The Sky isn't falling

As Canadian consumer debt levels creep higher and higher, many articles have been written about how a U.S.-style recession is destined to hit Canada. That's why it's refreshing to come across the odd article that opposes this Chicken Little-type view - like this one in the Montreal Gazette .



The article brings up a number of good points as to why Canada isn't like its American counterpart. Among the highlights:

- While Canadians' debt-to-income ratio is now equal to that of Americans' when things went south back in 2008, this ratio isn't an accurate tool to predict a Canadian recession. After all, when looking at income, Canadians don't have the burden of healthcare costs to pay for. With the average American spending approximately 19% of their take-home pay on their health, their income is actually much less than ours - and their debt-to-income ratio, therefore, much higher.

- You shouldn't just look at debt and income when measuring the debt burden - you have to look at assets too. When you incorporate this into the equation, you'll find that Canadians are typically much better off than Americans. Here, debt amounts to just 24% of a household's average net worth, compared to 29% in the U.S.

- Canadians are still more conservative when it comes to mortgage borrowing - and while some of us are using our homes like credit cards, most of us aren't. In fact, an average of 63% of a household's home value is equity in Canada, compared to 39% in the States. Forty percent of Canadians also don't have any mortgage debt, compared to 31% in the U.S.

Why on earth would you touch the equity in your house?

This week on my facebook page, Mortgages for Women.com Inc I asked the question "what is the #1 reason people refinance  their house?"  Most people suggested the number one reason to refinance was to consolidate debt.  The fact that it was #1 by a big majority even surprised me and I wonder if the media has anything to do with it?  If you are thinking of refinancing to consolidate debt here are a few things you should know.

1) It's going to cost you money.  Regardless how the ad spins it you need to plan to be out of pocket.  In order to refinance you need to break your current contract (all mortgages are contracts) and for that you need a lawyer.  If your lender has in house service that in house service costs money and they will break your old contract and register the new one just the same as your own lawyer would do.  You may also be asked to pay for an appraisal and of course there is the penalty for breaking your current mortgage contract. 

2) Get your eyes off the new monthly payment.  Don't be seduced by the new monthly payment.  There is a reason why you were able to payoff all your debts and end up with a lower monthly mortgage payment than you had before.  Only one of those reasons is the rate.  If you only had 15 years left of your mortgage and you roll all your debts together into a mortgage with 25 years to pay then of course your payment will be lower.  Best to pay attention to amortization schedules over monthly payments.

3) Get it absolutely right.  If your going to refinance do it right.  Make sure you have a plan and budget going forward.  One of my favorite budget work sheets is on the Financial Consumer Agency of Canada Website.  Put some forethought into your refinance.  You will want to work out a plan that will get you back on track and keep you there.  There is not much point in refinancing debts like car loans into a payment with a 25 year amortization.  That car will be in junk yard long before you pay it off. 

4) If the advise your getting doesn't feel right it isn't.    Do as much homework as you can.  If you don't feel you are getting good advise listen to your inner voice.  You have to live with the fall out not the person approving your loan.

So why did the survey surprise me?  Most refinance loans I do these days are for home improvements.  I think I'm bad (or good) at discouraging people from refinancing to consolidate debt.  If you have any questions don't hesitate to email me.  I will send you a list of things you need to get together before you make the refinance decision. 

 

Making the most of small spaces

 
As urban centres across Canada (and the world) become more populated - and developers try to find more ways to squeeze more money out of their projects - you've probably noticed that condo units have gradually decreased in size. Whether you're looking to downsize and take advantage of the benefits of city living, or you're a first-time buyer looking for an affordable way to get into the market, chances are you'll have to find ways to adapt to these smaller living quarters.

The first thing to look for when purchasing a small condo? An accompanying locker. This blog post from truecondos.com highlights the disconcerting trend of the disappearing locker space. As developers look for new ways to make more money from their condo projects, they're cutting back on locker and parking spaces in favour of more units. Learning to live in less than 1000 square feet can be difficult enough - doing it without a place to store those winter coats and sporting equipment can lead to a very cluttered, and uncomfortable, existence.

Another way to avoid clutter in a small space is to invest a bit of time and money into establishing an effective organizational system. Multi-functional furniture, that either fills more than one purpose or features hidden storage compartments, can go a long way. Investing in racks and organizational systems to declutter those out-of-sight areas - such as closets and kitchen cupboards - can also greatly increase the space of your apartment. This video, from unclutter.com, showcases how implementing some boat-inspired storage techniques can make a sub-300 square foot space livable.

And lastly, if you're looking to save a bit of a cash but city living isn't for you, why not build one of these hobbit-like low-impact woodland homes? Not only are they cozy, but they're easy on the environment as well!

The Mortgage Broker goes to TIFF

This week I got a call from a friend to do something I've never done before.  Somebody was raising funds for The United Way of Toronto  by auctioning off two tickets to TIFF complete with after party passes.  My friend and I decided to go all out.  After all this was for a charity we both love.  We put in our bid and didn't hear anything so I had forgotten about it completely.  Then on Thursday I got the call that we had won the tickets and nobody thought to tell us.  The scramble was on.  What to wear, how to get there..... details, details, details. 

Not having a lot of time to think about it turns out to be a good thing.  I had no idea what this was really going to be like and in the end that helped.  I pulled together an outfit, made a hair appointment, got my make up done professionally and dawned the biggest heels I could walk in.  My limo was a Beck Taxi and my purse was too big and I looked like a first timer.  The movie was a thrill.  So much fun to sit in a theater and watch a movie with the actors and director sitting there with you. 

