Closing day in a house deal is a milestone for both the seller and the buyer. To make it go smoothly, it is very important that both buyer and the seller are properly prepared.
Closing day in a house deal is a milestone for both the seller and the buyer. To make it go smoothly, it is very important that both buyer and the seller are properly prepared. http://www.moneyville.ca/article/1041152–17-things-to-know-about-closing-your-house-dealView full post
OTTAWA — Canadian house prices dropped in November for the first time in nearly a year, according to the monthly Teranet-National Bank house price index released Wednesday. The 0.2% drop followed two months of flat prices, and was the first decline in the index since a “brief correction during the three months ending November 2010,” …View full post
So what is your credit score and why does it matter? Just ask Robyn Lalani whose poor credit score hit her hard in the pocket book. Ms. Lalani bought her first condo in Vancouver for $249,000, borrowing $200,000. At the time she says she had a poor credit score, between 620 and 639, and the …View full post
Family Finance receives an average of 25 email inquiries a week, most in the day and day after the column appears, from readers who want to repair their financial futures. Their concerns vary from wanting to confirm plans they have already made to seeking relief from dire prospects. Many want to fix problems they should …View full post
Holiday Tree Debate: Real or Fake? Every holiday season, there’s one argument that arises again and again: which type of Christmas tree is better – real or fake? You can find a wide selection of both real and artificial holiday trees at our stores across the country. Here are the benefits of buying artificial or …View full post
OTTAWA — Canadian house prices dropped in November for the first time in nearly a year, according to the monthly Teranet-National Bank house price index released Wednesday.
The 0.2% drop followed two months of flat prices, and was the first decline in the index since a “brief correction during the three months ending November 2010,” said National Bank senior economist Marc Pinsonneault.
The national composite index, which tracks registered prices of homes sold at least twice, shows prices fell in eight of the 11 metropolitan markets tracked — one more than in October.
“Calgary and Victoria stood out with declines of 1.6% and 0.9% respectively,” said Mr. Pinsonneault, noting the declines were much smaller in the other six markets, though declines in Toronto, Hamilton and Winnipeg “are noteworthy in that these three markets are considered tight.”
December data released by the Canadian Real Estate Association suggested most real estate markets in the country are balanced, with the exception of those three cities, and Victoria, which is considered to be a buyer’s market.
November’s prices were higher than October’s in Edmonton (0.1%), Montreal (0.4%) and Halifax (0.5%).
Year over year, the composite index has gained 7.1%, up slightly from 7.0% the previous month because of a bigger drop in prices between October and November in 2010.
“Since prices began rising again in December 2010, the recent acceleration trend in 12-month changes could come to an end with next month’s report on December 2011 prices,” Mr. Pinsonneault said.
November housing prices (% change m/m % change y/y):
Calgary -1.6 0.5
Edmonton 0.1 1.0
Halifax 0.5 2.8
Hamilton -0.3 4.4
Montreal 0.4 7.2
Ottawa -0.2 4.2
Quebec -0.2 6.0
Toronto -0.2 10.8
Vancouver -0.2 9.1
Victoria -0.9 -0.3
Winnipeg -0.1 7.5
National Composite -0.2 7.1
So what is your credit score and why does it matter? Just ask Robyn Lalani whose poor credit score hit her hard in the pocket book.
Ms. Lalani bought her first condo in Vancouver for $249,000, borrowing $200,000. At the time she says she had a poor credit score, between 620 and 639, and the lowest interest rate she could obtain on a 30-year fixed mortgage for a five-year term was 5.34 per cent. Her monthly payment was $1,116. With a better credit rating, between 760 and 850, she says she would have been able to obtain an interest rate of 3.75 per cent. That would have dropped her monthly payments to $927. With a healthier credit score she would have saved more than $200 a month or $2,400 a year – significant savings over the life of her loan. Ms. Lalani has since improved her score and used it to her advantage in the purchase of her first house.
