Tales from the Trenches....the Dangers of Co-mingled Assets

Once upon a time there was a middle aged women with many children (5 to be exact) who had a good job, a good marriage and a beautiful home.  One day she came home from work and just as she was wondering what to serve for dinner the sheriff knocked on her door and told her she had to leave he was seizing the house for the mortgage company.  Stunned, but not stupid, she quickly called her lawyer who told her to pack as much stuff as she could get in her car, find an apartment and start divorce proceedings. 

As unusual as this story may seem to you we have seen it more than once.  So what happened?  The Husband had been self employed and the business had hit a bump.  Without discussion he went to see a mortgage broker who arranged to refinance the home.  He went home and told his wife about the resolve and told her she had to go to the lawyer and sign the documents.  Which she did.  Once the new mortgage was in place he never made a payment.  Her credit has always been immaculate but now it was showing 2 judgements against her from the mortgage company.  Once the house was sold (by the mortgage company) the judgements were paid but her credit was ruined for seven years.  She couldn't even get a new car.

So what should have happened?  The lender would have been smart to request ILA (independent legal advice) for both spouses.  BUT..... at the end of the day she signed a legal contract and left it to her husband  to take care of it.  The red flag should have been the refinance.  Since their credit was separate she had no idea how bad his was.  Never co-mingle anything until you have done your due-diligence.  If you're not sure what you should be doing get your own lawyer.  And if, like in this woman's case, it causes a rift between you and your partner then guess what.  The rift was coming anyway. 

Fixed or Variable? Will it ever get easy?

With interest rates at record lows, choosing between a fixed or variable rate mortgage has never been harder. So, which one should you go with?

The answer is one you probably won't like: It purely depends on your specific financial position and comfort level. Plain and simple.

If, for example, you can weather a slight increase in mortgage payments, you should definitely go for the variable rate. You're never going to see rates lower than this. If you can opt for a variable but set your payments as if you were paying the going fixed rate, you'd not only be protecting yourself from the shock of future increases, but you'd be banking a ton of extra money per month towards your principal.
On the other hand, if you're not extremely eager to take on risk, a fixed rate might be the way to go. Sometimes a five-year fixed rate is the best option if you want to set a budget and know exactly what to expect over the next five years. The thing is, sometimes a four-year fixed rate will work just fine too. Most people don't stay in their first home for more than five years, and the four-year terms occasionally come at a lower rate. At the same time, if you don't see yourself moving over the next decade or so, a 10-year option might be your best bet.
The point is that mortgages are not one-size-fits-all. To find out which option is best for you, give us a call. We'd love to help.1 888 372 7367. 

Only "insane" people have variable mortgages?

Kevin O'Leary, co-host of CBC's Lang and O'Leary Exchange and the "greedy" dragon on Dragon's Den, turned heads earlier this month when he spoke out against variable rate mortgages.

"If you have a variable rate mortgage right now, you're out of your mind not to lock it in. You'd be insane not to lock it in," he said.

His controversial views on the subject come shortly after announcing his entrance into the mortgage market. While no one yet knows whether O'Leary's coming into the industry as a broker or a lender, it's no secret his anti-variable opinion comes with an ulterior motive.
If he was genuinely looking to educate mortgage holders on the variable-fixed debate, he'd acknowledge that one isn't better than the other. It purely depends on the individual's financial position and what they feel comfortable with - plain and simple.
If, for example, you can weather a slight increase in mortgage payments, you should definitely go for the variable rate. You're never going to see rates lower than this. If you can opt for a variable but set your payments as if you were paying the going fixed rate, you'd not only be protecting yourself from the shock of future increases, but you'd be banking a ton of extra money per month towards your principle.
On the other hand, O'Leary's point of view does make sense for individuals who are not as eager to take on risk. Sometimes a five-year fixed rate is the way to go if you want to set a budget and know exactly what to expect over the next five years. The thing is, sometimes a four-year fixed rate will work just fine too. Most people don't stay in their first home for more than five years, and the four-year terms occasionally come at a lower rate.
The point is that mortgages are not one-size-fits-all and, given O'Leary's prominent position in the media, he should know better than to say that they are.
 

Are you more financially savvy compared to 2008?

Canadians feel the 2008 economic crisis has made them more financially literate, according to a poll by BMO. The majority of respondents say they now have a better understanding of their investments, and 74% rate themselves as either a B or C when it comes to financial literacy. How do you measure up? 1. Do you feel knowledgeable about Registered Retirement Savings Plans? (79% answered yes, compared to 69% in 2008) 2. Are you comfortable with Tax Free Savings Accounts? (72% said yes, compared to 64% in 2008) 3. Are you confident in Guaranteed Investment Certificates? (62% said yes, up from 60%) Are there specific financial topics you feel more comfortable with now, compared to in 2008? What financial areas of your life could use some improvement?

Financial Literacy is no longer optional

November is Financial Literacy Month, and the Financial Consumer Agency of Canada (FCAC) has provided us with some tips and tools to help us all become more financially savvy. Below are a few highlights -- you can find more on www.itpaystoknow.gc.ca. 

·         Making a Budget and Sticking to It takes you through all you need to know about budgets, including what they are, what to do before and after making a budget, and how to use the Budget Worksheet.
·         The Budget Calculator is an interactive tool that lets you list all your income and expenses. It will help you see where you might be able to reduce expenses in other areas (such as daily coffee or lunch purchases) to cover your additional holiday expenses. ·         In addition to making and sticking to a budget, look at ways to reduce the cost of paying for those additional expenses.  FCAC's tip sheet, Be Smart with Your Credit Card, lists ways to use your card wisely.
·          You may want to consider alternative forms of payment like cash -- sometimes this can even get you a discount.
·         It's important to remember that a credit card doesn't increase the amount of money you have available to spend. Continue to live within your means and your budget.
·         Remember that debit cards may also have costs associated with them. It could cost you more than $8.00 to use an automated banking machine (ABM) that is not owned by your financial institution.
·         For consumers who get swept up in the generous spirit of the holidays, our publication How to Beat That Debt gives tips on keeping track of your spending and how to avoid getting into more debt, as well as managing the debt you owe now.