Help Your Friends

The Bank of Canada recently released a paper on the "Competition in the Canadian Mortgage Market", which presented some very interesting findings.

• On average, higher income households pay a higher rate on their mortgage than lower income families.
• Banks with large branch networks charge higher rates on their mortgages.
• Borrowers who put less down on their mortgage pay a rate premium over those who put more down.
• Banks offer larger discounts to new clients than existing clients.

This report also found that just over 30% of people who applied for a mortgage did so through a mortgage broker.  There are a lot of people out there who didn't benefit from the services that I provide my clients.
As a mortgage broker, I make sure that you are receiving the lowest possible rate on your mortgage!  Even if you feel more comfortable going to one of the larger banks, I can get you a discounted rate that they won't offer you as a client of that bank.
Tell your friends about the benefits of using a mortgage broker!  They may be one of the people that haven't received the best rate available to them.  Wouldn't you want to help your friends thousands of dollars on their mortgage?

http://www.okanaganmortgages.com/

Help Your Friends

Day of Decline

John Greenwood, Financial Post In a worrying replay of the crisis of 2008 and 2009, lending rates in Canadian credit markets continued to react to the growing turmoil over European debt, with key overnight bank lending spreads doubling since February.

"We are starting to see interbank lending rates back up again and that's an unfortunate development," said Doug Porter, deputy chief economist at BMO Capital Markets. "We are starting to see investors shun any kind of risky trade again, whether corporate bonds or equities. We are seeing risk aversion right across the board."

While Canada has only modest direct exposure to troubled European countries, like other major economies it is feeling the indirect impact of turmoil in global financial markets sparked by fears of a possible sovereign default.

The early days of the crisis that climaxed early last year were characterized by a steady retreat by lenders from any kind of risk, reflected in steadily rising rates that banks charged each other for short-term loans, which eventually moved so high that interbank lending was effectively halted.

Conditions in Canadian credit markets are still nowhere near where they were in March 2009 at the height of the storm but the widening of spreads in just about every sector is a worrying "echo of what happened," Mr. Porter said.

The comments come after German Chancellor Angela Merkel slapped a ban on the short-selling of certain kinds of stocks and bonds, that sparked anger among other European leaders and sent equity markets into a tailspin as investors concluded the European bailout was unravelling.

The closely watched London Interbank Offered Rate climbed to the highest level in 10 months earlier this week as international banks hoarded money and investors grew more leery of risk.

Meanwhile, a U.S. Federal Reserve governor yesterday warned that the European troubles could spark another financial crisis, with credit markets freezing up around the world all over again.

"The European sovereign-debt problems are a potentially serious setback," Daniel Tarullo said in testimony before congressional subcommittees.

But Mr. Porter said the markets have now moved beyond that and are now focused on the possibility of "a deeper global slowdown" that would result if the European issues are not contained.

As a major global economy roughly the size of the United States, Europe is a key driver of global growth and if European demand starts to fall, as is already happening, the rest of the world will feel it.

As a major global economy roughly the size of the United States, Europe is a key driver of global growth.

If European demand starts to fall, as is already happening, the rest of the world will feel it.

That includes regions such as Canada and China that have so far avoided serious recessions.

Indeed, Canada emerged largely unscathed from both the crisis and the economic downturn that followed partially because Canadian governments did a better job of handling their finances than most other countries.

But one reason for the widening of credit spreads on Canadian government debt may be that investors are starting to take a second look at the quality of that debt.

In a report titled Is Canada Really So Pristine on the Debt Front, Mark Chandler, a fixed-income strategist with RBC Dominion Securities Inc., notes that Canada is average with other major countries in terms of the size of its debt, about 83% of gross domestic product, sandwiched between Britain (78%) and the United States (93%).

As a result of being downgraded by most of the rating agencies about 15 years ago, Canada lost its appeal to many foreign investors and little Canadian debt is now held by foreign institutions, which is a good thing when credit markets are roiled.

