in small businesses. Small business owners often put their lives on the line for their business, literally. This is a big no-no. When starting a business it’s important to immediately separate your personal finances from your business finances. If you’re like any other entrepreneur it’s going to take more than one go to be successful. That being said, you definitely don’t want a failed business to tarnish your financial reputation.
Start by opening up a business bank account and apply for a business credit card to keep track of expenses. Make sure you’re only using your business credit card for business expenses and vice a versa. Failing to separate the two can also lead to complications around balancing accounts, filing taxes, measuring profits and even setting clear financial goals. Do yourself a favor and avoid mixing these expenses.

Spending too much time on non-cash-generating activities
It’s a given that you most likely won’t see an ROI on every activity you do when running a business. That being said, it’s important to distinguish which ones have the highest chance of eventually generating some cash flow. When it comes to time tracking and time management, it’s important to pay close attention to your productivity levels.
Everyone has 24 hours in a day, some decide to work smarter than others and that’s why they become successful. Know that time is your most valuable asset and treat it as such. Remember, it’s okay to say no or to turn down meetings that you know provide little to no value for your business. There’s no need to take or be present on every phone call either. Being able to identify what brings true and tangible value to your business is a key to success.
Try your best to follow the 80/20 rule. There are likely three to four activities in your business that generate the most cash. Once you identify these activities, create a habit of spending 80 percent of your time doing these tasks and save the rest of your time for other miscellaneous jobs. If you’re able to get really disciplined around this strategy, it will surely pay off.
It takes years of practice to improve your financial literacy. Although most lessons in finance are learned the hard way, it’s important to learn them nonetheless. Take note of these four common financial mistakes and do your best to avoid them. Contact Jen Lowe at 250 217 4925 or j.lowe@dominionlending.ca.

GETTING A MORTGAGE AFTER CONSUMER PROPOSAL OR BANKRUPTCY

Life can definitely throw some challenging financial situations your way. As mortgage professionals, we can provide solutions and strategies during or after these challenging times in order to get you back on track. We have access to banks, trust companies and mortgage companies that specialize in this transitional period to help you move forward with the best mortgage plan for you. We protect your credit by negotiating with multiple lenders to find a solution for you.

If you have never owned a home and have had a consumer proposal, the good news is that you are already accustomed to the discipline of saving money every month. Should you choose to continue to grow your savings, those funds can then be put toward a down payment and re-establishing credit.

If you own a home already, there are lenders that will help you refinance and pay out your proposal earlier in order to accelerate your transition period.

After bankruptcy, different lenders will issue mortgages based on the amount of time since you were discharged, the amount of down payment on a purchase and/or the current equity in your home if your already own. Lenders then price their rates based on these aspects of your application.

At Dominion Lending Centres, we look forward to learning about your journey while protecting your credit and guiding you through the best strategy on a moving forward basis.

INSIDE AND OUTSIDE THE BOX MORTGAGES IN TODAY’S MARKET

As we truck along in 2017, Mortgage Brokers and Lenders are adjusting to the new risk based mortgage rate pricing that came into play after the Finance Minister changed Government backed mortgage default insurance regulations in late 2016.

Lenders often choose to pay for mortgage default insurance on mortgages where the borrower was not required to pay it themselves. This method protects a lenders book of business against credit loss, helps them package more secured mortgages together to sell to investors and reduces the amount of capital they are required to maintain. This method in the mortgage industry is called back-end insuring.

The changes have limited the mortgage profiles that lenders are allowed to insure using Government backed insurers. Essentially the Government is intentionally passing on the risk to Lenders by implementing stricter insurance qualifying guidelines and limiting mortgages that can be insured to what they consider lower risk “inside the box” mortgages.

The onus is now on the lender to absorb more costs if a borrower defaults. In the end costs are passed on to borrowers by lenders applying higher rates to less secured mortgages.

If you’re looking for a mortgage in today’s market your circumstances may not fit “inside the Box” and be an insurable mortgage profile and your mortgage rate may be higher. The following is a short list of what insurers have limited their guidelines to:

• 25 year maximum amortizations
• Must qualify by using a rate stress test
• Maximum Gross Debt Service Ratio (GDS) of 39% (shelter expenses)
• Maximum Total Debt Service Ratio (TDS )of 44% (all liabilities)
• No refinances
• No single unit rentals
• Purchase price must be less than $1 Million

As you can see the insurer’s list is limited making Dominion Lending Centre’s lender connections and mortgage solutions more important than ever! Our Mortgage Brokers have a vast amount of mortgage options available to cover “outside the box” uninsurable mortgage profiles. Whether your refinancing, you need an amortization over 25 years, want to buy a single-unit rental or more we have a mortgage for that!

