Thursday, November 26, 2015

The perils of having no credit#.VlW_ldwN0F0.facebook#.VlW_ldwN0F0.facebook

The perils of having no credit#.VlW_ldwN0F0.facebook#.VlW_ldwN0F0.facebook

Thursday, October 01, 2015

When the only ring is on your keys: What common-law couples should know before buying a house together

Tuesday, February 25, 2014

The fees associated with purchasing your first home can really add up. To help Canadians with these costs, our conservative government introduced the First-Time Home Buyers Tax Credit. This credit allows Canadians to save up to $750 on qualifying homes purchased after January 27,2009.

Thursday, March 14, 2013

Apply for a no obligation quote today while interest rates remain low

Thinking about purchasing a home? I can walk you through the process step by step, explain all of your options and all of the costs involved in making a home purchase. If you are first time home buyer you should know what you qualify for be...fore you start shopping. And with interest rates so low, I can even lock in your interest rate for 120 days. 2.89% for a 5 year fixed... WOW... what are you waiting for. Apply for a no obligation quote today.

Saturday, March 02, 2013

Win an Apple iPad Mini 16 GB Wi-Fi

$329 VALUE - See product details.

To enter the contest I need you to do three things for me...
1. LIKE my Facebook Page

2. Simply click on my google plus link below and click on "Write a Review" and write a review/testimonial on your experience with me.

3. Click on the link below or Email me at with your name, email phone number confirming you did both steps above so I can enter you into the contest.

Wednesday, February 13, 2013

Is a Costco membership worth it?

Is a Costco membership worth it?

Tax-Free Savings Account (TFSA)

Tax-Free Savings Account (TFSA)

The Smith Manoeuvre Debate

About one year back, I did a review of The Smith Manoeuvre (SM) book and noted that the book should have talked about the pitfalls involved with the strategy. Many financial planners have left comments disagreeing with my review (though I reviewed the book, not the strategy) and I challenged one planner to show me how a client implementing the SM will come out ahead in the worst-case scenario (this particular planner uses segregated funds, so he tells me the worst case scenario is 0% returns).

The planner’s client (let’s call him Joe) owns a house appraised at $350K and has a $260K mortgage on it. His monthly mortgage payment is $1,520. To implement the SM, the planner takes out a secured investment loan of $55K and invests the proceeds (less expenses) in segregated funds. To service the investment loan, Joe pays an interest of $275 per month.

To make an apples-to-apples comparison, I am going to assume that Joe can make an extra payment of $275 towards his mortgage principal. If Joe can find an extra $275 savings for the SM, he can find a similar amount for a mortgage pre-payment.

After five years, let’s assume that Joe’s home is still worth $350K (the home’s value doesn’t affect the outcome). If he had opted for an accelerated mortgage pay down, he would have a mortgage balance of $211K and he has a net worth of $139K. If Joe had implemented the SM instead, after five years, he would own the $350K home, an investment portfolio of $99K and a loan of $321K, leaving him with a net worth of $128K.

What about after 10 years? With mortgage pre-payments, Joe’s net worth would be (Home:$350K – Mortgage:$149K) $201K. The SM would leave him with (Home:$350K + Investments: $160K – Loan:$321K) $189K. Even after 15 years, Joe would be better off with a mortgage pre-payment (net worth of $280K) than the SM (net worth of $270K).

Now, surely over 20 years Joe would have come out ahead, right? Not really. With pre-payment Joe now owns his home free and clear. The SM also results in a mortgage-free home, but Joe now has a portfolio of $346K and an investment loan of $321K and a net worth of $375K. But, the key difference is that Joe hasn’t made a mortgage payment for 17 months, which if he had saved would have added an extra $31K to his net worth.

The point of this exercise is not to show that the SM doesn’t work but that it entails taking a small risk, not any risk at all as many planners claim. You should also note that this particular SM example involves a higher leverage and would become risky if a severe real estate downturn should occur. Also, while segregated funds may give you peace of mind, it also comes with a higher price tag. If you are earning 8% in the markets and giving up 3% in expenses, you would probably just break even with the SM. I’ll close with a comment made by David Trahair, author of Smoke and Mirrors, in a recent Toronto Star column: “It’s a high-risk strategy because you’re betting the farm that some investment adviser can do better than you can. You have a guaranteed return from getting rid of the mortgage.”

The Smith Manoeuvre Debate

Thursday, January 24, 2013

Refinace changes come home to roost

A new report identifying a spike in consumer loans may be the strongest indication refinance rules are forcing Canadians into higher-interest borrowing.

Fourth quarter 2012 saw a 3.2 per cent rise in non-mortgage loans compared to the year-old period, according to Equifax’s latest National Credits Trends study, released Thursday. That’s over and above the near-2 per cent climb recorded between July and September – again a year-over-year comparison.

That new debt came in the form of bank loans, lines of credit, car leases and credit cards, says the report. Those loans generally carry interest rates as much as 1,800 basis points higher than mortgage debt.

The grow starting in Q3 coincides with the introduction of the government’s latest round of mortgage rule changes, which reduced the ceiling on refinances to 80 per cent loan-to-value from the then 85 per cent.

Brokers have argued the move as detrimental to borrowers looking to manage debt without resorting to the kind of high-interest credit cards that may have contributed to their financial woes in the first place.

Those mortgage professionals are likely to find support for their conclusions in this latest Equifax report.

Still the study does offer some good news for an economy still grappling to contain rising household debt levels – ostensibly, the reason the government introduced those more stringent mortgage rules in July.

The percentage of unpaid non-mortgage debt in arrears, or more than 90 days past due, stood at 1.19 per cent in the fourth quarter, down slightly from 1.22 per cent in Q3.