Thursday, December 17, 2009

The Real Estate Gamble?

I just came across an article on that discusses the risks of assuming that your home will fund your retirement.
A growing number of Canadians view their home as their ticket to retirement comfort. This article asks, is that wise?
The article states that there are huge risks that come with this approach, mainly:
-What if house prices crash as the baby boomers start to downsize?
-The growing view that our housing market is “bubbly”
-Many new home buyers may not even have their homes paid off by the time retirement age arrives. Have you ever heard of a “mortgage burning party”? This elusive party celebrates a person’s newfound freedom after paying their mortgage down to $0. I can remember my parents mentioning these parties back in the ‘80’s. I don’t think I’ve heard of a single one in my adult years! If they exist anymore, they must be few and far between.

Our world has definitely changed in a short period of time. While funding one’s retirement through home ownership certainly has its risks, I must point out that everything comes with some level of risk. If you leave your money in a bank account you will accrue very little interest income (but will have very low risk), if you invest in the stock market you have the opportunity for big gains (and losses) depending on how your invest, and, if you purchase a home you do run the risk that the house will not increase in value the way you had hoped. When planning your retirement strategy I think it’s really important to speak with a knowledgeable financial advisor to determine your best course of action and how you can diversify your assets and savings to lower your overall risk!
Click on the link below to read the full MACLEANS article!

Monday, December 14, 2009

Moving checklist

While moving will always be stressful, there is a way to make it a little less so by organizing your efforts ahead of time. Below is a moving checklist to help with your endeavour:

Immediately after your offer is accepted:

- Start researching moving companies or truck rental companies. Remember, weekends - especially long weekends, or those at the beginning/end of a month - are high traffic moving days. Make your moving arrangements early to avoid last-minute headaches.

- Get your records in order. Contact your doctor, veterinarian, insurance agent and your child's school to find out what you have to do to transfer your records -or insurance coverage - to a new location. Use this opportunity to ask about noteworthy doctors, schools or veterinarians in your new community.

- If you have a gym membership, find out what it's going to take to cancel, transfer or sell your membership.

- If you're moving into a condo, find out what's involved in booking the elevator (i.e. deposit) and book it as soon as possible.

Two months before moving day:

- Ensure a fresh start in your new home by weeding through the clutter and tossing/giving away everything you don't need. Many charities are willing to come by your home and pick up old clothing (that is washed and in good condition) or usable furniture. If you'd like to make a bit of cash from your used goods, try an old-fashioned yard sale, or placing an ad on Craigslist or Facebook Marketplace.

- Start gathering moving supplies - boxes, packing tape, bubble wrap, etc.

One month before moving day:

- Get packing! Start with the items you don't use on a regular basis. Make sure boxes are clearly marked with the new room destination as well as a list of the contents.

- Jot down items of significant value, for moving insurance purposes.

- Visit to forward your mail to your new address. It couldn't hurt to also notify your: bank; cable/phone provider; insurance company; credit card provider; hydro/utility company; doctor/dentist; and any subscriptions you may have.

Two weeks before moving day:

- Check in with your moving/truck rental company ? just to be safe. Make sure your reservation is still standing, and all the information is accurate.

- Cancel or transfer your newspaper service.

- Transfer your hydro/utilities account and your cable/phone. Make sure you cancel the services the day after you move out, and activate the hydro at your new residence the day before you move in. Your phone/cable may have to wait until the day after you move in since a representative will likely have to visit your home.

- Keep packing!

One week before moving day:

- At this point, most of your packing should be completed - everything remaining should be items you're going to use this week. Leave a few empty boxes aside for these items, as well as a bag for those things you plan to carry with you.

A few days before moving day:

- Re-confirm arrival time of your moving truck. If moving yourself, re-confirm your reservations with the truck rental company.

- Prepare a detailed map and directions for your movers including a cell phone number you can be reached at on moving day.

- Pack a travel bag with the items your family may need on moving day such as tooth brushes, change of clothing, medications, hair bushes, soap, toilet paper, paper plates and cups, aspirin, etc.

-If you are moving yourself, start dismantling dressers, tables and other large furniture.

-Empty, defrost and clean your refrigerator at least 24 hours before moving day.

Moving Day

- Make note of all utility readings (new and old home).

- Supervise movers as they load and unload the truck (or, if you're moving yourself, remember to lift with your legs ? not your back!)

- Provide movers with directions and your cell phone number.

- Designate someone to direct the movers and determine which boxes go in which rooms.

- Check for damaged items before the movers leave. Also make sure all appliances are in working order.

- Enjoy your new home!

Courtesy of Axiom Mortgage Partners

Friday, December 11, 2009

You're asking me for too much paperwork!

