Tag Archives: Father and Son Mortgage Team

BREAKING THE CYCLE OF BAD MONEY HABITS IN BLACK FAMILIES

African American girl puts money in piggy bank

One thing that traditionally hasn’t been a strong suit in the Black family – and simultaneously, a detriment – is passing down healthy money habits to ensure financial stability for future generations.

In the technology age, however, that is beginning to change as more Black parents are building a foundation for their children to learn financial responsibility at an early age, hoping it’ll drive their decision making in adulthood.

“There is nothing righteous about struggling for your financial security,” Sabrina Lamb, a financial literacy educator, explained in the Pittsburg Post-Gazette. “It is actually a perfect storm of low self-esteem, lack of knowledge and generational conditioning.”

In order to break bad generational habits of spending money, parents must first take an introspective look to see how they’ve been holding up financially – only then can a parent truly impart wisdom on their child about good spending habits.

Here are some tips to start the conversation with your young ones.

Save, save, save!

It’s never too early to show your child the importance of saving money. On birthdays and holidays, for example, teach your child to put at least 30 percent of the cash they received into a piggy bank  – or, an actual bank savings account.  This will become routine so every time your little one gets some extra cash as a gift, they’ll immediately think to save it.

Teach the value of money.

So many children actually think money just appears into their parents’ pockets. Be direct in teaching your child that that’s not the case. Think about ways to make your child work for the money they’re seeking to purchase toys, video games or anything else they like – perhaps, a weekly payout for chores. This way your children will feel some type of way when spending the money that they actually worked their butts off for.

Discuss bills and budgets openly.

Now, it’s typical in many traditionally Black households that adults frequently tell children to stay out of “grown folks business.” Because of this, Black parents tend to never discuss any financial hurdles they may be facing – such as problems making mortgage payments – or even the growing costs of bills. It’s important to show your children how bills work. Like, for example, how leaving the lights on in every room translates into how much money the family owes on the monthly electricity bill.

Practice what you preach. 

Children mimic everything they see their parents do. So, if you recklessly use your credit cards to buy clothes, jewelry and other non-necessities at the mall, your children will adopt that behavior without understanding the consequences of it. Be the financially responsible person that you want your children to be.

 

Source: BlackDoctor.org – 

African American girl puts money in piggy bank

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Canada to admit nearly 1 million immigrants over next 3 years

Immigration Minister Ahmed Hussen said that by 2036 100 per cent of Canada's population growth will be as a result of immigration, it stands at about 75  per cent today.

Economic class will make up about 60% of newcomers

Immigration Minister Ahmed Hussen said that by 2036 100 per cent of Canada’s population growth will be as a result of immigration, it stands at about 75 per cent today. (CBC)

Canada will welcome nearly one million immigrants over the next three years, according to the multi-year strategy tabled by the Liberal government today in what it calls “the most ambitious immigration levels in recent history.”

Canadian immigration levels by year

The number of economic migrants, family reunifications and refugees will climb to 310,000 in 2018, up from 300,000 this year. That number will rise to 330,000 in 2019 then 340,000 in 2020.

The targets for economic migrants, refugees and family members was tabled in the House of Commons Wednesday afternoon.

Hussen said the new targets will bring Canada’s immigration to nearly one per cent of the population by 2020, which will help offset an aging demographic. He called it a historic and responsible plan and “the most ambitious” in recent history.

“Our government believes that newcomers play a vital role in our society,” Hussen said. “Five million Canadians are set to retire by 2035 and we have fewer people working to support seniors and retirees.”

In 1971 there were 6.6 people of working age for each senior, Hussen said, but by 2012 that ratio had gone to 4.2 to 1 and projections show it will be at 2 to 1 by 2036, when almost 100 per cent of population growth will be a result of immigration; it stands at about 75 per cent today.

