Skip to main content

How to Give Financial Advice on Buying a Home

 

As a financial professional, you are more objective and knowledgeable about financial matters than most people. However, there is a line to walk. You do not want to give the impression that you know everything because you don’t. You also do not want to be the one who knows a lot but never helps anyone.

When someone is purchasing a home, here is how to give solid advice without overstepping.

First, suggest they begin saving early. They will need a downpayment. Do not be specific about what downpayment they will need. This will vary. The smallest downpayment possible is 5%, but this does not apply to everyone or to every property. The average Toronto home price in September 2020 is 1 million dollars, but you know how averages work. Suggest they speak to a mortgage professional who can help with specifics. 

Be sure to tell them to put their whole downpayment in a single accessible Canadian bank account. Regular automatic deposits to this bank account are a good way to go.


Along with the downpayment, they will need closing costs and moving costs. Closing costs are the fees and expenses required to close the purchase of their home. It is a good idea to budget 3-4% of the purchase price. They will also need money to move into the house and do a few things to the house when they get there. 

Given the high prices of the Toronto market, they will probably use all they have to get into the house. As a good friend, you will want them to keep a little aside as an emergency fund. If not possible, get them started on the emergency fund right after the home purchase.

How much home can they afford? Be careful about making pronouncements here, but as a rough rule of thumb, you need an annual income of $150,000.00 to purchase a million dollar Toronto home. If you think your friends are well below this level, do not burst their bubble. There are a bunch of things that can be done to help, but they will need the help of an experienced mortgage broker to make something work.  

The next step is in the realm of personal finance. Advise them to check their own credit at equifax.ca or creditkarma.ca. Their own reports do not affect their credit scores. They should pay their bills on time, keep credit accounts open, and have low credit balances.

Suggest they get a pre-approval letter from their mortgage broker before starting the home search. Once they have the letter, they should be aware that big moves such as major purchases, changing jobs, and new information may impact their pre-approval.




Popular posts from this blog

Donor-centred Fundraising?

The notion of “donor-centred fundraising” raises alarm bells. It seems to share ideological roots with corporations that proclaim they are ‘customer-centred’.1For example, Amazon.com’s highly-vaunted customer focus has been widely vilified for coming at the expense of other stakeholders, especially employees and suppliers.2 Corporations such as Walmart, Amazon, McDonald’s, and Uber with questionable records on caring for employees, suppliers, the environment, and communities use the language of ‘customer care’. For generations, non-profit sector employees have struggled with reasonable work hours, fair pay, benefits, job security, and opportunities for advancement. Does ‘donor-centred fundraising’ represents yet another assault on the non-profit worker? In a local example, an agency went all out upon the arrival of a $50,000 donation. (I think the donation was a portion of a real estate sales fee). There was a dinner, plaque, and public acclaim for the donor. Meanwhile, the agency did …

Russell Freedman's, Lincoln: A Photobiography

'Just completed a classic of American history for young people, Russell Freedman's, Lincoln: A Photobiography (HMH Books for Young Readers, 1989). Back in its day, the book won a coveted Newbery Medal.







For this Canadian, Freedman's book was an excellent and reliable introduction to President Abraham Lincoln's story. Insofar as I remember the general outline of Lincoln's public life, Freedman covers the bases in a dependable manner and includes an amazing series of archival photographs. The cover photo of a clean shaven Lincoln is fascinating. Apparently, Lincoln was the most photographed man of his time.

Perhaps the most striking thing about the book was its tone. Freedman manages to present Lincoln in a way that is appealing and upbeat while not sweeping away the darkness of his time and work or the depression in his personality and family.


The book sweeps through events and words of epic proportions - and helpfully includes a selection of Lincoln quot…

Mark Twain and Early Rising

“Give a man a reputation as an early riser and he can sleep 'til noon.”
― Mark Twain


Mark Twain lived in an era of self help books and ambitious go-getters. In protest, he wrote Early Rising, As Regards Excursions to the Cliff House, all about the perils and madness of early rising.

The writer of Tom Sawyer and Huck Finn, is of course, an authority on all
aspects of life and work. I wonder though if Mr. Twain too easily surrendered early morning to those hyper-productive worker bees who are annoying at the best of times, but unbearable in the early morning hours?
I used to be one of these. In my younger days, I remember occasionally calling a few wealthy investors with urgent news in the early morning hours. I would ask, "did I wake you?" Without fail, they would say "no" and sometimes, "no, I was looking forward to your call." Back then, the guys with the expensive houses and cars would never admit that they slept. 
Mark Twain might have known the secre…