Money123: Know your closing costs, Kleenex leaving Canada, wildfire insurance impacts

Closing time? Here are the costs to prepare for

Closing on the purchase of a new home comes with a wave of incremental fees, signatures and new responsibilities that can be particularly overwhelming if you’re a first-time buyer.

The good news is that a lot of the biggest expenses for closing on a home can be refunded or reduced if you’re entering the property market for the first time.

Global News spoke to real estate lawyers this week for the latest instalment of Home School to give new buyers a sense of what they should be budgeting beyond the downpayment when they’re preparing for that first purchase.

In addition to land-transfer taxes, B.C. real estate lawyer Dharam Dhillon says there are a number of incremental costs related to closing a deal and making sure you’re in the right legal position to take possession of a home that can rack up and surprise first-time buyers.

“The way those numbers calculate, they can be material. So all of a sudden, if someone hasn’t accounted for that, they have to come up with that cash for closing,” he tells Global News.

Read more about what you should have set aside for closing costs.

Climate change is changing insurance

News of wildfires spreading across the Northwest Territories and British Columbia in recent months is just the latest wave of extreme weather to sweep through Canada.

Wildfires, flooding and other natural disasters are forcing changes to how insurers look at Canada, and the premiums some homeowners will soon be forced to pay.

Craig Stewart, the Insurance Board of Canada’s vice-president for climate change and federal issues, estimated that premiums could rise between five and 50 per cent.

“Due to these trends that we’ve been seeing over the last decade, we are seeing, unfortunately, insurance premiums increase as the risk goes up,” he told Global News.

With more fires and floods, he said insurers are taking a close look at how well a community is prepared – “whether there are fire hydrants, whether there is a trained fire response, volunteer firefighters in place, whether they are fire engines” — when considering new premiums.

Read more about what to expect if you live in a community affected by severe weather.

Kleenex bids Canada adieu

Canadian shoppers reaching for a tissue refill will have one less option soon as Kleenex announced this week that it’s exiting the Canadian market.

Todd Fisher, Kimberly-Clark Canadian vice-president and general manager, said in a statement its Kleenex business has been faced with “unique complexities” in Canada.

The decision to remove the product was made this month, a spokesperson said. It’s unclear how many Kleenex tissue products remain available for purchase in Canadian stores.

“Thank you so much for your loyalty to our Kleenex brand facial tissues for the past few decades,” a message on the Kleenex website reads.

“We appreciate you allowing us in your households and want you to know how difficult it was for us to end our sales in Canada.”

Kleenex is just the latest brand making a clean exit from Canadian store shelves in recent months, joining Nestle Canada’s frozen products such as Delissio and the iconic cone-shaped Bugle corn snack.

Read more about Kleenex’s departure here.

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– THE QUESTION –

“My common-law spouse made a deposit to a spousal RRSP in my name in December 2021. I have contacted CRA and a financial advisor to see when I can withdraw money and it not be applied to my spouse’s income. Both had a different answer, and I am getting conflicting responses. I understand it is three years, so would I be able to take money out Jan. 2024 and have it applied to my income?”

— A Money123 reader 

“Spousal RRSPs can be an effective income splitting strategy, but most Canadians don’t understand them. A spousal RRSP is separate from your RRSP and your spouse’s. It is in your spouse’s name, but you are the contributor. This means you can contribute using your RRSP room to a spousal RRSP in your spouse’s name. Or your spouse can contribute using their RRSP to a spousal RRSP in your name.

Why would you do that? It might save you tax after you retire. You pay less tax after you retire if you and your spouse have similar taxable incomes. Your taxable incomes at that point will be your government & employer pensions, withdrawals from your RRSPs (converted to RRIFs after you retire), and any investment or work income, if you still work.

If it looks like your taxable income after you retire will be noticeably higher than your spouse’s, you can try to even them out by putting more into RRSPs in their name. You can contribute to a spousal RRSP in their name, while they contribute to their own RRSP. With effective planning, you can have retirement incomes that are closer to even.

To prevent short-term uses, the rules require that any contribution to a spousal RRSP stay in for the year it is contributed plus at least two more years. If you withdraw sooner, then the withdrawal is taxable to you, the contributor. If you leave it in long enough, withdrawals are taxed to your spouse, the owner of the RRSP.

The rules often say ‘three years,’ but it’s not actually three years. In your case, you contributed in 2021, so it is the rest of 2021 plus two full years. So you can withdraw it in January 2024 or later and the withdrawal is taxed to your spouse.”

–  Ed Rempel, fee-for-service financial planner & tax accountant, Unconventional Wisdom

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