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Immigration Minister on the government’s new multi-year plan
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Immigration Minister on the government’s new multi-year plan6:58

Hussen said immigration drives innovation and strengthens the economy, rejecting some claims that newcomers drain Canada’s resources and become a burden on society.

He said the government is also working to reduce backlogs and speed up the processing of applications in order to reunite families and speed up citizenship applications.

Canadian immigration class levels by year

The federal government’s own Advisory Council on Economic Growth had recommended upping levels to reach 450,000 newcomers annually by 2021. Hussen said the government is taking a more gradual approach to ensure successful integration.

“At arriving at these numbers we listened very carefully to all stakeholders who told us they want to see an increase but they also want to make sure that each and every newcomer that we bring to Canada — bringing a newcomer to Canada is half of the job. We have to make sure that people are able to be given the tools that they need to succeed once they get here,” he said.

Focus on integration: Rempel

Conservative immigration critic Michelle Rempel was critical of the plan, suggesting the government needs to do a better job of integrating newcomers.

“It is not enough for this government to table the number of people that they are bringing to this country. Frankly the Liberals need to stop using numbers of refugees, amount of money spent, feel-good tweets and photo ops for metrics of success in Canada’s immigration system.”

Chretien Ceremony 20170925

Luiz Capitulino, 11, of Brazil joins others take the oath as they become official Canadians during a citizenship ceremony at the National Arts Centre in Ottawa on Sept. 25, 2017. The federal government will welcome 310,000 newcomers to Canada in 2018. (Sean Kilpatrick/Canadian Press)

She said the Liberals need to bring Canada’s immigration system “back to order” by closing the loophole in the Safe Third Country Agreement that has seen migrants cross into Canada at unofficial border crossings only to claim refugee status.

She also said the immigration system should focus on helping immigrants integrate through language efficiency and through mental health support plans for people who are victims of trauma.

Dory Jade, the CEO of the Canadian Association of Professional Immigration Consultants, welcomed the news although he suggested the numbers should be higher.

“Canada will greatly prosper and grow once the 350,000 threshold has been crossed,” he said. “Nevertheless, we are witnessing a very positive trend.”

The Canadian Council of Refugees also welcomed the news, but wanted more, saying the share for refugees was only increased slightly from 13 per cent this year to 14 per cent in each of the next three years.

Calls for longer-range forecast

In past, there has been a one-year figure for how many immigrants will be permitted into the country, but provinces and stakeholders have called for longer-range forecasts.

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Hussen on immigrant integration funding
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Hussen on immigrant integration funding0:17

A statement from Ontario’s Immigration Minister Laura Albanese, before the announcement, said the province supports the introduction of multi-year levels plans “to provide more predictability to the immigration system and inform program planning.”

“Significant variation in year-to-year immigration levels can dramatically impact the requirement for provincial year-to-year resources. A longer term outlook would help in planning for appropriate service levels and use of resources.”

The statement said Ontario supports growth in immigration levels, particularly in economic immigration categories to support the growing economy.

Diversity drives innovation

During the government’s consultation period, the Canadian Immigrant Settlement Sector Alliance presented “Vision 2020,” what it called a “bold” three-year plan to address growing demographic shifts underway in the country, calling for increased numbers in the economic, family and refugee categories.

It recommended a target of 350,000 people in 2018, which climbs to 400,000 in 2019 and 450,000 by 2020.

Chris Friesen, the organization’s director of settlement services, said it’s time for a white paper or royal commission on immigration to develop a comprehensive approach to future immigration.

“Nothing is going to impact this country [more] besides increased automation and technology than immigration will and this impact will grow in response to [the] declining birth rate, aging population and accelerated retirements,” he told CBC News.

Source; CBC.ca – Kathleen Harris, Chris Hall, Peter Zimonjic, CBC News 

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How new mortgage rules hammer indebted households

The Toronto housing market’s rotten January has thrown a scare into veteran mortgage broker John Cocomile.