5 COMMON MISTAKES TO AVOID WHEN SHOPPING FOR A MORTGAGE

Avoid these 5 common mistakes, and you will have no problem getting your mortgage faster, more efficiently, and with a clear understanding of the process:

1. Thinking banks are the first and best place to go for a mortgage

Mortgage brokers can often beat the bank rates by using different lending institutions. The bank is limited to one lender, but if you use a mortgage broker, they have the option to shop for you with multiple lenders to find you the best product.

2. Not knowing your credit score

Your credit score is a HUGE factor in your mortgage application. The first thing lenders look at is your history and your score—then from there they build your file.

You should know where you stand because so much of your lending availability is tied to your credit score. In mere minutes, a mortgage broker can help you obtain a copy of your credit report, and go through it to ensure the information is correct.

3. Shopping with too many lenders

When you shop from institution to institution you will have your credit score pulled multiple times. Lenders typically frown upon this and it may interfere with your mortgage application. If you go to a mortgage broker though, your score is pulled ONE time only.

4. Not keeping your taxes up-to-date

Plain and simple: If you are self employed or the mortgage application is requiring a 2 year income average to qualify (utilizing overtime wages and/or bonuses) and you haven’t filed your taxes and kept them up to date, you cannot get a mortgage. Lenders will ask for your notice of assessment if your tax filings are not up to date, and you will not get your mortgage until they are filed properly and a Notice of Adjustment from the latest year it is received.

5. Not understanding that the real estate market you qualify in TODAY will adjust in the future.

Rates may be at an all time low right now, but new rules, government regulation, and changes when you are up for renewal can change the circumstances. You must be able to carry your mortgage payment at a higher rate or with new laws imposed.

Remember, securing a mortgage isn’t always about getting the best deal. It’s about getting a home you want and establishing yourself as a homeowner. That means not overextending yourself and taking your qualifying amount to the maximum. Leave some breathing room because no one knows what the future may hold.

IS TODAY THE RIGHT DAY TO BUY YOURSELF A HOME OR NOT?

Q. Is today the right day to buy yourself a home or not?

A. Today is the right day assuming one has found a specific property that works for them on all levels.

This question arises on a near daily basis within our social circles and most of the chatter around the topic is largely noise. Noise that needs to be blocked out so that you can evaluate your own personal circumstances fairly.

If the conversation is about an owner occupied property which one plans to reside at for at least the next 7-10 years, then arguably yes the right time to buy is today.

Over a 7-10 year horizon the day to day, even the month to month gyrations of the market will tend to resemble those of a small yo-yo on a large escalator.  Some ups and downs although with the lows often not dropping below the second last high. This is true of nearly any major urban 25 year chart of Real Estate Values.

There are some key considerations that will dictate not only the continued value, but perhaps more importantly your own ability to stay put for that magic 7-10 year time frame.

• Location
• Layout
• Age
• Size
• Recreational amenities
• Schools
• Distance from workplace
• Potential basement suite revenue
• the list goes on…

Getting all of these variables aligned is something that takes dedication on the part of the both the buyer and their Realtor.  The hunt itself can easily consume a few months or more, and for some may result in over 100 viewings.  This is more than enough to juggle without also trying to ‘time the market’ on that perfect home.

Speaking of timing; consider allowing for a small overlap during which you have access to both the current residence as well as the new one. Being able to install new flooring throughout, complete interior painting, or upgrade kitchens and bathrooms, without having to live in the middle of the disruption is well worth an extra month of rent or the marginal costs of bridge financing. The costs involved are surprisingly lower than most clients expect.

Keep in mind during your search that the MLS #’s are an imperfect indicator of what is happening today in the market, as in literally ‘today’, MLS data reflects purchase contracts that were negotiated 30, 60, 90 or even 120 days prior to the completion date which was itself in the previous months report.  In other words by the time the MLS data indicates a trend one way or another said trend has in fact been in motion for as long as 6 months and could be either reversing or ramping up further.