However, Canada still faces the worry that holders of its debt may not be willing to renew, known as "roll-over risk," and once again we are about at "the middle of the pack" internationally, Mr. Chandler says in the report released yesterday.
Read more: http://www.financialpost.com/story.html?id=3054501#ixzz0oYt2D0pG

Day of Decline

Personal finance

The top 10 financial resolutions for 2010

Manulife's Kurt Rosentreter says Canadians are spending far too much money on real estate debt and not concentrating enough on building portfolio wealth. When prioritizing between putting money into an RRSP, RESP or TSFA, families need to consider the emotional and financial aspects of that decision. iStockphoto

Get on top of that debt. Save. Set out a plan. And stick to it.

Roma Luciw

From Monday's Globe and Mail Published on Sunday, Jan. 03, 2010 6:26PM EST Last updated on Monday, Jan. 04, 2010 7:35AM EST

With 2009 slated to go down as a tumultuous time for your money, 2010 could prove to be the year when Canadians put their financial house in order – provided they can get their balance sheets under control.

Heading into the new year, debt is the biggest financial hurdle for many families, says certified financial planner Bradley Roulston, a manager of the Nelson & District Credit Union in British Columbia.

“Household debt – mostly mortgages and consumer debt – has increased to record levels. And with interest rates bound to go up, people need to make sure they have enough cash flow to sustain a few percentage [point] increases on their payments.”

The debt-to-income ratio among households hit a record this year. The latest Statscan

report showed that for every $100 of personal disposable income, Canadians are carrying $145 in debt, up sharply from $88.60 in 1990. The ballooning debt comes at a time when the Bank of Canada is warning of higher interest rates.

Citing potential interest rate increases, Manulife Securities senior financial adviser Kurt Rosentreter is advising clients shopping for real estate in 2010 to take defensive measures. “Resist overpaying for a home, delay the purchase of secondary or recreational real estate, save for larger initial deposits and focus on debt repayment more than new, optional portfolio savings.”

Given the massive Canadian stock market decline and ensuing rebound, investors also had a rocky 2009.

Patricia Lovett-Reid, a certified financial planner and senior vice-president at TD Waterhouse Canada Inc., says that while investors “climbed a huge wall of worry” in 2009, Canadians are still stashing money in “safe” places, like cash and savings accounts.

“Even though the stock market turned in March, people are still terrified to move up the yield curve,” she said.

Patricia Lovett-Reid

Ms. Lovett-Reid expects that will start to change in 2010, when people re-evaluate not only their investment portfolios but also increase their savings rates, tackle debt loads and develop a financial plan – some for the first time.

“This will be the year when people feel they really need to take back control of their money,” she said. “It is empowering to be in the driver's seat and I think 2010 will let us do that.”

1) Take control of your finances
Take the time to get a professionally developed financial plan that meets your personal goals. Take a course or a seminar to brush up on your financial know-how. It does not matter how much money you do or don't have, this is the time to get in the driver's seat. “Your financial plan is going to be the GPS to control your emotions and make rational decisions this year,” says Ms. Lovett-Reid.

2) Pay down debt
As a rule of thumb, pay off your high-interest and non-tax deductible debt first. Consider consolidating your debt, cutting up secondary credit cards and, if possible, make more than your minimum monthly payments. “When the holiday spending hangover comes, tackle those January and February balances hard. Try avoiding any new credit card debt for the first few months,” Mr. Roulston says.

3) Spend less
With only so much money coming in, decide what really matters to you. Set a family threshold with specific goals, one that curbs the urge to impulse buy. “Frugality is our reality now and living within your means has taken a new meaning. A budget allows you to take corrective action, it gives you a road-map,” says Ms. Lovett-Reid, adding that she and her husband review their family budget each week.