If a lending institution perceives that you are a credit risk, then your borrowing terms and conditions will be more onerous, and that could cost you thousands of dollars over the life of a loan, according to Tom Reid, director of consumer relations for TransUnion.ca. Mr. Reid says a credit score of 750 or greater is good. In order to reach or maintain a healthy score we have to do three things: limit delinquency of payment, limit utilization of credit, and maintain a healthy mix of credit. Considering the largest portion of our credit score is made up of our payment history and the simple exercise of paying your bills on time, a simple solution is to set up automatic bill payments.
Ramit Sethi, author of I Will Teach You To Be Rich shares a simple strategy for putting your bill-paying system on autopilot. Any bills you can’t pay automatically will likely have a feature that will alert you when your bill is ready to be paid.
Debt-to-credit ratio is the second most important consideration when it comes to credit. Ideally we should be using less than 40 per cent of our available credit, says Mr. Reid. If you have an open credit card that you no longer use, you don’t need to close it, especially if it doesn’t have an annual fee. Considering “a major determining factor in your score is your percentage of available credit, you want to have the highest level of available credit, while using as little of it as possible. If you have a card you no longer use, keeping it open will actual lower your credit utilization rate,” says Andrew Schrage of the personal finance blog MoneyCrashers.com. Having a lower debt-to-credit ratio equals a higher overall score. The other option before you close an account is to secure an increase on available credit on the cards you are keeping open. Paying off debt should therefore be a priority, and so should having a healthy mix of credit in your name: credit card bills, utility bills, car loans, and so on.
If you’ve checked your score with either TransUnion or Equifax and you’re sitting with a score of 800 points or higher, with a low debt load, then you won’t have difficulty getting access to loans at the lowest rates and terms available. If you have a score less than 600, considered to be poor, then following the three suggestions above will help to increase your credit number over time.
Our credit score affects us in a variety of ways these days that we may not be aware of. It affects mortgage rates, insurance rates, and can even affect our ability to get a job, according to Mr. Schrage.
“Wherever your score currently stands, you should identify ways to improve it in your daily life. By combining money-saving strategies with more credit score-friendly practices, you can immensely improve your credit score standing.”
Family Finance receives an average of 25 email inquiries a week, most in the day and day after the column appears, from readers who want to repair their financial futures. Their concerns vary from wanting to confirm plans they have already made to seeking relief from dire prospects. Many want to fix problems they should have seen and addressed long ago.
Over more than two years, Family Finance has gathered a composite, somewhat expected, picture of folks who ask us for help. Early in life, people take on debts, mostly mortgages. As they move through life, net worth rises. After age 60, it is more unusual among Family Finance submissions to find people with debts in a multiple of two or more times income. Yet there are similarities in the mistakes made by all. Here, we highlight 10 common financial missteps, the thread of which runs throughout our weekly series.
“Many people believe that in event of a crisis or even down the road in life, everything will be covered,” says Caroline Nalbantoglu, a financial planner at PWL Advisors Inc. in Montreal. “Life is not like that. A non-indexed pension that looks good in mid-life can be eroded by inflation. A will drafted in one province may not be interpreted as planned when one dies resident in another province. Failure to draft a living will can expose assets to misuse if one is seriously incapacitated.” Rule: Consider contingencies, what will happen in life, what can happen if bad luck strikes, and prepare for risk.
Plans once made need to be reviewed periodically. It is helpful to get perspective, sometimes by adding the eyes of professional advisors, says Adrian Mastracci, a financial planner and portfolio manager who heads KCM Wealth Management Inc. in Vancouver. “It is a matter of expectations,” Mr. Mastracci says. “Paradoxically, the methods used to build a fortune can wreck it.” The belief that what is will be is the problem. For example, a will drafted in 1980 instructed trustees never to invest in anything but short-term government debt that, at the time, paid as much as 15% a year. Today, those treasury bills pay 1% to 2%, and fortunes invested in them have been eviscerated by inflation. The implication: Lack of foresight combined with inflexibility can doom a fortune.