Where then to get the most accurate data?

Talk to front line folks, Realtors, Brokers, Appraisers, etc. for a better handle on up to the minute trends.  Ask an Industry Expert – like your local Dominion Lending Centres mortgage professional.

Short term fluctuations in values and/or interest rates are themselves not the key factors in many peoples decision to buy, instead it is finding that perfect combination of all the factors that create a home within a community and the realization that homeowners win in the long run by owning, not by sitting on the sidelines.

It is all about finding a place you can call home for the duration. To be able to plant roots and become a part of a community.  Home ownership will undeniably continue to be a part of living the Canadian dream.

Perhaps the (short term) timing will feel imperfect, as it did for presale buyers in 2007, whose completion dates were set for Spring 2009.  However 7-10 years later most will be glad that they bought when they did.  In fact many were smiling again as soon as the Spring of 2010.

Home ownership remains the one true forced savings plan, and one of the best investments we make socially as it provides an individual and/or a family with a certain sense of security, stability and community. Block out the noise and do what is right for you.

TOP FIVE HOME RENOVATIONS THAT INCREASE PROPERTY VALUE

Looking to increase your homes property value? Here are five of the best renovations you can do to your home to increase property value. These five renovations can sometimes have a return on investment 5-6x what they cost.

# 5 Flooring

Flooring is one of the most important aspects of your house. You will see an immediate rise in property valuation with the installation of hardwood floors. Existing hardwood floors that you can refinish are ideal as they are less costly to restore and in higher demand than new flooring materials. For the bathroom, tile will always be in demand and retain value exceptionally well.

# 4 Fixtures

Kitchens often look tired and dated, in large part due to old fixtures. Replacing or updating cabinet hardware, light fixtures, countertops and faucets will result in an immediate increase in your home’s value. This small, but effective upgrade will also revitalize the entire home. Pot lights are in high demand in open concept style homes.

# 3 Bathroom

The bathroom is the second most important room in the home in terms of valuation. If you can add a three-piece bathroom to a home with only one full bathroom, you will see a dramatic rise in the market value of your home. While you should never compromise bedroom space for a bathroom, try sneaking one in dead space in the home. Scott managed to fit in a 3-piece bathroom under a staircase – the width of the room measured just 44 inches. As an added tip, use glass for the shower to make the bathroom feel more spacious.

#2 Kitchen

Kitchens are the single most important room in the home relating to valuation. The kitchen can make a significant difference in the value of your home. As such, it is crucial that you invest in having a modern, fresh and desirable kitchen. Modern cabinetry, under cabinet lighting and new appliances will all significantly increase the value of your home on the market. To save on cost without compromising construction and desirability, look at options like Ikea cabinets as opposed to custom cabinetry.

#1 An Income Suite

No surprise, but the single biggest way to increase the value of your home is to build an income suite within the property. Whether this is converting your basement into a rental, or another floor in the home, an income property will increase your home’s worth. The main reason for this is that it covers a portion, or sometimes all of your mortgage payments, and results in your home being cash flow positive – which creates real wealth that can supplement your income.

Speak with any Dominion Lending Centres mortgage professional about how Genworth Canada can help qualified home buyers make their new home just right for them, with tailored improvements, immediately after taking possession of the purchased property.

Check out this video for more information.

WHAT DOES IT ACTUALLY MEAN TO CO-SIGN FOR A MORTGAGE?

There seems to be some confusion about what it actually means to co-sign on a mortgage and you know that where there is confusion, your trusted mortgage professional seeks to offer clarity. Let’s take a quick look at why you may be asked to co-sign and what you need to know before, during, and after the co-signing process.

So why are you being asked? Last year there were two sets of changes made to the mortgage world which can likely explain why you are receiving this request in the first place.

The first occurred early in 2016 whereby the overall lending standards were increased in regards to an individual’s management of their credit and the resulting responsibility of Canada’s financial institutions to ensure they are lending prudently. We have seen an increase in requests for co-borrowers to help strengthen applications when credit or job stability is an issue.

The second happened just in October. A new ‘stress test’ rate applies which has especially impacted borrowers with less than 20% down. They must qualify at a rate of 4.64% though their actual interest rate is much lower. This has decreased affordability for many which means they could be looking for a co-borrower to increase how much home they can qualify for.