4) Save more
Canadians are saving about 4.8 per cent of their personal income, down sharply from roughly 10 per cent back in the 1980s. The trick to saving is simple: don't spend everything you earn. Mr. Roulston suggests having one spend nothing day each month. Another option is to automatically divert a small portion of each paycheque into a separate bank account designated for saving.

5) Develop a personal investment policy statement
Aside from your investing plan, articulate – and stick with – a personal philosophy for your portfolio. Ms. Lovett-Reid advises her clients to sit down and write out their investment goals, risk tolerance, and required rate of return. Once you have it in writing, review it at least once a year.

6) Rebalance
Aim for 2010 to be a year of balance. Are you sitting on too much in cash? Move up the yield curve incrementally. Are you too heavily invested in equities? Try to get a good mix of bonds, stocks and other investments. “This is the year to find a required rate of return for achieving your goals. Go back to your asset allocation and stay true to that,” says Ms. Lovett-Reid.

7) Get tax efficient
For many Canadians, paying the taxman is their single biggest expense. Even in the midst of an economic recovery, people can still take steps to deduct, defer and divide their way to a lower tax bill. Consider splitting income with family members, using the home renovation and child fitness tax credits, or juggling asset allocation and life insurance to ensure the most tax-friendly transfer of wealth.

8) Get insured
Not every Canadian absolutely needs insurance, but everyone should at least think about what would happen to their family if they suddenly passed away or became critically ill. Would your family be able to maintain the lifestyle they are accustomed to? “Depending on how you answer that will dictate whether you need to incorporate life insurance into your overall plan,” says Ms. Lovett-Reid.

9) Don't give up
Watching the value of your portfolio drop by 25 per cent is as difficult as losing that extra 25 pounds. Developing and living according to a financial plan takes time and patience. “Make sure the investment plan reflects your goals and risk levels,” says Mr. Rosentreter. Rebalance yearly to capture gains and remember that “staying on plan presents the greatest likelihood of achieving desired results long term.”

10) Review, adjust and enjoy
The recent economic and stock market downturns have taught people the need to spend responsibly, within the context of a financial plan and their lifestyle. Having a solid financial foundation in place frees you up to do all those things that give your life more meaning. “That alone will reduce your financial anxiety,” says Ms. Lovett-Reid.

Home Buyer's Tax Credit

Today’s focus is on the Home Buyers’ Tax Credit (HBTC).

What is this credit?

The Federal Budget 2009 proposed a tax credit for First Time Home Buyers as an action to provide support for Home Ownership. This proposal was thought to assist first-time home buyers with the costs associated with the purchase of a home (i.e. legal fees, disbursements and land transfer taxes).

For 2009 and subsequent years, the budget proposes to introduce a new non-refundable income tax credit, based on the amount of $5000 for first time home buyers who plan to purchase after January 27, 2009. For an eligible individual, the credit will provide up to $750 in federal tax
relief starting in 2009.

How is the new HBTC calculated?

It is calculated based by multiplying the lower personal income tax rate for the year (15% in 2009) by $5000. So that means, for 2009, the credit will be $750.

Who qualifies for the HBTC?

The individual must meet the below criteria:

They acquire a qualifying home.

Neither the individual or spouse/common-law partner has owned and lived in another home in the year of purchase or any of the 4 preceding years.

A person with a disability or are buying a house for a related person with a disability, you DO NOT have to be a first time home buyer. The home must enable the person with a disability to live in a more accessible dwelling.

Who is considered a person with disability?

An individual who is eligible for the Disability Tax Credit (DTC).

What is a qualifying home?

The home must be located in Canada.

This includes existing and new construction. Single-family homes, semi-detached homes, townhouses, mobile homes, condominium units, apartments in duplexes, triplexes, fourplexes or apartment buildings all qualify.

A share in a co-operative housing corporation that entitles you to possess and gives you an equity interest in a housing unit located in Canada also qualifies. (BUT a share that only provides you with a right to tenancy in the housing does NOT qualify).

You or the related person with a disability must intend to occupy the home as a principal residence no later than ONE year of purchase.