Failure to save
This is a fundamental failure, yet many people spend what they don’t have with credit cards and loans with little idea of when and how the loans will be repaid. Economists call erosion of net worth “dissaving.” It is responsible for many consumers’ financial anemia.
Of course, there’s the biggest planning error of all — procrastination, says Andy Husband, head of A.M.H. Financial Services in Edmonton. “People don’t want to confront today what they can defer to tomorrow,” he says.
Overpaying for financial advice
It can happen in a bill from a fee-only planner. And it can happen without being noticed when advisors who sell mutual funds that provide annual so-called trailer fees to advisors for keeping clients in the funds are overpaid. For example, a $1-million mutual fund account with an average 2.5% management expense ratio has an embedded $2,500 annual management expense. The advisor may get 40% of that fee, or $10,000. For a $2-million portfolio, the fee is double and the advisory work would probably be much the same. It’s vital to price advisory services. After all, a 1% annual fee adds up to 20% in two decades. What’s more, the cost is certain, the benefits of advice are anybody’s guess.
Planning to retire too early
A major Canadian insurance company built a vast book of business by marketing its services with the pitch that people can retire at age 55. Few people have sufficient resources to pull it off. Yet the notion has spurred retirement planning at age 55. What happens, of course, is that it is necessary to wait five or 10 years for the Canada or Quebec pension plans to kick in and for Old Age Security benefits to flow. In the gap, people have to use up their savings. What’s more, they give up a decade of potential savings. In the end, few people are adequately prepared to retire at age 55.
Failing to cut debt
There are three tiers of debt. First is mortgages and lines of credit secured against a home with interest rates of 2% to 5% or so. Then there is debt on universal plastic like Visa that is billed at 15% to 18%. And, finally, there is retail plastic debt at rates up to just a hair under 30%. Planners strive to help people to deleverage their debts, usually by cashing in stocks or other assets that are not likely to beat what they have to pay to lenders. The best rule: Don’t take on debt with double-digit interest rates. Investments seldom match it and, compounded, it can eat you alive. If you do have such debt, pay it off as soon as possible. Don’t let interest compound if you don’t pay or don’t pay enough and be sure to eliminate all non-tax-deductible debt by retirement. Keeping cash in low-return investments might be better off used to pay off debt.
Buying rental properties without estimating returns
Derek Moran, head of Smarter Financial Planning Ltd. in Kelowna, B.C., says the failure to do pencil work on real-estate deals is the cause of many family portfolio flops. The two elements of property investment — cash flow from net rents and growth of equity through mortgage paydown — can be estimated prior to the time of purchase. Capital gains can’t be planned, but if a property pays for itself, you can afford to wait for gains.
Carrying more risk than appropriate through failure to diversify
Most people have no idea of what an asset mix is, Mr. Mastracci says. The asset mix predicts the risk level of the portfolio. If you have bonds that tend to rise when stocks fall — and vice versa — and some commodities or investments in commodity funds that track inflation, then risk is diversified. There are still questions of balance — how much of each — and of picking the right assets in each class. But a portfolio assembled with those balanced characteristics will tend to weather financial storms, he says.
Not being emotionally detached from investments
It happens with surprising regularity. You can like a stock or a rental apartment building. Ego gets in the way, for dumping an investment seems an offence of ego. Moreover, if a rental apartment is occupied by your child or sibling or parent, it may be hard to sell. “Family and business do not mix well,” Mr. Moran says.
Posted by: Andrew Allentuck in Family Finance
London, December 1, 2011
Condo market soft in November
Home sales in November 2011 dipped 7.1%, due in large part to a drop in condo sales. “Sales of detached homes were down only a marginal 1.8% from the previous November,” says Jack Lane, President of the London and St. Thomas Association of REALTORS®. “It was the condo market that was soft. Bear in mind, however, that condo sales for November 2010 were up 16.2% over November 2009, so the bar was set pretty high. The good news for condo sellers heading into an early Spring market is that there will be pent-up demand; the good news for buyers interested in condos is that there will be plenty of supply at a very reasonable price.” Overall Year-to-Date sales of all house types are down a modest 1.1% from last year.