A lot of Mr. Cocomile’s business in recent years has been mortgage refinancings, which are like a financial-stress reducer. When your household debt gets too high, refinancing takes the pressure off by folding all your borrowings in with your mortgage. What worries Mr. Cocomile is that the latest developments in housing make it much harder to refinance.

We’ve seen household-debt levels push ever higher in recent years, with no evident repercussions in terms of more people being unable to repay what they owe. Now that refinancings are no longer an easy fallback, Mr. Cocomile thinks we’ve hit an inflection point where more people will find their debt unmanageable. This could be the year debt gets messy.

A big reason why Toronto home sales fell 22 per cent compared with January, 2017, was the introduction of new mortgage regulations designed to make the housing market more stable going forward.

The rules include a stress test that applies to anyone with a mortgage that isn’t insured against default. Typically, this means people with a down payment of 20 per cent or more and people who are refinancing.

The stress test is designed to see if borrowers can afford interest rates that are higher than the abnormally low levels of today. At Mr. Cocomile’s office, a lot of people are flunking the test. He’s had 10 people contact him about refinancing this year who did not end up qualifying. “All 10 would have qualified a year ago,” he says.

Meanwhile, debt loads are getting heavier to carry. The Bank of Canada has increased its trend-setting overnight rate three times since last summer, and the cumulative rate increase on some kinds of debt is a hefty 0.75 of a percentage point.

In the past few years, Mr. Cocomile would do roughly 60 refinancings a year for people with an average $70,000 in non-mortgage debt that he summarized as “a smattering of credit-card debt, plus lines of credit.” The usual procedure was to put them in a new mortgage that included credit-card and line-of-credit debt. The logic here is that the mortgage has a much lower interest rate than other forms of debt, and payments are manageable because they’re stretched over the life of the mortgage.

Even so, Mr. Cocomile finds that clients usually have to go with a 30-year amortization in their refinanced mortgage. Paying off your mortgage over 30 years isn’t possible when you have an insured mortgage, but you can still do it with a down payment of 20 per cent or more.

Refinancings in which people increased the amount they owe accounted for 21 per cent of the one million or so new mortgages issued in 2016, the most recent numbers from Canada Mortgage and Housing Corp. show. That’s an increase of 3.8 per cent over the previous year.

You’re usually allowed to refinance no more than 80 per cent of the value of your home, a modest limitation in hot real-estate markets where rising prices have steadily handed people more home equity to work with. “People could refinance because the value was there,” Mr. Cocomile said. “They call me and say, ‘My neighbour’s house just sold for $1.7-million, can I pull some equity out? I want to do a refi.'”

Toronto real estate’s rotten January suggest people may be a bit disappointed in what their homes are worth now. The price of detached homes in the city fell 9 per cent on a year-over-year basis, even as condo prices rose 14.6 per cent. Mr. Cocomile finds that home appraisers are reacting to the current environment by getting more conservative with their assessments of how much homes are worth.

Refinancing your mortgage by folding in other debts makes sense in theory because you’re converting higher-rate debt into a mortgage, which typically has a very low rate. But a refinance does nothing to address the behaviour that leads people to over-borrow. In fact, some people have exploited rising house prices by doing multiple refinancings over time to ease their debt loads.

It’s arguably a good thing that refinancings are harder to get in 2018. With rates rising, it’s time for households to attack their debt, not accommodate it.

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Preet Banerjee examines the pros and cons of switching to a fixed-rate mortgage.
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Source: Globe and Mail –
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Is a rental property a good investment?

Q:  I own a condo in my hometown of Duncan, BC, but my partner and I have just bought a house across town and have moved into it together. Should I keep the condo as a rental property or sell it and invest the equity?

Every time I ask friends or family what I should do with the property, they tell me I should keep it because ‘property values keep going up and one day, I’ll just own it!’ But my rental income wouldn’t cover my cost for keeping the condo and I feel like sinking money into the unit every month just to keep it afloat is a bad idea, no matter what the long term gain might be.