If it was me, I would ask questions as to exactly why the applicant needs a co-borrower. If it is a credit issue then you need to assess if that an acceptable risk. If it is a matter of not enough income, you need to assess that instead. What is the exit strategy for you all from this joint mortgage?

What can you expect? You will be required to complete an application and have your credit pulled. As you are now a borrower the banks will ask you for all the documentation that the main applicant has already provided. This can include but will not be limited to:

• Letter of employment
• Paystubs
• 2 years Notice of Assessments, Financial Statements and complete T1 Generals
• Mortgage statements on all properties you own
• Bank statements if helping with the down payment
• Property tax bills
• Lease agreements
• Divorce/separation agreement

So you get the idea. You are now a full applicant and will be asked for a whole bunch of paperwork. It is not just a matter of saying yes. Once the application is complete and all conditions have been met with the mortgage, you will have to meet with the lawyer as well.

What do you need to be aware of?

1. This is now a monthly liability according to the world. You will have to disclose this debt on all your own applications going forward. It can affect your ability to borrow in the future
2. Each lender is different in their policy as to how soon you can come off the mortgage. Familiarize yourself with this. Are you committing to this indefinitely or only for a couple of years?
3. Mortgages report on the credit bureaus so you could be adversely affected if there are late payments
4. If the main applicant cannot make the payment for whatever reason, you are saying that you will. Make sure your budget can handle that for a few months.

A few things you may want to consider if you do agree to co-sign:

• Ask for an annual statement to be sent to you as well on both the mortgage and the property taxes.
• Consider a joint account for mortgage payments so that you can check in every so often to ensure all payments are being made on time
• Talk about life insurance! If the worst occurs, then at least have enough of a policy in effect, with yourself as the beneficiary, to cover a year of mortgage, taxes and bills so that you are not hit with an unexpected series of expenses until the property sells.

So though you just want to help your loved one into their dream home, you are all better served if you know exactly what you are getting into and are prepared for the contingencies. We here at Dominion Lending Centres are ready to help!

3 STEPS TO KEEP YOUR CREDIT IN CHECK

If you have have overextended yourself with credit card debt, or have consolidated all of your consumer debt into your mortgage, or are at the point where you just want to cancel your credit cards, we have the 3 steps for you to follow to get your credit back in check.

1. DO NOT CANCEL ALL YOUR CARDS

It may seem tempting, but money lenders want to see that you can handle your credit responsibly. Instead keep your 2 oldest credit cards (trade lines). The longer you have had your trade line, the better it is for your credit.

2. FOLLOW THE 2/2/2 RULE

The 2/2/2 rule means that money lenders what to see 2 trade lines, for 2 years with a minimum of a $2,000 limit. These cards need to be paid on time each month, and they also need to stay within that $2,000 limit!

3. USE WITH CARE-REGULARLY

The 2 trade lines you keep need to be actively in use. If you are concerned about consumer debt, then have a monthly bill such as your cell phone, cable, or even Netflix charge billed to your credit card. Then have that credit card paid automatically each month from your bank account.

Follow these steps to keep your credit in check and growing.  When it is time to renew or revamp your mortgage, or purchase a new home, your credit won’t hold you back—And you can bet Dominion Lending Centres is here to help you get the sharpest rate and the best product.

10 FIRST TIME HOMEBUYER MISTAKES

If you’re on the hunt for your first home and want to have a smooth and successful home purchasing experience avoid these common first-time homebuying mistakes.

1. Thinking you don’t need a real estate agent

You might be able to find a house on your own but there are still many aspects of buying real estate that can confuse a first-time buyer. Rely on your agent to negotiate offers, inspections, financing and other details. The money you save on commission can be quickly gobbled up by a botched offer or overlooked repairs

2. Getting your heart set on a home before you do your homework

The house that’s love at first sight may not always be what it seems, so keep an open mind. Plus, you may be too quick to go over budget or may overlook a potential pitfall if you jump in too fast.

3. Picking a fixer-upper because the listing price is cheaper

That old classic may have loads of potential, but be extra diligent in the inspection period. What will it really cost to get your home where it needs to be? Negotiating a long due-diligence period will give you time to get estimates from contractors in case you need to back out.

4. Committing to more than you can afford

Don’t sacrifice retirement savings or an emergency fund for mortgage payments. You need to stay nimble to life’s changes, and overextending yourself could put your investments – including your house – on the line.