Listings were up 1.6% in November, at month-end the Association’s inventory of listings stood at 3,414, and the average price for a home (including condo sales) in the Association’s jurisdiction stands at $234,602, up 0.2% from the previous month. The year to day average price now stands at $232,819 which is up 4.1% over January 2011.
The news from St. Thomas was very positive. Fifty homes sold in London’s Sister City in November, up 22% from November 2010. The average price for a home in St. Thomas Year to Date stands at $185,303.
|The following table, based on data taken from CREA’s National MLS® Report for September 2011 (the latest information available), demonstrates how homes in LSTAR’s jurisdiction continue to maintain their affordability compared to other major Ontario and Canadian centres.
Average House Price
|Newfoundland & Labrador||$253,337|
|London St. Thomas||$232,714|
The average price for a home in Canada overall September month-end stood at $357,942.
The best-selling house style in LSTAR’s jurisdiction for November 2011 was the two-storey, followed by the bungalow, then the ranch, then the townhouse condominium.
|House Style||Units Sold||Average Price|
The London and St. Thomas Association of REALTORS® (LSTAR) is one of Canada’s fifteen largest real estate associations, representing 1,500 REALTORS® working in Middlesex and Elgin Counties, a trading area of 500,000 residents. LSTAR adheres to a Quality of Life philosophy, supporting growth that fosters economic vitality, provides housing opportunities, respects the environment and builds good communities and safe neighbourhoods and is a proud participant in the REALTORS Care Foundation’s Every REALTOR™ Campaign. As members of the Canadian Real Estate Association, LSTAR members may use the REALTOR® trademark, which identifies them as real estate professionals who subscribe to a strict code of ethics. The Association operates the local Multiple Listing Service® (MLS®) and provides ongoing professional education courses for its members.
Vacation time and slower work schedules create an ideal time for open houses. However, as homes fill up with presents, decorations and visitors, sellers are often faced with the challenge of striking the right balance between cosy and crammed.
Keeping your home tidy and sparingly decorated doesn’t mean sellers can’t celebrate the season in style, but remember that buyers are looking for just the right amount of sparkle.
“Potential buyers expect that there may be some decorations, but when they arrive they are trying to envision how they would spend their day-to-day lives in the home,” says Phil Soper, president and chief executive, Royal LePage Real Estate Services. “Keeping the holiday decorations to the right level will be easier if you remember the goal is to bring out the home’s structural charm.”
While trying to manage the Christmas clutter, sellers should also remove items that remind buyers that the home belongs to someone else. To assist sellers, Royal LePage compiled a top 10 list of things to avoid when selling a home during the holiday season.
1. Too many lights: A home will dazzle more if lights are kept to a tasteful minimum. Sellers should opt for white lights instead of multi-coloured flashing bulbs to provide a more neutral glow to a home.
2. Forgetting to clear the snow: Snow can look beautiful on trees, but drive-ways and walkways should be cleared as soon as the flakes fall. Buyers should be able to move freely during an open house.
3. No life or landscape: Give buyers a chance to imagine the potential in your landscape. Frost-resistant plants allow sellers to liven up walkways with-out taking away the buyer’s ability to envision his or her dream outdoor spaces.
4. Not cosy: Everyone appreciates a warm, cosy home – especially in the winter. Set the thermostat at a warm temperature for the whole day.
5. Engage the senses: Simmering a pot of cider with cinnamon during open houses or showings will create a warm, festive feeling.
6. Lingering odours: Be aware of those holiday dishes that may leave a strong odour.
7. Hiding a home’s seasonal bests: Photos of the home’s back and front yards, gardens and patios in spring and summer will show potential buyers what the house looks like when it is not buried under snow and when the leaves are still on trees.
8. Don’t let the tree take over: A smaller Christmas tree, with minimal decorations, will create the appearance of more space. A huge tree, on the other hand, will make the room look smaller, and busy decorations can intensify clutter.