The two-bedroom condo was built in 1993 and it’s in a highly rentable part of town (most units in the area are renter-occupied). I think I could charge about $800/month for it. Vacancy rate is pretty low here, so I probably wouldn’t have too much trouble finding a tenant. The building is well maintained (I chair the strata council) and has a solid contingency reserve. I expect strata fees to increase at a rate of about 2% per year for the foreseeable future.

—Harmony

A: One of the best things about investing in real estate is that it is generally much more empowering than investing in stocks. Stocks are difficult for a lot of people to understand, whereas real estate can be more intuitive.

It helps to understand what you’re investing in and when it comes to a property you’ve already lived in and a neighbourhood you know, I can appreciate the appeal, Harmony.

I prefer condo investing over detached houses, because condo expenses are pretty predictable. Expenses for a house can be a lot more sporadic.

I think that real estate investors are probably better off focusing on cash flow than capital appreciation. In other words, avoid owning on speculation to sell the property in the short-term for a profit. You appear to have a long-term cash flow approach, Harmony, but the cash flow–or lack thereof–seems to be a cause for concern.

A property that runs cash flow negative can still be a good investment though, so I think you need to consider why the rent won’t cover the costs. Do you have a short amortization on your mortgage? You may be able to reduce your costs by extending the amortization on the mortgage back to 25 years so that the property runs neutral or positive.

 

I like to project the after-tax cash flow and net equity for a rental property over a number of years in order to fairly evaluate the property. To me, this is a true representation of the investment, rather than simply looking at the cash flow in isolation or speculating on the appreciation in the property value.

If a property runs cash flow negative, you may be able to claim a deduction on your tax return that leads to a tax refund. I say “may” because the mortgage principal is not tax-deductible and once you back that out, your property might be running cash flow positive for tax purposes, Harmony.

After you have determined the tax implications of your rental property’s cash flow, you need to consider the change in the net equity. If your property is running cash flow negative by $2,000 after-tax annually but you’re paying down your mortgage principal by $4,000 annually in the process, that’s an important consideration.

But does that mean you’ve invested $2,000 and earned $4,000? Not really. You also have to take into account how much equity you have tied up in the property. In other words, if you have $48,000 in equity in the property and you’re cash flow negative $2,000, you’ve made a $50,000 investment to earn $4,000. That’s an 8% return. Add in a bit of property value appreciation and you might have a double-digit return (at least on paper) in this notional example.

On the other hand, are the rents just not high enough in the neighbourhood to justify the carrying costs on the property? It may just be a renter’s market. In some cases, the all-in return on a rental property just isn’t enough to beat out other alternative investment options. If the condo proceeds could enable you and your partner to put down a larger down payment on the house and avoid CMHC insurance premiums, or provide cash to make an RRSP or TFSA contribution, I think you need to be sure the cash flow/net equity return is enticing.

The point is, you can’t just focus on top-line cash flow for a rental property. Dig deeper, consider the tax implications, mortgage principal repayment and your existing equity.

And while I hate to be a pessimist, the realist in me can’t help but point out that your condo represents a reasonable back-up plan in the event things don’t work out with your partner. Also keep in mind that after two years of cohabitation, the same laws that apply to married couples apply to common law couples in B.C. when it comes to a division of assets. In your case, you may both be entitled to half the house as well as half the appreciation during your relationship on your condo. So consider a consultation with a family lawyer as well.

Source: MoneySense.ca –

 

by 

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto, Ontario. He does not sell any financial products whatsoever.

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Would legal cannabis become a rental property nightmare?

Would legal cannabis become a rental property nightmare?

Canadians will soon be able to add marijuana to their collection of household herbs, and that’s creating a nightmare for the country’s landlords.

With Prime Minister Justin Trudeau set to legalize recreational weed in July, apartment owners are concerned about safety and potential damage to their buildings if tenants grow plants and smoke up in their units. Landlords are lobbying provincial governments for legislation that would ban marijuana use in rental units or allow them to add restrictions to lease agreements.