And then there's the after party or should I say parties.  Of course our passes were vague and we had to keep asking for clarification.  (Further pegging us s first timers) But the drinks were flowing and atmosphere was totally relaxed.  The food was amazing and the after party for the after party was stacked with celebs.  My heart was in my mouth all night and I sat in the shadows with my friend and marvelled how we didn't recognize a single person.  I have to get out more.  Okay - Ben Mulroney was obvious as was Bill Nighy but clearly there were more.  I did get a chance to chat briefly with Cameron Bailey and he is so down to earth and loves when people of Toronto embrace the festival.  It's what makes the event so special.  The whole town is in a festive mood and the parties are everywhere. 

I tweeted but my blackberry was letting me down.  Foursquare couldn't find me and thought I was still in Cobourg, my media card kept telling me it was full and the few pictures I did take uploaded to Twitter but not to facebook.  Good thing blackberry is Canadian or I'd have iPhone this morning. 

With all that aside I had a great time.  It reminded me what a great City Toronto is and how accessible these events are.  My first time doing TIFF in style is behind me and next year I will do it again and for sure I'll know better.  Lots of outdoor up in the sky patios so leather is better than strapless anything.  Your ride matters.  Check to make sure your phone is working before you go. You can wear anything and pull it off as long as your purse isn't too big.  Heels are a must.  And being a first timer is easier than you think. 

We are so blessed to have an great arts community to Toronto.  As a person who can get too caught up in the day to day grind of running a business it's so nice to have distractions.  It's also great to try new things and let go of old things.  I'm putting some old things behind me realizing there is world full of adventure.  I'm happy that I stepped outside my comfort zone and did something new.  Today I feel alive, reborn and accomplished.  I know I didn't climb a mountain but maybe that's next.

The lowdown on title insurance

Among the slew of insurance options that come with purchasing a new home, you've likely come across the term "title insurance". But what exactly is it - and is it worth forking over the extra money?


In a nutshell, "title" refers to your ownership of a property - so "title insurance" protects both you ( the owner) and the lender against loss resulting from title defects or fraud. While other types of insurance may protect your home from things that may happen in the future -such as fire or flooding - title insurance protects your home from things that may have already happened, but weren't immediately evident upon the purchase of your home. Some examples, as cited by title insurance company, Stewart Title, include:

-    someone else owns an interest in your title
-    existing liens against the title
-    violations of municipal zoning by-laws
-   encroachments onto an adjoining property (other than fences and boundary walls)
-    setback violations
-    realty tax arrears
-    outstanding municipal utility charges, provided such charges form a lien on title
-   existing work orders
-    lack of legal access to the property
-    un-marketability of the land due to adverse matters that would have been revealed by an up-to-date survey / RPR/ Building Location Certificate
-    fraud, forgery and false impersonation to the extent they affect the validity of title

Many homeowners find title insurance to be a worthwhile purchase because it's a minimal one-time fee with no deductible, and stays in effect for the amount of time you own the home. While title insurance is typically acquired at the time a home is purchased, there are options available to those home owners who are refinancing. For more information, give us a call - or check out one of Canada's title insurance companies, such as Stewart Title, First Canadian Title or Chicago Title Canada.

Debt freedom is difficult but not impossible

Canadians may be overly optimistic when it comes to predicting their "debt freedom day"?, a new report by CIBC reveals. But that doesn't mean debt freedom is out of grasp - it just takes a little more effort and planning than one would expect.
According to the CIBC report, regardless of an individual's age group, most Canadians believe, on average, that they will be debt-free 10 to 15 years from their current age. In reality, very few will actually reach this goal - only 18% of 45 to 54-year-olds are debt free, and only 35% of 55 to 65-year-olds have achieved their debt freedom goal.
If you're hoping to eliminate your debt over the next decade or so, it should be noted that it is possible - it just takes a bit of work. If you're interested to hear how others have done it, check out these stories of debt freedom:
http://www.milliondollarjourney.com/how-to-become-mortgage-free.htm
http://zenhabits.net/the-10-key-actions-that-finally-got-me-out-of-debt-or-why-living-frugally-is-only-part-of-the-solution/
http://sarawharding.hubpages.com/hub/How-We-Became-Debt-and-Mortgage-Free
http://thecompleteself.com/blog/how-we-became-debt-free-from-40k-in-past-due-debt-to-over-30k-extra-cash-in-the-bank-part-1-of-3/
While these case studies may not represent your ideal path to debt freedom, there are a few common truths to debt elimination that every person should expect to follow:
1)    Becoming debt free doesn't come without sacrifice. Whether you're planning on paying off your mortgage in three years or becoming completely debt free in 15, you're likely going to have to evaluate your spending, buy only what you can afford and forego a lot of items that fall into the "want" category.
2)    Establish a plan - and stick to it. Whether you sit down with a financial planner to talk about your goals, or establish a budget and pay-off plan yourself, the idea is to establish a path, stick to it and revise when necessary.
3)    Start saving. Cash is king, and the bigger cushion you have, the better. While it's often difficult to do, the bigger your cushion for retirement, emergencies and luxury spending, the less likely you'll be to accumulate debt.
4)    Avoid credit when you can. This goes with the above point - almost all the individuals in the above case studies eliminated their debt first, and then set out on a goal to eliminate credit from their lives. Whether it's a credit card or a line of credit, it's quite easy to borrow more than you can pay off.
"A mortgage has a beginning, a middle and an end,"? Marta Stiteler, a financial planner with the Pillar Retirement Group, told the Hamilton Spectator. "Lines of credit are perpetual. A lot of people don't even really see them as debt. Their incredible popularity has made this carrying of debt last forever."