5. Going with the first agent who finds you

Don’t get halfway into house hunting before you realize your agent isn’t right for you. The best source: a referral from friends. Ask around and take the time to speak with your potential choices before you commit.

6. Diving into renovations as soon as you buy

Yes, renos may increase the value of your home, but don’t rush. Overextending your credit to get it all done fast doesn’t always pay off. Take time to make a solid plan and the best financial decisions. Living in your home for a while will also help you plan the best functional changes to the layout.

7. Choosing a house without researching the neighbourhood

It may be the house of your dreams, but annoying neighbours or a nearby industrial zone can be a rude awakening. Spend time in the area before you make an offer – talk to local business owners and residents to determine the pros and cons of living there.

8. Researching your broker and agent, but not your lawyer

New buyers often put all their energy into learning about mortgage rates and offers, but don’t forget that the final word in any deal comes from your lawyer. As with finding agents, your best source for referrals will be friends and business associates.

9. Fixating on the lowest interest rate

Yes, a reasonable rate is important, but not at the expense of heavy restrictions and penalties. Make a solid long-term plan to pay off your mortgage and then find one that’s flexible enough to accommodate life changes, both planned and unexpected. Be sure to talk your your Dominion Lending Centres mortgage professional to learn more.

10. Opting out of mortgage insurance

Your home is your largest investment so be sure to protect it. Mortgage insurance not only buys you peace of mind, it also allows for more flexible financing options. Plus, it allows you to take advantage of available equity to pay down debts or make financial investments.

FED POINTS TO RISING CONFIDENCE LEAVING RATES UNCHANGED

The Federal Open Market Committee (FOMC) reiterated in their press release today that the labor market is strengthening and the economy continues to expand at a moderate pace. The consumer is doing most of the heavy lifting as business investment remains soft, but both business and consumer confidence is rising. Inflation has ticked up, but remains below the Fed’s 2 percent long-term objective. Inflation expectations are stable.

Given the Fed’s expectation that labor markets will improve “somewhat further,” economic growth will be moderate and inflation will rise to 2 percent over the medium term, the Committee decided to maintain the target range for the overnight federal funds rate at 1/2 to 3/4 percent as expected.

As always, the Fed will monitor both domestic and international developments to assess the timing and size of interest rate hikes in the future. According to the Fed’s Monetary Policy Report in mid-December, most members of the FOMC expects three rate hikes this year. At the moment, the market does not envision the next hike until May or June.

The Committee believes that monetary policy is accommodative and given low inflation, members believe that only gradual interest rate increases to levels below their assessment of the long-term normalized rate is warranted. Most members of the policy Committee estimate that the longer-term federal funds rate is likely to be 2-3/4 to 3.0 percent. It will likely be a few years until the funds rate returns to this level.

Some have been concerned about the level of bond holdings on the Fed’s balance sheet arising from the quantitative easing in the wake of the financial crisis. The Fed purchased bonds in the open market to stimulate economic activity during the Great Recession. Today’s policy statement restated that the Fed will maintain its existing policy of “reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions”.

No doubt President Trump will be happy with today’s Federal Reserve decision. He had accused the Fed during the election campaign of being politically motivated in keeping rates steady. There is some concern that the Trump administration might threaten the independence of the Fed, in direct contrast to historical presidential policy.

The new administration has created a good deal of uncertainty with respect to the size and timing of tax cuts, spending increases and regulatory rollbacks, which should boost growth and inflation.

Until recently, longer-term bond yields shot up following the results of the presidential election. Markets are expecting sizable fiscal stimulus. The post-election jump in borrowing costs filtered through to a rise in mortgage rates in both the US and Canada. In the US, steady growth in jobs, wages and the economy will continue to underpin home purchase.

In Canada (and the US), the supply of available properties is at historic lows, driving up house prices, especially in the Greater Toronto Area. With the Fed projecting three interest-rate increases this year, further increases in mortgage rates could put houses out of reach for more buyers. This, despite the Bank of Canada remaining on the sidelines.

Given the federal government’s regulatory actions to slow the housing market, higher mortgage rates driven by US rate hikes is likely to be a welcome development in Ottawa, even though it certainly does not make housing more affordable.

Written By Dr Sherry Cooper, Chief Economist, Dominion Lending Centres