“We’re hammering away at this pretty tirelessly,” according to David Hutniak, chief executive officer of Landlord BC, a housing-industry group in the province of British Columbia.

“Can you imagine you’re living in a 100-unit apartment, and in theory, there could be 100 grow-ops in that thing? I mean, that’s ridiculous,” Hutniak told Bloomberg.

Cannabis stocks have jumped and businesses are primed to cash in on Canada’s long-awaited pot party. Yet federal regulations on recreational use of the drug in the country, where medical marijuana has been legal since 2001, are still being worked out. Proposals include allowing people to smoke in private residences and to grow as many as four plants per rental unit. Provinces have the right to set rules in their own jurisdictions, including age limits for possession of weed and whether landlords can restrict use on their properties.

Read more: Legal marijuana shops could boost nearby property values – study

One reason landlords don’t want tenants lighting up is that many rental buildings are fairly old, so “smoke and smells are easily transmitted through hallways between units” and can disturb others who don’t want to partake, Canadian Federation of Apartment Associations president John Dickie explained.

Growing pot requires certain humidity levels that may damage apartment walls, and the electrical wires required to run the operation can start fires, according to Hutniak. Budding plants also give off a pungent aroma that can seep through door cracks.

Failing to implement regulations that allow landlords to ensure smoke-free, grow-free units could lead to higher rents, according to William Blake, spokesman for the Ontario Landlords Association. Some provinces, including Ontario, block landlords from extracting damage deposits from tenants, said Blake, who once spent more than $5,000 to clear the smell from a marijuana smoker’s unit.

“This is not a political issue for us – we care about taking care of our tenants and keeping costs low,” Blake said. “When we have to pay out thousands of dollars, landlords will want to raise the rents for the next tenants.”

Finding an affordable apartment in supply-squeezed cities like Toronto and Vancouver is already challenging, and vacancy rates are at record lows. For people who use pot, the search may get even tougher: It is “legal and legitimate” for landlords to select tenants who don’t smoke, Dickie argued.

Source: MortgageBrokerNews.ca – by Ephraim Vecina13 Feb 2018

 

Would legal cannabis become a rental property nightmare?

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Capital gains explained

Source: MoneySense.ca – by   

 

Capital gains explained

How it’s taxed and how to keep more for yourself

What is it?

You have a capital gain when you sell, or are considered to have sold, what the Canada Revenue Agency deems “capital property” (including securities in the form of shares and stocks as well as real estate) for more than you paid for it (the adjusted cost base) less any legitimate expenses associated with its sale.

How is it taxed?

Contrary to popular belief, capital gains are not taxed at your marginal tax rate. Only half (50%) of the capital gain on any given sale is taxed all at your marginal tax rate (which varies by province). On a capital gain of $50,000 for instance, only half of that, or $25,000, would be taxable. For a Canadian in a 33% tax bracket for example, a $25,000 taxable capital gain would result in $8,250 taxes owing. The remaining $41,750 is the investors’ to keep.

The CRA offers step-by-step instructions on how to calculate capital gains.

How to keep more of it for yourself

There are several ways to legally reduce, and in some cases avoid, capital gains tax. Some of the more common exceptions are detailed here:

  • Capital gains can be offset with capital losses from other investments. In the case you have no taxable capital gains however, a capital loss cannot be claimed against regular income except for some small business corporations.
  • The sale of your principal residence is not subject to capital gains tax. For more information on capital gains as it relates to income properties, vacation homes and other types of real estate, read “Can you avoid capital gains tax?
  • A donation of securities to a registered charity or private foundation does not trigger a capital gain.
  • If you sell an asset for a capital gain but do not expect to receive the money right away, you may be able to claim a reserve or defer the capital gain until a later time.

If you are a farmer or a newcomer to Canada, they are special capital gains rules for you. The specifics can be found at the CRA website.

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