Can my spouse/common-law/friend claim the HBTC?

Either person can claim the credit or you can share it. BUT the total of both claims cannot exceed $750.

If you are purchasing a home with a friend, and you both meet the conditions for the HBTC, either one of you may claim the credit or share it. BUT the total cannot exceed $750.

Does the home have to be registered under the applicable land registration system?

Yes. The home must be registered in accordance with the applicable land registration system.

How do I claim the HBTC?

Beginning with the 2009 personal income tax return, a new line will be incorporated for you to claim the credit.

Do I have to submit any supporting documents with my income tax?

No. But make sure that the information is available just in case CRA requests for it.

Is the HBTC connected to the Home Buyer’s Plan?

No. Some of the conditions for the HBTC and Home Buyer’s Plan are similar but they are not connected. Eligibility for the HBTC will not change if you participate in the Home Buyer’s Plan.

For more information on the First-Time Home Buyers’ Tax Credit, click on Department of Finance’s Budget 2009 (Page 128).

Please refer to Canada Revenue Agency’s website for up-to-date details on the HBTC.

Home Buyer's Tax Credit

Finances - Homeowners Insurance

It is something that you have to have, so why not make sure you are getting the best deal possible. For many households, simply taking the time to compare different insurance plans can lead to savings of 10% or more per year. You want to make sure that you are adequately insured, but many people make the mistake of getting too much insurance instead. Below we have included some tips that can help you save on your homeowners insurance:

• Add some security devices such as smoke deterctors, dead bolts, or a burglar alarm
• Do an annual review to compare the amount of insurance you are carrying to your home and assets. You want to be properly insured without overpaying for insurance you do not need.
• Often insurers will offer steep discounts if you also get your auto insurance through them
• Call and ask your insurer if there is anything you can do to save. This simple act can often save your some money.
• Consider raising your deductible. Call your insurer to find out what you could save by raising your deductible another $250.

These few steps can help you gather the information needed to ensure you have the right coverage at the right price.

Finances - Homeowners Insurance

Golden Rules of Renovation

Keep the golden rules in mind.

Golden Rule# 1: Don't choose a renovator on price alone.

The Canadian Renovator's Council of the Canadian Home Builders' Association offers a number of golden rules to help renovating homeowners achieve their goals.

Know what you want. Take the time you need to explore the possibilities for your home and develop a firm plan. Begin with the fundamentals - what do you need and how you want your “new” home to look, feel and work for you and your family?

Set a realistic budget. Decide as early as possible how much money you want to spend - this allows you and your renovator to focus on the work that is doable within that budget. Experienced renovators can provide sound cost advice.

Plan for the long term. Thinking ahead avoids short-term renovations that may need to be redone in the future. Discuss your short and long-term goals openly with your renovator. Professional renovators can conduct a thorough inspection of your home and offer suggestions for the most effective sequencing of work over a period of time.

Don’t jeopardize the quality of your renovation by compromising on the quality of products or materials. If it’s worth doing, it’s worth doing well, and that means using products that offer the right combination of performance, durability and aesthetics.

Don’t choose a renovator on price alone. While it is always
tempting to go for the lowest price, you need to consider the implications of doing so. Does the renovator understand what’s involved in your project and have the necessary experience? Will the renovator offer a warranty on the work? Will the renovator still be in business if you need to call back?

Protect yourself. Dealing with a professional renovator is your greatest protection against an incompetent or unfinished job. A written contract spells out the arrangements between you and your renovator and describes your renovation in detail. Professional renovators also carry Worker’s Compensation, liability insurance and any licenses required by
your province.

And don’t buy from a door to door salesperson without carefully checking out the company. Before you enter into any kind of agreement, talk with friends and family. Contact your local Home Builders’ Association to see if the company is a member. Also check with the Better Business Bureau to see if anyone has lodged a complaint against the company.

(Source: Canadian Home Builders Association)

Golden Rules of Renovation