The Federal Reserve Bank of Cleveland has released a commentary explaining their theory on why the American housing market imploded while the Canadian market has remained strong.
The conclusion?
A lack of sub-prime lending in Canada.
What is a subprime borrower exactly?
Wikipedia defines it as:
“Subprime borrowers show data on their credit reports associated with higher default rates, including limited debt experience, excessive debt, a history of missed payments, failures to pay debts, and recorded bankruptcies.” (
So here is my humble opinion and semi-rant; sub-prime borrowing was rampant in the United States prior to the market meltdown. I’ve read many stories about individuals who were approved for mortgage financing with very lax lending guidelines, including mortgage loans that were approved with very little documentation. In my business, I sometimes have clients who complain about the amount of paperwork they are being asked to produce.
My thoughts are this: yes, I sometimes have to ask you for more paperwork than you expected and from your end I know this can seem a little over the top sometimes. But, you know what? The bank is lending you a lot of money! The bank is required to do their due diligence and confirm your income, source of employment, down payment funds and closing costs. I don’t make up the paperwork requirements; they come directly from the underwriter on your file.
Aren’t we all glad that the Canadian housing market has remained healthy throughout this global financial crisis? Can you imagine what would happen to your property value if you had 4 or 5 houses that were abandoned/foreclosed on your street? I partially contribute this healthy Canadian housing market to the fact that the vast majority of Canadian mortgage lenders have remained responsible and maintained strict underwriting/documentation requirements.
Buying a home and getting approved for a mortgage is a big deal, one that requires responsible borrowing and lending. So, if you feel you are being asked for too much paperwork just take a look at our neighbours to the south and you’ll be glad that Canada’s mortgage lenders are lending responsibly and ensuring that you do, in fact, qualify for your mortgage!

Thursday, December 10, 2009

Canadians' rising debt worries Bank

Paul Vieira, Financial Post Published: Thursday, December 10, 2009

OTTAWA -- Rising levels of household debt and deteriorating budget balances in a number of countries will emerge as the most prominent risks to the Canadian financial system over the next few years, the Bank of Canada said Thursday.

In its semi-annual review of the Canadian financial system, the central bank said the level of vulnerability to an adverse near-term shock has declined modestly. Furthermore, the likelihood of a renewed global downturn has diminished since the release of its previous assessment in June.

"At the same time," it warned, "several medium-term risks have intensified."

Two were singled out: rising levels of household debt, perhaps spurred in recent months by consumers looking to take advantage of record-low borrowing costs; and an inability to resolve global trade imbalances, which the bank warned could cause a "disorderly" adjustment in exchange rates.

The central bank said the review is meant to provide an assessment of downside risks that could cause stress in financial markets, even if they are low-probability events.

Nevertheless, it acknowledged that ratio of household debt to income has climbed to "historically" high levels, of over 140%.

"The medium-term risk to financial stability arising from the household sector is judged to have increased," it said. "This judgment is predicated on concerns that the sustained growth of household debt in the context of rising interest rates will increase the vulnerability of households to an adverse shock over the medium term."

To illustrate its point, the bank conducted two hypothetical stress tests. In one scenario, interest rates rise to levels consistent with the current fixed-income market; and in the other, rates climb at a quicker pace than currently priced in by traders.

The results, for the period up to the second quarter of 2012, suggest the proportion of households with a debt-service ratio of over 40% -- a threshold the central bank deems vulnerable – would increase, from its present level of 5.9% to a range between 8.5% and 9.6%. (The debt-service ratio measures the amount of income needed to finance loans.)

The percentage of overall debt held by these vulnerable households would increase, from 10.7% now to somewhere between 16% and 19%.

While lenders might be able to absorb these type of losses based on current capital buffers, the central bank warned they should "carefully consider" the risk to their entire household exposure, even if mortgages are insured by the federal government. "A household defaulting on an insured mortgage would likely be unable to meet its other debt obligations, resulting in a deterioration in the quality of the bank's entire household loan portfolio."

The Canadian housing market has been on fire this year, with sales and price levels in the existing home market posting significant double-digit gains, especially in big urban centres.

Meanwhile, the central bank also raised a red flag on efforts to level out current account imbalances – whereby countries with massive deficits, such as the United States, save more while surplus nations, led by China, have to boost domestic consumption.

While there has been progress, the central bank warned that further adjustments in exchange-rate policies are required – a hint aimed at China and other Asian nations, which have intervened in currency markets to keep their currencies from appreciating. Unless that happens, other economies, such as Canada, might be forced to bear more of a cost than they can handle in terms of evening out imbalances.

In addition, dealing with the imbalances might be hindered by the massive budget shortfalls a "number of countries" are running at present, and are expected to continue over the medium term. The central bank didn't cite countries, but it is likely the United States was top of mind.

Should concerns over fiscal sustainability mount, the central bank suggested this could result in higher-than-expected yields on sovereign bonds – which would translate into higher borrowing costs for households and businesses across the board. Moreover, there is likely to be more volatility in currency markets.

"While Canada's fiscal position remains relatively strong, [the country] could be adversely affected if higher borrowing costs facing countries with large deficits were to mute the global recovery, or if there are rapid shifts in exchange rates," the review said.

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Wednesday, December 9, 2009

As predicted, on Tuesday the Bank of Canda kept it's promise and left the prime lending rate unchanged...the next scheduled date for annoucning the overnight rate is January 19th 2010.