9. Presents should not be present: It is important to cut back on clutter when showing a home.
10. Too many decorations: Remember, when selling a home during the holidays, less is always more. Whimsical ornaments can be great accents during the holidays, but be mindful not to go overboard.
© Copyright (c) The Vancouver Sun
Debt-ridden Canadians may be enamoured with home equity lines of credit but many are using them as a quick, easy way to borrow without really understanding how they work.
A Leger Marketing poll released Tuesday shows that 36 per cent of Canadians have a home equity line of credit (HELOC). Although more than three-quarters – 79 per cent – said they were “quite confident of their level of knowledge,” on average, they correctly responded to only 43 per cent of questions that tested their basic knowledge of how HELOCs work.
Those without a HELOC did even worse. On average, they correctly answered only three of eight true-or-false questions. The poll of 1,501 adult Canadians, commissioned by the TitlePLUS, the title insurance arm of Lawyers Professional Indemnity Co. (LawPRO), was conducted online late last month.
While home equity lines of credit can provide people with low interest rates and flexible lending terms, “there’s more to this arrangement than meets the eye,” said real estate lawyer Ray Leclair, the acting vice-president of public affairs for LAWPRO.
“Without understanding all of the implications of this type of borrowing, consumers could risk their future credit or run into issues when they sell or refinance their home.”
With interest rates flirting with rock-bottom levels, Canadians are taking on debt in record levels. Home equity credit lines, which allow people to borrow at low rates because they use their house as security, have become a popular and fairly easy way for Canadians to access cash. The fear, as with all debt, is what will happen when interest rates rise.
Chartered accountant David Trahair, who recently wrote a book on debt, says HELOCs are a dangerous trap because they spur people to spend more than they would otherwise have, which leaves them with more combined debt than someone without a HELOC.
So how are Canadians using their HELOC? Among those polled, 37 per cent have used them to finance major purchases like a home renovation, 17 per cent for a car, 11 per cent for a vacation, 9 per cent for a down payment on an investment property, and 5 per cent for children’s education. One quarter of those with a HELOC haven’t used it, the poll found.
Among those polled who have a secured line of credit, 55 per cent reviewed all the loan documents with a loan officer while 33 per cent read all the fine print. A minority, only 12 per cent, consulted with a lawyer before signing the agreement.
Most disturbingly, the poll found that 11 per cent said they did not review any documents or seek any advice before signing.
In some cases, depending on the fine print, a home equity line of credit can affect your credit rating, your ability to borrow for other needs, and even your ability to use your credit card going forward, said Mr. Leclair. He suggest people get professional advice and make sure they know what they are getting into before they sign on the dotted line.
“When you use your home as collateral, the bank has legal rights to your property and you cannot close on a sale of that home without paying back that loan,” Mr. Leclair said.
Failing the HELOC knowledge test
The poll found that the majority of Canadians were fuzzy on the details of how secured lines of credit work. Among those who said they did have a home equity line of credit:
57 per cent did not know that when you take out a HELOC the financial institution lending the money puts a mortgage on the borrower’s home.
58 per cent did not know that taking out a HELOC when they already have a mortgage on their home means that the lending institution places a second mortgage on the home, or modifies the original mortgage to capture all the equity in the home.
69 per cent did not know that having a HELOC could negatively affect their credit rating or future loan applications.
83 per cent of all survey respondents did not know that when you pay off and close your home equity line of credit, any credit card consolidated under this line of credit may be cancelled and not available for future use.
62 per cent did not know that having a home equity line of credit could negatively impact your ability to take out a loan or mortgage with another financial institution.
58 per cent did not know that when you take out a line of credit, your home becomes the bank’s security for any credit card debt, other loans you have with that bank, or any other loans you have co-signed.
roma luciw Globe and Mail Update
Posted onTuesday, November 15, 2011 10:53AM EST
Canadians saved $2.7-billion in the past year renewing or refinancing their mortgages and the betting money among consumers seems to be that interest rates are not going up any time soon, according to a new survey.